Traversing the Traction Gap with Bruce Cleveland
It is in traversing the traction gap that most startups fail. The ability to tackle that journey will determine their success.
Our favorite stories feature epic traverses riddled with danger, challenges, excitement, risk, and ultimately, success. Think about Frodo and the Ring, Odysseus and his voyage home, and Amelia Earhart and her solo flight across the Atlantic. Success tastes sweeter when it requires us to give it a piece of ourselves. The journey isn’t easy, and that’s why we’re so drawn to it.
Bruce Cleveland of Wildcat Venture Partners knows that the startup journey bears striking similarities to these epic quests. If you attempt to build a startup, you’re in for adversity, doubt, and challenge. People along the way will either support you or try to hold you back. Ultimately, success does not depend so much on your idea, but on your perseverance.
Bruce explains that “the first issue to objectively consider is whether you are truly prepared to begin the journey.”
In particular, you need to be prepared for the toughest leg of the journey — what he calls “the Traction Gap”: the go-to-market stage of the journey, where startups face great financial risk and limited time to get things right. This is where most startups fail.
The initial go-to-product stage tends to go smoothly for entrepreneurs with a good idea who have ample access to resources and support. But gaining traction to move to market and onto scaling is treacherous, and is further complicated by the fact that market engineering is often not an area where “idea-focused” product engineers thrive.
“Startups are typically great at engineering products, but many lack the requisite skills needed to engineer a market for those products. Without solving both parts of this equation, they are doomed,” writes Bruce Cleveland.
“Are you and your team really ready to traverse the Traction Gap?”
1. Getting ready
Bruce is clear that you’ll need to complete some major tasks to prepare for the traverse, including all of your “market engineering” and “product engineering” tasks.
Market engineering includes:
- Category creation and definition
- Statistically valid market research
- Initial messaging matrix, value propositions, and preliminary pricing
- Your talk tracks — thought leadership, sales leadership, and investor
In particular, category creation is paramount to your success. As a new startup, it’s essential for you to either redefine an existing category (think Apple with the cellphone), or create a new one (think cloud computing, and perpetual enterprise software). You simply can’t compete within a category that already exists.
Product engineering entails:
- A comprehensive beta program
- NPS scores that indicate what Bruce calls “market/product fit” (without a market, there is no need for your product)
- Usage rates and customer/user testimonials indicating their satisfaction with the product
“These product engineering and market engineering tasks should largely be complete at Initial Product Release (IPR) — the official kick-off point of the Traction Gap — and must be entirely complete before declaring Minimum Viable Product (MVP), which is when the first real market engagement begins for most startups,” explains Bruce.
2. Understanding the stakes
As you move out of the go-to-product phase and into the go-to-market phase, the emphasis must quickly switch from an intense focus on product issues to a focus on market issues. You need to start creating awareness and interest and then convert that interest into a set of repeatable processes that cost-effectively and reliably drives engagement, downloads, usage, and ultimately revenue.
“The team needs to realize that if it wants to be in the upper quartile of startups, it only has about two and a half years to go from MVP to Minimum Viable Repeatability (MVR) to Minimum Viable Traction (MVT). If it’s a SaaS company, MVT means about $6M ARR. If it’s a B2C software company, it means about 1M active users, dependent upon the type of business model.”
“If you don’t reach MVT in those two and a half years, you may find yourself languishing and unable to secure additional financing to continue,” adds Bruce.
3. Forming your team
Team is paramount.
“Time and again, every CEO and/or founder we interviewed in our research said that hiring mistakes cost them dearly. And, perhaps more importantly, firing mistakes were even more devastating.”
By mistakes, Bruce isn’t referring to firing the wrong person, but rather, not firing someone soon enough, especially a toxic team member.
When forming your team, it’s important to remember that the product skills that took the team to MVP must be augmented quickly with go-to-market skills.
“To be clear, this doesn’t mean a lot of people, it means a few people with the expertise to take the product to market. Don’t bolt on execution-oriented marketing and sales teams before you reach MVR,” says Bruce, “or you could burn up a lot of capital for naught.”
4. Things to watch out for
“The most common roadblocks seem to occur when teams decide it’s time to move to a subsequent value inflection point, despite not having adequately completed the tasks required to do so.”
For example, declaring MVP early — without completing all product engineering and market engineering tasks — is a common mistake.
“You need to be aware that moving into demand generation mode when the product is still buggy, the UI shoddy, the value propositions weak, and the category definition ambiguous, is what tanks many startups,” writes Bruce.
Be aware that many teams feel pressured by venture firms to “hurry up,” which — combined with the ever-dwindling capital in the bank — leads them to move forward before they’re ready. Stand firm in your commitment to do things right.
5. Navigating the Gap
“You could follow the Traction Gap Framework and its principles to the letter and not succeed. But, if you don’t follow them, I would argue that your chances of success are significantly diminished.”
From Bruce’s perspective, the best thing you can do for yourself and for your team once you embark on your journey is to develop a “market first” mindset, perform statistically valid market research, create your category, and demonstrate traction.
Easy? No, of course not, but the challenge to create something new and compelling is a powerful force.
To learn more about the CEO Quest, head here.
To learn more about the Traction Gap Framework, head here.
To get a deeper understanding of the Traction Gap principles, check out these resources:
The opinions expressed here represent those of the author and not necessarily the views of Wildcat Venture Partners.