Using The Path Forward to determine fundraising strategy

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As you might have seen we launched The Path Forward last week as a guide for ecommerce and marketplace entrepreneurs in their first year (diagram above). We’ve been using it internally for a while and we’ve noticed that we find it easiest to get excited about startups that are at Step 1: Valid Idea, and Step 3: Valuable Business. When we meet new companies at Step 2: Valued Product, entrepreneurs have made choices and started down a path which inevitably shuts off some opportunities that were there earlier but they haven’t got far enough along to know whether those choices are good.

It turns out we’re not alone. I saw this on Founders Notebook earlier today:

You can only raise money by pitching the “Dream” or by selling “Traction”. So either bootstrap your startup, or raise money in the early “dream” (no code, no plan, just a dream) phase or in the “traction” (the model is working) phase of your business.

The Path Forward is a good tool for understanding what makes a good dream and what qualifies as good traction. To summarise what’s on the site, pitching a “Dream” works best when the need has been proven with customers and a prototype really resonates, whilst pitching traction works best when the business looks set to scale. If you want more detail go to The Path Forward, click on the ‘About the Path Forward’ button and check out the definitions of Step 1: Valid Idea and Step 3: Valuable Business and associated Waypoints. (“Waypoints” is the name we’ve given to the sub-steps you can see in the graphic above.)

 

 

  • https://twitter.com/BogdanNedelcu @BogdanNedelcu

    Love this one `You can only raise money by pitching the “Dream” or by selling “Traction”.`
    You made a very good point about traction. I suppose that many entrepreneurs struggle to respond to this question: Do I have enough traction to start pitching investors?

    Building traction usually happens like this: you take a key performance indicator and start working on it. But… is your chosen KPI the correct one? Does it demonstrate that you identified the right growth channel?
    Shortly said: traction is more about identifying sustainable growth channels.

  • http://www.theequitykicker.com brisbourne

    Thanks!