Investors care most about traction, especially when it comes to valuations. You’ll probably deal with investors who don’t know you personally, so they have to make educated guesses about your philosophy and work ethic. Traction shows them that your business is more than an idea, and that you’re more than another “wantrapreneur.”
There are many ways to show traction, but investors care most about customers and revenue. Cash is king. Land your first customer before your big pitch, and the tone of the conversation will change from one of skepticism about you and your idea, to enthusiasm and respect. When you have revenue, the investor’s main concern changes from “Is this a real business?” to “How scalable is it?”
There are many other ways to show traction: obtain letters of intent, build an e-mail list, get notable people in the industry to join your board or team, build a prototype, file for a trademark or patent, or get a deal with a strategic partner.
Investors care about traction so much because it’s a good indicator of progress. The more traction you have, the easier it is to believe that you’re a management team that will make it happen.