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  Traction Thinking

Bullseye helps you determine which traction channels to focus on at any given time, but doesn’t give you any specific strategies or tactics for how to focus on traction channels. That’s what the rest of this book is for. This chapter presents traction strategies you should employ across each traction channel.


The 50% Rule

If you’re starting a company, chances are you can build a product. Almost every failed startup has a product. What failed startups don’t have are enough customers.

Marc Andreessen, founder of Netscape and VC firm Andreessen-Horowitz, sums up this common problem:

“The number one reason that we pass on entrepreneurs we’d otherwise like to back is their focusing on product to the exclusion of everything else. Many entrepreneurs who build great products simply don’t have a good distribution strategy. Even worse is when they insist that they don’t need one, or call [their] no distribution strategy a ‘viral marketing strategy.’”

A common story goes like this: founders build something people want by following a sound product development strategy. They spend their time building new features based on what early users say they want.

Then, when they think they are ready, they launch, take stabs at getting more users, only to become frustrated when customers don’t flock to them.

Having a product your early customers love but no clear way to get more traction is frustrating. To address this frustration, spend your time building product and testing traction channels – in parallel.

Building something people want is required for traction, but isn’t enough. There are many situations where you could build something people want, but still not end up with a viable business.

Some examples: you build something users want but can’t figure out a useful business model – users won’t pay, won’t click on adverts, etc. (no market). You build something people want, but there are just not enough users to reach profitability (small market). You build something users want, but reaching them is cost prohibitive (hard to reach market). Finally, you build something users want, but a lot of other companies build it too, and so it is too hard to get customers (competitive market).

In other words, traction and product development are of equal importance and should each get about half of your attention. This is what we call the 50% rule: spend 50% of your time on product and 50% on traction. This split is hard to do because the pull to spend all of your attention on product is strong, and splitting your time will certainly slow down product development. However, it won’t slow the time to get your product successfully to market. That’s because pursuing product development and traction in parallel has several key benefits.

First, it helps you build a better product because you can incorporate knowledge from your traction efforts. If you’re following a good product development process, you’re already getting good feedback from early users. Traction development gets you additional data, like what messaging is resonating with potential users, what niche you might focus on first, what types of customers will be easiest to acquire, and major distribution roadblocks you might run into.

You will get some of this information through good product development practices, but not nearly enough. All of this new information should change the first version of the product for the better.

This is exactly what happened with Dropbox. While developing their product, they tested search engine marketing and found it wouldn’t work for their business. They were acquiring customers for $230 when their product only cost $99. That’s when they focused on the viral marketing channel, and built a referral program right into their product. This program has since been their biggest growth driver.

In contrast, waiting until you ship a product to embark on traction development usually results in one or more additional product development cycles as you adjust to real market feedback. That’s why doing traction and product development in parallel may slow down product development in the short run, but not in the long run.

The second benefit to parallel product and traction development is that you get to experiment and test different traction channels before you launch anything. This means when your product is ready, you can grow rapidly. A head start on understanding the traction channel that will work for your business is invaluable. Phil Fernandez, founder and CEO of Marketo, a marketing automation company that IPO’ed in 2013, talks about this benefit:

“At Marketo, not only did we have SEO [Search Engine Optimization] in place even before product development, we also had a blog. We talked about the problems we aimed to solve… Instead of beta testing a product, we beta tested an idea and integrated the feedback we received from our readers early on in our product development process.

By using this content strategy, we at Marketo began drumming up interest in our solutions with so much advance notice we had a pipeline of more than 14,000 interested buyers when the product came to market.”

Marketo wouldn’t have had 14,000 interested buyers if they just focused on product development.

It’s the difference between significant customer growth on day one – real traction – and just a product you know some people want.


Comparison to Lean

Many good product development methodologies exist, but don’t deal explicitly with getting traction. The Lean Startup framework is a popular one. This approach involves creating testable hypotheses regarding your product, and then going out and validating (or invalidating) those hypotheses. It’s an approach that demands a great deal of interaction with customers, discovering their needs and understanding the types of features they require.

Bullseye works hand-in-hand with Lean. What Lean is to product development, Bullseye is to traction. With Lean, you figure out the right features to build. With Bullseye, you figure out the right traction channel to pursue.

To reiterate, the biggest mistake startups make when trying to get traction is failing to pursue traction in parallel with product development.

Many entrepreneurs think that if you build a killer product, your customers will beat a path to your door. We call this line of thinking The Product Trap: the fallacy that the best use of your time is always improving your product. In other words, “if you build it, they will come” is wrong.

You are much more likely to develop a good distribution strategy with a good traction development methodology (like Bullseye) the same way you are much more likely to develop a good product with a good product development methodology (like Lean). Both help address major risks that face early stage companies: market risk (that you can reach customers in a sustainable way) and product risk (that customers want what you’re building), respectively.

Pursuing both traction and product in parallel will increase your chances of success by both developing a product for which you can actually get traction and getting traction with that product much sooner.


Moving the Needle

Your traction strategy should always be focused on moving the needle for your company. By moving the needle, we mean focusing on marketing activities that result in a measurable, significant impact on your company. It should be something that advances your user acquisition goals in a meaningful way, not something that would be just a blip even if it worked.

For example, early on DuckDuckGo focused on search engine optimization to get in front of users searching for “new search engine.” In the early days, these users really moved the needle and were the biggest source of growth. Eventually, DuckDuckGo’s userbase outstripped this volume by many times, and they had to move onto another traction channel that moved the needle.

From the perspective of getting traction, you can think about working on a product in three phases:

  • Phase I – making something people want
  • Phase II – marketing something people want
  • Phase III – scaling your business

Phase I is very product focused and involves pursuing initial traction while also building your initial product as we discussed above. This often means getting traction in ways that don’t scale – giving talks, writing guest posts, emailing people you have relationships with, attending conferences and doing whatever you can to get in front of customers.

As Paul Graham said in his essay “Do Things that Don’t Scale:”

“One of the most common types of advice we give at Y Combinator is to do things that don’t scale. A lot of would-be founders believe that startups either take off or don’t. You build something, make it available, and if you’ve made a better mousetrap, people beat a path to your door as promised. Or they don’t, in which case the market must not exist.

Actually startups take off because the founders make them take off… The most common unscalable thing founders have to do at the start is to recruit users manually. Nearly all startups have to. You can’t wait for users to come to you. You have to go out and get them.”

If you’ve made it to phase II, you have a product that resonates with customers – initial traction – and therefore doesn’t require sweeping product changes. In other words, in phase II you have established product/market fit and now are fine-tuning your positioning and marketing messages.

In phase III, you have an established business model, significant position in the market, and are focused on scaling both to further dominate the market and to profit.

At different product phases, moving the needle means different things. In phase I, it’s getting those first few customers. In phase II, it is getting enough customers where you’re knocking on the door of sustainability. And, in phase III, your focus is on increasing your earnings, scaling your marketing channels, and creating a truly sustainable business.

Some traction channels will move the needle early on, but will fail to work later. Others are hard to get working in phase I, but are major sources of traction in the later phases (PR is a good example). On the other hand, some channels will be great in phase I but useless in phases II and III because they simply don’t have the volume required to move the needle.

When you’re just starting out, small things can move the needle interms of traction. A single tweet from a well-respected individual or a speech to a few hundred people at a meetup can result in a meaningful jump in users.

As your company grows, smaller things like that will be difficult to notice. If you have 10,000 visitors to your website each day, it will be hard to appreciate a tweet or blog post that sends 200 visitors your way. As your startup sees more traction, things that worked early on may not scale well (or be worth scaling). What moves the needle changes dramatically.

Moving the needle in the later stages requires larger and larger numbers. If you want to add 100,000 new customers, with conversion rates between 1–5%, you’re looking at reaching 2–10 million people – those are huge numbers! That’s why traction channels like community building and viral marketing can be so powerful: they scale with the size of your userbase and potential market.

Startup growth happens in spurts. Initially, growth is usually slow. Then, it spikes as a useful traction channel is unlocked. Eventually it flattens out again as a channel gets saturated and becomes less effective. Then, you unlock another strategy and you get another spike. That’s why the cover of our book looks the way it does.

In other words, the way you get traction will change. After your growth curve flattens, what worked before usually will not get you to the next level. On the flip side, traction channels that seemed like long shots before might be worth reconsidering during your next iteration of Bullseye.

You can think of your initial investment in traction as pouring water into a leaky bucket. In phase I, your bucket will be leaky because your product is not yet a full solution to customer needs and problems. In other words, your product is not as sticky as it could be and many customers will not want to engage with it yet. As a consequence, much of the money you are spending on traction will leak out of your bucket. There is no reason to scale up your efforts now. You are throwing much of your money away!

As you hone your product, you are effectively plugging leaks. Once you have crossed over to phase II, you have product-market fit and customers are sticking around. Now is the time to scale up your traction efforts: your bucket is no longer leaky.

When you constantly test traction channels by sending through a steady stream of new users, you can tell how leaky your bucket is. You can also tell if it is getting less leaky over time, which it should be if your product development strategy is sound. In fact this is a great feedback loop between traction development and product development that you can use to make sure you’re on the right track.


How Much Traction Is Enough for Investors?

Startup founders tend to focus on fundraising, often out of necessity. As a result, they often wonder how much traction they need to get investors interested. Naval Ravikant, founder of AngelList answers this question well:

“It is a moving target. The entire ecosystem is getting far more efficient.Companies are accomplishing a lot more with a lot less.

Two years ago (Nov 2010) you could have gotten your daily deal startup funded pre-traction. Eighteen months ago you could not have gotten a daily deal startup funded no matter how much traction you had. Twelve months ago you could have gotten your mobile app company funded with ten thousand downloads. Today it’s probably going to take a few hundred thousand downloads and a strong rapid adoption rate for a realfinancing to take place.

The definition of traction keeps changing as the environment gets competitive. That’s why it is actually useful to look at AngelList and look at companies who just got funded; that will give you an idea of where the bar is right now.”

It is also a good idea to first reach out to individuals who intimately understand what you’re working on (perhaps since they have worked on or invested in something similar before).

The better your prospective investors understand what you’re doing, the less traction they will need to see before they invest because they are more likely to extrapolate your little traction and believe it could grow into something big. On the other hand, those investors that have little real-world experience within your industry may find it hard to extrapolate and may demand more traction initially before they invest. An outlier is friends and family, who may not need to see any traction before investing since they’re investing in you personally.

You may not have the benefit of reaching out to people who are familiar with you or your work. In this case, you will want to do your homework on prospective investors. Again, the ones most likely to understand your company (because they’ve made similar investments or have done similar companies before) are the ones you should approach first.

It is easy to get discouraged when you are fundraising because you can get so many rejections. However, you shouldn’t take rejection as a rejection of your idea. There are many reasons why investors may say no that are simply beyond your control (investment goals, timing, expertise, etc.).

Remember that different investors have different goals. Some are looking for home runs and so are focused on turning a big profit. Others are looking for a single or a double, and will therefore be more looking at your revenue and current traction strategy. Others still are simply looking to get involved with something interesting.

Likewise, some investors may focus on revenue and profitability while others may want to see evidence of intense product engagement.

Product engagement means different things for different startups, but generally it means real customers using your product because it is solving some problem or need for them. Sustainable product engagement growth (i.e. more customers getting engaged over time) is hard for any investor to ignore.

This is true even if your absolute numbers are relatively small. So if you only have 100 customers, but have been growing 10% a month for six months, that’s attractive to investors. With sustainable growth, you look like a good bet to succeed in the long run.


To Pivot or Not to Pivot

You may come to a point where you are simply unhappy with your traction. You may not be able to raise funding or just feel like things aren’t taking off the way they should. How do you know when to “pivot” from what you’re doing?

We strongly believe that many startups give up way too early. A lot of startup success hinges on choosing a great market at the right time. Consider DuckDuckGo, the search engine startup that Gabriel founded. Other search startups gave up after two years: Gabriel has been at it for more than six.

Privacy has been a core differentiator for DuckDuckGo (they do not track you) since 2009 but didn’t become a mainstream issue until the NSA leaks in 2013. Growth was steady before 2013, but exploded when privacy became an item on the national consciousness.

It’s important to wrap your head around this time-scale. If you are just starting out, are you ready to potentially do this for the next decade? In retrospect, a lot of founders feel they picked their company idea too quickly, and they would have picked something they were more passionate about if they realized it was such a long haul. A startup can be awesome if you believe in it: if not, it can get old quickly.

If you are considering a pivot, the first thing to look for is evidence of real product engagement, even if it is only a few dedicated customers. If you have such engagement, you might be giving up too soon. You should examine these bright spots to see how they might be expanded. Why do these customers take to your product so well? Is there some thread that unites them? Are they early adopters in a huge market or are they outliers? The answers to these questions may reveal some promise that is not immediately evident in your core metrics.

Another factor to consider before you pivot: startup founders are usually forward thinking and as a result are often too early to markets (that’s why it’s important to choose a startup idea you’re willing to stick with for many years). Granted, there is a big difference between being a few years too early and a decade too early. Hardly anyone can stick around for ten years with middling results. But, being a year or two early can be a great thing. You can use this time to improve and refine your product. Then, when the market takes off, you have a head start on competitors just entering your space.

How can you tell whether you are just a bit early to market and should keep plugging away? Again, the best way to find out is by looking for evidence of product engagement. If you are a little early to a market there should be some early adopters out there already eating up what you have to offer.


Takeaways


• Don’t fall into The Product Trap: pursue traction and product development in parallel, and spend equal time on both.

• The Bullseye Framework and a product development framework (e.g. Lean Startup) can work together to maximize your probability of success.

• Focus on strategies and tactics that can plausibly move the needle for company. What change in growth metrics would move the needle for your company?

• How much traction is needed for investors is a moving target, but a sustainable customer growth rate is hard for investors to ignore. Potential investors who understand your business are likely to appreciate your traction and thus invest earlier.

• If you’re not seeing the traction you want, look for bright spots in your userbase, pockets of users that are truly engaged with your product. See if you can figure out why it works for them and if you can expand from that base. If there are no bright spots, it may be a good time to pivot.