This is the second in a three-part series that aims to help you understand the Traction Gap Framework® – a step-by-step approach that startup teams can use to go from ideation to preparing to scale. The principles outlined in this framework can help prevent your startup from joining the vast majority who have landed on the entrepreneurial scrap heap. In the first post, we drilled down into the often-overlooked notion of “market-engineering” and why it’s so critical.
Read on to find out what exactly the “gap” in the Traction Gap Framework is and why traversing that gap is so critical to your success.
Mind the Traction Gap?
The best way to explain the “gap” in the Traction Gap Framework is to review the three phases that every startup must pass through in order to succeed.
In two of these three phases – the first and third – volumes of helpful information and numerous organizations are readily available to help guide and support founders of startups.
In the go-to-product phase, you can get help from a plethora of incubators, accelerators and angel investors. Books such as Steve Blank’s The Startup Owner’s Manual and Eric Ries’s The Lean Startup do a great job of exploring the challenges of the go-to–product phase, and identifying the importance of reaching product/market fit with a Minimum Viable Product (MVP).
Likewise, there’s a substantial amount of support for the very few startups that make it to the third, go-to-scale phase. These are the consultants and books that offer founders the tools and insights needed to “cross the chasm” (as Geoffrey Moore put it) and begin to scale.
But when it comes to that crucial second phase – go-to-market – entrepreneurs find themselves devoid of help and support. There are no seminal books and few insightful blogs for them to turn to. And given the paucity of business metrics at this point in a startup’s lifecycle, spreadsheet analysis is of little help. Most entrepreneurs have a solid product to offer, but in order to fulfill any dreams of scaling, they must first get their product into the market and generate initial awareness and interest.
In other words, they need go-to-market traction. We call this crucial phase the Traction Gap.
The Traction Gap is somewhat of a no-man’s land for entrepreneurs. It’s a place of vulnerability where many startups crash and burn – where they face great financial risk and a limited amount of time to get things right. The harsh reality is that if they can’t demonstrate traction, most startups won’t be able to convince investors to provide them with the capital they need to make it to the third, go-to-scale, phase. Next thing they know it’s too late: They have joined the 80+ percent of startups that find themselves auctioning off their IP for pennies at best, boarding up their doors and joining the ranks of Munchery, Path, Apprenda, Klout and many, many others.
But there’s a way to survive – even thrive – in this high-stakes environment. The key lies in thinking about the go-to-market phase as a number of sub-phases within the Traction Gap Framework. We call these sub-phases value inflection points. The reason is that as you reach each one, you dramatically increase the value of your startup by reducing market, technical, execution, and team risk. In Wildcat’s experience, organizing the go-to-market phase using these specific points vastly improves your odds of reaching the go-to-scale phase.
The value inflection points include:
Minimum Viable Category (MVC).
This is a key part of the market-engineering process — although strictly speaking it’s part of the go-to-product phase. As you develop your product, you must concurrently invest in market-engineering tasks. Market-engineering includes identifying your product category, and refining how you are creating, defining or disrupting that category, initial positioning, pricing models, messaging matrix, etc. In this phase, you should conduct validated market research that confirms that your chosen category can support your venture.
Initial Product Release (IPR).
This is the point at which the product (often a Beta version) first becomes available to the public and to the target user(s). At this stage, the team is seeking market and customer validation metrics.
Minimum Viable Product (MVP).
The MVP is the most pared-down version of a product that customers are willing to purchase or use. It marks the first moment at which you have in your hands the raw version of what you believe can be a successful product.
Minimum Viable Repeatability (MVR).
MVR is the smallest amount of repeatability a startup can demonstrate, while still proving its business model and market/product fit. More than just sales, repeatability also means demonstrating product release repeatability, implementation success repeatability, and some marketing and lead generation repeatability.
Minimum Viable Traction (MVT).
This is the point in a company’s maturity – indicated by a certain level of revenue growth, engagement, downloads, usage or other metric – that demonstrates market validation and signals a positive growth trajectory. Think about MVT as: MVR plus multiple quarters of growth. The industry-leading, public companies – on average – made it from IPR to MVT in three years or less. This is the yardstick by which your startup will be measured.
If you achieve MVT, you have successfully traversed the Traction Gap and congratulations are in order. You’ve beaten the odds and are now part of a very small club of startups that survive this process. You are now ready for the go-to-scale phase.
In the third and final installation of this series, we’ll examine the four architectural pillars of the Traction Gap Framework. These are the foundational building blocks that all companies, irrespective of size and maturity level, must continuously measure, refine and optimize – any one of which can lead to failure if overlooked.
You can learn more about the Traction Gap Framework here.
Bruce Cleveland is a Founding Partner at Wildcat Venture Partners and author of the book “Traversing the Traction Gap“. The book pulls from Bruce’s three decades of experience as an operating executive at once “early-stage startups” Oracle and Siebel, and as an early-stage venture investor in companies such as C3, Doximity, Workday, Marketo, Obo and Greenfig (the latter two he co-founded).