Traction Tricks: Meaningless Metrics and Laughable Logo Lists

Traction is the indicator a startup needs to demonstrate that it is on the road to scale, the prerequisite for monetization, otherwise known as cashing in.

Since differentiating oneself sufficiently to attract attention, let alone moolah, is a significant achievement, it is understandable that entrepreneurs do not want to give the wrong impression and lose whatever funding they have and to which they will inevitably feel compelled to add. Nothing ever goes right, or at least according to plan, more time is almost always needed, which means more money will be required to fund that time.

So there is an entire subculture around creating impressive albeit frequently irrelevant and sometimes false metrics. Not necessarily false in the sense of fraudulent, but false in the sense of meaningless.

The metricidal tradition in tech is rich: those who remember the early days of the dotcom era will recall when 'eyeballs' were all the rage. That being the number of people who spent some time on your site. Then, the amount of time they spent there was thought to be redolent of success until it was established that most people who spent a lot of time in the early days were either on hold with customer service or trying to figure out how to enter their credit card info without it being rejected for the twenty-third time.

Those technical bugs have been largely eliminated but not so the urge to, well, exaggerate one's impact. To which has been added the requisite list of 'client' logos, some of whom merely answered the phone.

The point is not that metrics or clients are irrelevant, but that in a world of information, where most people use the same hardware, software and educational credentials, there is not all that much that is easily falsified. You may not have the numbers - yet - but as the following article explains, if you can justify your processes and assumptions, you may already be ahead of the curve. JL

Jonathan Friedman comments in Venture Beat:

If you have not yet reached product/market fit, instead of trying to cover this up with impressive but meaningless numbers, use this as an opportunity to discuss your future plans for the product roadmap, business model, and financial projections.
Pitches for early-stage companies that have already released a B2B product typically include a slide full of client logos, which they use as proof of “traction.” Whenever I see this my ears perk up, as it’s no easy feat signing on so many paying customers at an early stage, and my mind starts calculating the probable revenue run rate.
But then, when I ask how much these “clients” are paying to check if my calculations are correct, it’s as if I’ve caught the entrepreneur off guard. Like a deer caught in headlights, they tell me “well, for the pilot/beta phase we are giving a deep discount, but from here on out we’ll be charging $XXX.” When this happens, the credibility and excitement built up to that point leaves the room like air leaving a balloon.
The pitfalls of faking traction 
Trying to “fake it till you make it” by exaggerating traction may get you attention in demo days and press releases, but vanity metrics don’t fool serious investors. This form of exaggeration just makes it more difficult for investors to take anything you say at face value.
To avoid creating this doubt, don’t try to gloss over traction by showing off a bunch of impressive logos without any context. Rather than hoping investors won’t ask detailed questions and reactively fumbling through your response, use this slide as an opportunity to build trust and to demonstrate your thought process and plans.
Less logos, more explanation
Be clear on why you are charging current clients much less than your business model indicates, and why you will be able to charge more in the future. Perhaps these were reference clients, or perhaps they were early beta testers who paid less in exchange for providing meaningful product feedback. Whatever the reason, don’t just say you charged them less because it was easier to get them on-board faster, as it won’t be clear why in the future it will get easier to charge everyone a full price that nobody is paying yet.
On the slide itself present this in more of a structured, timeline-driven fashion. Upfront, you can indicate with a pipeline image how many users you have, how many are paying, and how much they are paying. Then, another slide can match your projected improvements on the key metrics to your product roadmap and planned milestones. This sets the groundwork for the later conversation about how much you want to raise and what you plan to achieve.
The takeaway
The best investor pitches are more like conversations than presentations. If you have not yet reached product/market fit, instead of trying to cover this up with impressive but meaningless numbers, use this as an opportunity to discuss your future plans for the product roadmap, business model, and financial projections. Investors will have more confidence in someone who has a firm handle on what needs to be done and how to get there than in someone who is not authentic.