I wrote a post last week about the dreaded “startup traction gap” between having a sellable MVP and getting to $50K MRR or some other measure of traction.
This is 1st in a series of 4 posts describing how software founders are creatively bridging the traction gap without big funding.
95% of tech investors and acquirers wait on the other side of the traction gap.
Most founders with a big idea and a product-y thing to sell never make that far.
They stall out in the traction gap.
(Link to my previous post in comments.)
Here’s is the most common way I see how savvy founders are making it across the traction gap before they have predictable revenue:
THEY FUND THE START AND THE TRACTION-BUILDING THEMSELVES in one of two ways:
1) They have a SERVICES BUSINESS that generates enough cash and extra team time to build a sellable product. They keep this services business going to fund the product startup experiments and get to self-sufficient revenues.
2) They invest their OWN TIME to code a sellable first product themselves. They are technical enough to build something sellable. They don’t pay for outsourced developers. And they don’t quit their day jobs until they have enough revenue coming from the new product business.
These founders know that their startup revenue problem won’t be solved (or will be harder to solve) with “magical” outside funding.
They are taking the startup risk themselves. They can’t ask an outside investor to fund something they don’t know will work yet.
In both cases, they have bought enough time to pivot, experiment, try again, learn and improve little by little. Sometimes it takes years.
Both self-funding methods require frugality, customer intimacy, product savvy, revenue focus, and practical ambitions.
This is called PRACTICAL FUNDING.
For PRACTICAL FOUNDERS.
By far the question most early-stage institutional investors ask me is this: “Do you know any self-funded software companies that got to $3M or $5M without outside funding?”
And by far the founders who get to $3M or $5M in recurring product revenues have the most OPTIONALITY AND CONTROL over how to grow their already-valuable companies.
There is no such thing as “no funding.”
Building products and getting customers takes investment–of your time, profits, savings, relationships, and more.
I estimate that self-funding or an existing services business actually funded the start-to-traction phase of 20%-25% of all companies on Gregslist.
It’s way more common than people can see because there are no big press releases announcing VC funding, no overspending on visible marketing, and no over-hiring that attracts attention.
Just a hunkered-down founder slowly investing their own time, team, and money.
I’ll write next about other ways to brute force your way across the traction gap if you can’t fund it yourself.
There are many ways to cross the traction gap.
Here are all 5 parts of the series on funding your way across the traction gap.
- Crossing the dreaded Traction Gap between MVP and sustainable sales
- Funding your startup across the Traction Gap with your day job or services business
- Funding your startup across the Traction Gap with sales revenue aka customer funding
- Funding your startup across the Traction Gap with angel investors
- Funding your startup across the Traction Gap as a 2nd time founder