Chris Sims is a partner at The Alchemy Fund, which invests in early-stage startups in New England. He’s been on both sides of the startup coin, as a founder and as an investor. He’s also an MFN advisor, and we’re happy that he’s generous enough to share his experience and tips with our community. Video shot and edited by MFN Communications Associate Natalia Giacomozzi.

VIDEO TRANSCRIPT

I often get asked: “How much traction do I need before investors invest in my company? Is it 100 customers? Is it $100,000 in revenue? What’s the benchmark?” Many don’t want to hear “it depends.” I get it; it’s frustrating to be told “it depends,” but what does it depend on?

It’s essential to understand that investors aren’t merely looking for $100,000 in revenue. They’re looking for a hint of something extraordinary.

Consider this: If you’ve earned $100,000 in revenue from a consumer product marketed globally and only a few unique individuals want it, you might have just shown that your product isn’t special. In that situation, the $100,000 in revenue isn’t that significant.

On the other hand, imagine you have a product, and you introduce it to everyone on your city block. You knock on every door, showcase the product, and 80% of them give you their email addresses to know when it’s available, yet you’ve made $0 in revenue. Now that’s exciting. Here, it’s the intensity and eagerness of the demand that’s crucial.

What you need to demonstrate is the potential for scale and impact. It’s about presenting a glimpse into a potentially significant and transformative business. It’s not just about taking the first steps on a long journey but understanding and aiming for the right endpoint. Remember, strategy starts with setting the correct goal. If you set and achieve the wrong goal, that’s a failure.

So, when discussing traction in your pitch, showcase that the traction you have, when scaled up, can lead to substantial outcomes. After all, the goal for many investors is not just a return on investment, but potentially significant financial rewards, like owning a private island.