How do you measure traction and growth?

To measure traction and growth, focus on key performance indicators (KPIs) such as customer acquisition rates, retention rates, lifetime value of a customer, and revenue growth. Use tools like analytics dashboards to track these metrics in real-time. Additionally, monitor qualitative data like customer feedback and reviews to gauge market reception. Comparing these metrics against set goals and benchmarks will help you assess whether you're gaining traction and growing as intended. The aim is to make data-driven decisions to guide your growth strategy.

Product-Market-Fit is the first milestone to further growth of a venture. It does not relate to the process of commercial success it is where it starts from. If this criterion is not fulfilled it is not worth going further. Technically, it means how well your product solves the problem of the end-users in comparison to the existing solutions on the market. How your disruption and/or value-added are perceived by the users in the context of exciting solutions provided by your competitors. That can then forecast willingness to pay, adoption, retention and loyalty. The tests can be done in waterfall or agile ways.

A good indicator of product market fit is if you discontinue client access to your service. How quickly do your clients want access to the service again. If the majority cant see life without your service, you have reached product market fit.

Measuring business performance involves tracking key metrics across different domains: Traction: Focus on user engagement, customer acquisition, churn rate, and Net Promoter Score to gauge interest and momentum. Growth: Measure revenue growth rate, customer growth rate, and CAGR to evaluate how fast the company is expanding. Revenue: Keep an eye on gross and net revenue, ARPU, and various revenue streams to understand income generation. Unit Economics: Examine Customer Lifetime Value (CLV) and Customer Acquisition Cost (CAC) to assess the long-term profitability of acquiring and retaining customers.

It is important to know how revenue and unit economics co-exist in our venture. It's important that revenue coming from the customer significantly exceeds the cost at which this customer was drawn. That is why such metrics as LTV (Customer Life Time Value) and CAC (Customer Acquisition Cost) and their ratio LTV/CAC would be obtained carefully. It has to be aligned according to the product and its customer acquisition channels flatly.

A growing company has found a good marketing mix that leads to increased revenue. Where preferably 1$ spent on marketing leads to >1$ in return. If this a applicable to a large audience, and for example 1m spent on marketing leads to > 1m in return, it is scalable.

Beware to growth at all costs or vanity metrics. sometimes growing too fast, for example taking on more customers than the business can handle can have a detrimental effect. Would an experienced restaurant manager confirm 100 bookings at 7.30pm for a 50 seater restaurant?

The growth rate depends on multiple factors. What investors assess the most is the CMGR (Compounded Monthly Growth Rate). It is the average month-over-month growth rate over a more extended period, typically around 7-18 months. It reflects exponential growth and includes compounding effects. It linearly depends on the demand and ease of adoption in the target market. Scalability reflects the volume of the primary target market, the repeatability of the business model and the agility to penetrate adjacent markets geography-wise and product-wise in the future.

Regarding the concept of TAM. Total Addressable Market and Total 'Achievable' Market are 2 different realities. Yes always aim to capture the entire market, which is unlikely... even if you are Apple, Nike or Tesla.

The market size that is attractive for the majority of investors should exceed $1B. The market share can be also assumed from the top-down approach. However, it is better and more precise to derive it from thorough competitive landscape research.

Having a competitive moat (ie, a sustainable advantage that can fend off competitors) is often the make-or-break factor for a startup looking for long-term success. A moat can be proprietary technology, access to exclusive distribution channels, or being in a space with a high cost of entry. Without these, you're either susceptible to being overtaken by a competitor or... if your product or service relies on network dynamics, then your network is your moat. Grow your network as fast as possible because each new user adds value to the network and makes it harder for new entrants to disrupt your position. Think about social media platforms or marketplaces—their dominance/value is inextricably tied to the size and engagement their user base.

It all starts with whether your solution is a necessity, the more is better or wow. Basically, all the exciting solutions on the market including yours propose a basic necessity solution. The value proposition and differentiation begin at "the more is better" or wow level. If you manage to find unreplicable or expensive to replicate moat you will be better off.

Early stage investments are mainly about the team and their ability to execute on the company’s vision. How likely is it that the current team can deliver on their value proposition on both product/service and distribution? Are they the best fit to deliver on this mission, or are there other competitors who are more likely to succeed?

Indeed, in early-stage startups that lack traction the founder and his team are especially crucial for drawing investors. That's when communication skills and charisma step in. Along with the team, the market size is also an essential attribute.