The Traction Gap

My friend and a partner at Wildcat Venture Partners, Bruce Cleveland, along with his associates, has come up with an idea that helps explain why some early-stage companies thrive and thus raise more capital, while others die on the vine.

As a venture capitalist, he is always trying to figure this out, trying to determine who gets another round of funding and who doesn’t. If you are a high-net-worth individual parking money in a VC firm, that should be comforting.

Cleveland’s idea comes from Eric Ries, founder of the blog Startup Lessons Learned.

“What matters is proving the viability of the company’s business model, what investors call ‘traction.’ Demonstrating traction is the true purpose of revenue in an early growth company,” Ries said.

Now, before we award anyone a Nobel Prize, that is pretty much what Geoffrey Moore was talking about in the 1990s when he coined “crossing the chasm.” New or recycled, however, the idea bears renewed consideration, especially in this advanced marketing age.

Read the full article here.