Traction Trumps Team When Going For The Million Dollar Round?

(Photo: César Salazar of 500Startups)

Teams are great. A lot of people look at founders and teams, but of course the product has to be great too. That is unless you’re a founder with a track record for success, but all of that will be covered later.

Greg Kumparak is evidently back at TechCrunch. Kumparak was one of my favorite TechCrunch writers while I was “thedroidguy” we’d bump into each other all the time while I was on the mobile beat, Berlin, Barcelona and of course here at home. He left last year after the Arrington fiasco and apparently he’s back, writing about startups.

So let’s dive into the meat and potatoes of this post here, because that’s why you clicked on the link. We try and share whatever startup tips we can and one of the biggest things people want to know about is raising money. Specifically, startups in their earliest stages want to know how to raise millions of dollars so they can just “work” and not have to worry about where their next meal is coming from or how the rent will get paid.

Somewhere along the way though, $100,000 or even $500,000 was not enough. Everyone seems to be looking for that million dollar Series A round, or even more presumptuously they are looking for a million dollar seed round, or angel round. Regardless of the round, Ash Fontana, a venture hacker at AngelList, came up with the bullet points above when talking about raising a good million dollar round.

Like me, one of the first things Kumparak noticed in the slide is that product and team are crossed out. Traction is clearly circled. So now traction is the most important?

Perhaps this is right, but of course from the perspective of an AngelList venture hacker it’s absolutely right. AngelList thrives off traction. We actually learned that 500 Startups, startups, actually plan one startup a week that they will all follow on AngelList in unison. This way a 500 Startups, startup, is always trending on AngelList.

This real need for startup traction actually goes well beyond AngelList and can be a key performance indicator when your deal is being reviewed by investors.

In case you can’t clearly read the slide here are the key take-aways, things that your startup should already have before approaching that investor for your million dollar round:

– Enterprise startups need to have 1,000 seats at $10/seat/month

– Big enterprise startups need to have 2 pilot contracts with some $

– Social startups need 100,000 downloads and signups

– e-commerce “market place” startups need to have $50,000 in revenue per month

Fontana did disclose to Kumparak that these numbers are just rough estimates based on his insight and not actual numbers directly from the AngelList database.

While many investors talk about the importance of product and team it seems that when you get to the stage where you’re ready for a $1 million dollar investment (or more) the product and the team should already speak for themselves and the traction should tell their story.

Tell us what you think in the comments.

Source: TC