A VC explains the difference between what they say and what they actually mean when talking about traction

I often hear founders say “Australian VCs are so conservative, they all want traction before they’ll invest! You have to go to the US!”.

While the idea that you must go to the US for funding merits a longer write-up, let’s talk about VCs asking for traction.

VCs, like most people, can be bad communicators. There’s also a real incentive for them to give you feedback that’s not too honest. If they’re too honest they risk upsetting you and hurting their reputation.

Reputation is everything as a VC and it’s more accepted to have an “ok” reputation than an outright bad one.

For example, I can often be a bit too honest, and that’s a risk for me because not everyone likes that (even though I believe in being super-honest with founders).

So instead of being fully honest VCs may give you a watered-down version of their opinion. I think asking for traction is one variant of that.

Here’s an example:

You pitch a software tool that you plan to sell to schools.

You’re in the early stages of being a founder and haven’t yet spent enough time talking to schools or thinking about go-to-market. As a result, let’s say that you don’t impress the VC with your insights about how you’re going to sell to schools or teachers.

In their response they don’t want to say “I just don’t think you were that impressive” or “I just don’t think you’re going to be able to sell” (partly because it might offend you and partly because they could easily be wrong!).

So they say something like: “Thanks so much for your time but we’re not going to invest. We think selling to schools can be very difficult and so I’d love to touch base when you have won over some customers”.

It’s not because they need traction by default, it’s because they want proof that they’re wrong or they will continue to hold their current belief (which is that you don’t know how to sell to schools).

I’m not saying that this approach to feedback is right. I’m trying to explain how VCs think.

If you can’t convince a VC with narrative alone they will look for traction.

I also need to caveat: the above is just one example of what traction-based feedback can mean.

My colleague Jethro shared three other types of traction-based feedback:
1) I want more traction than what’s appropriate for your stage (that’s unreasonable, they’re just a later-stage investor in that case)
2) I’m excited by you as a founder but I’m anxious about GTM in this market and need to see traction to overcome this (reasonable)
3) Your traction is too slow for your stage (reasonable)

Let me know if this helps and I’d love to hear your experiences with this type of feedback!