complicated concepts

What to Look For When a Startup Has No Traction

Last week at Angel Squad Summit, Eric Bahn (co-founder and GP at Hustle Fund) explained his 5-part framework for evaluating early-stage startups.

The framework included his way of thinking about:

  1. team
  2. problem
  3. solution
  4. market
  5. traction

The whole thing was fascinating.

But while he was talking about the first four points, I couldn't stop myself from thinking: what traction?

Early stage companies usually don't have any traction.

They often don't have any customers, so they have no retention, so they have no revenue.

Turns out, Eric knows this about early-stage startups. I guess listening to like 100,000 pitches over the course of his career actually did teach him a thing or two.

And he insists that even early-stage startups with no paying customers have some level of traction to consider.

Here's what he looks for:

1. they've talked to their customers

Let's face it... it's not that hard to come up with an idea for a business.

But coming up with an idea for a business AND proving there's demand for it?

That's much harder to achieve.

When companies are too early to have traction, Eric wants to know that they've talked to dozens or even hundreds of potential customers.


Because this shows him that the founders deeply understand their customer's pain points.

It also shows him that the founders understand why existing solutions aren't working.

2. they show signs of selling

Many early-stage companies fundraise before they've made any revenue.

But Eric looks for founders who show signs that they CAN sell, even if the product isn't built yet.

For example, he loves to see:

  • a waitlist of potential customers
  • signed contracts → even if payment won't come until after they've delivered the product
  • a pilot program in the works

These signals show Eric a few things.

First, that the founder knows how to sell. Many founders are technical, and their expertise is in building beautiful, useful products.

But if they can't sell their product, it doesn't matter how useful it is. They have to have customers.

Secondly, that the founder has a thesis behind customer acquisition.

Even if their thesis isn't scalable, Eric wants to know the founders are thinking strategically about bringing in new clients.

There you have it

This is just one part of Eric's 5-part framework.

If you want to learn about the rest of it, check out the recording from Angel Squad Summit.

Fast forward to 17:25 to get to Eric's 5-part deal assessment framework.

See you next week!

– Kera from Hustle Fund