✅ Framing is the founder’s most powerful tactic in an investor meeting. ✅ 

Framing is important across many dimensions in an investor meeting. But especially in the scenario where the startup is fundraising with an “almost, but not yet” traction story.

For context, the #1 measurement of traction is customers and revenue.

But frequently, startups don’t achieve as much progress across customers or revenue before they have to start fundraising again, and they are running out of cash. Thus, the startup needs to raise a bridge round with what I call an “almost, but not yet” traction story.

The “almost, but not yet” traction story is where the startup has almost hit the next value inflection point that is typically customer or revenue related, but is not yet there. This traction story is not as optimal for fundraising because the startup’s case to investors is not as compelling as everyone would like.

There’s been a handful of scenarios where I have helped our portfolio companies through this “almost, but not yet” traction story.

Here are a few ways that I think about it.

Framing an “Almost, but Not Yet” Traction Story

✅ With an “almost, but not yet” traction story, I recommend that founders get the customer and revenue question out-of-the-way first and then put the spotlight on something else. ✅

I think about this statement as a template to help with the “almost, but not yet” traction story:

✅ “So at this point, we have [insert current customer/revenue traction], but, at the last fundraise, we saw that [insert X, Y, and Z risks that were present at the last fundraise,] and so we [insert the accomplishments that show how X, Y, and Z risks have been addressed.]” ✅

State your Customer and Revenue Traction Up Front.

There is a natural desire with startup founders to not immediately reveal the customer and revenue facts if the numbers are not super impressive. I felt this as a founder, so I get the tension. But this can be misinterpreted in a negative way.

I once experienced a situation where a founder sent a company investor update.

An investor asked about the revenue numbers for the company.

The founder didn’t immediately come out with the numbers in the first volley of communication and essentially said, “It’s still early” and got into other items.

The initial response gave the appearance like the founder was hiding something. Being a former founder, I knew the founder wasn’t. They were just hesitant to answer the question because they knew the numbers were not as impressive as everyone wanted them to be.

I communicated with the founder again, and the founder listed out the revenue from different channels specifically and we got the clarity we needed.

If the customer or revenue numbers are in “almost but not yet” category, you can use the first line of the statement above. This can sound like…

• “We are piloting with three potential customers and have yet to activate revenue, but…”

• “We are generating a few thousand in ARR at this point, but…”

• “We are still pre-revenue but…”

Why come out and say it instead of saving the customer and revenue numbers until the investor asks? Because the investor will ask. You can be 100% sure of that.

If brought up right out of the gate, using the statement above, the founder frames the customer and revenue traction as if it’s a passing thought and then verbally moves the attention of the conversation onto something else.

If the investor has to ask specifically ask about it, the lack of customer and revenue traction then becomes the focus of the conversation and the founder finds himself or herself in a corner.

The hidden secret is that because customer and revenue traction is a key piece of information, the investor can almost always tell that you are not saying it, and assumes why…

Using a tightly scripted statement, state the customer and revenue traction up front and then say, “but,” which leads to the next part.

Put a spotlight on the risks that were present at the last fundraise

✅ Traction is not as much about what your startup has accomplished.

Rather, it is more about the risks that your startup has removed. ✅

A fantastic podcast clip is from this interview from the Pattern Breakers podcast, formally Starting Greatness. Mike Maples Jr. of Floodgate.VC is interviewing Vinod Khosla of Khosla Ventures. Vinod drops a great insight that I had never heard before...

"What really matters in a startup is not timeline on one axis and money spent on the other… but rather, money spent versus risks removed. That is the most important graph in a startup.”

When I invest, I think of every startup as a measure of risk. Specifically, there is risk across three dimensions - 1) Technical risk, 2) Market risk, and 3) Scale risk. 

1. Technical risk is “Can this product, and therefore, the fundamental customer transaction, technically be achieved?”

2. Market risk is “Is there strong evidence that customers demand the product and are paying for it?”

3. Scale risk is “Can customers be acquired with high margins and low customer acquisition costs across a large number of customers, quickly?”

Detail the accomplishments that show how those risks have been addressed

Tie every accomplishment to a risk category.

Using these three categories of risk above as a template, start listing the startup accomplishments based on the categories of risk that your company faced at the last fundraise. Or, if this is the first fundraise, upon company inception.

• For technical risk, this could be accomplishments that are product or technology-related that reduce the technical risk.

• For market risk, this could be accomplishments that demonstrate demand signals and product retention. Examples could be waitlists, demonstrating early product margins, re-order rate, conversion rate, churn rate, etc.

• For scale risk, this could be accomplishments that demonstrate that there is demand at a large number of customers and that the company can scale rapidly.

✅ Traction is the objective validation that a startup is moving from a position of high risk across either technical, market, or scale risk, to a position of lower risk in those same categories. ✅ 

✅ Thus, the only thing I consider traction is notable achievements that display progress and that serves to reduce the startup’s risk in one of those three categories. Anything else is vanity metrics and activity without achievement. ✅

Bringing it All Together

You should now be able to communicate in a tightly scripted statement to an investor,

✅ “So at this point, we have [insert current customer/revenue traction], but, at the last fundraise, we saw that [insert X, Y, and Z risks that were present at the last fundraise,] and so we [insert the accomplishments that show how X, Y, and Z risks have been addressed.]” ✅

So, what will be on your traction slide?

A traction slide acts as a “de-risking progress” slide.

The same way that it is communicated verbally, on the traction slide, I recommend that founders get the customer and revenue question out-of-the-way first and then put the spotlight on something else.

On the traction slide, list the accomplishments that are the most relevant to the risk category that you are working on. If you’d like, tie those accomplishments to the risk categories.

Just as you verbally come right out and state the customer and revenue traction, I encourage you to come out and state it on the slide. (“3 paid pilots,” “waitlist of 876 email addresses,” but… and list the other accomplishments that are tied to risk.

Closing Thoughts

✅ Framing is the founder’s most powerful tactic in an investor meeting. ✅ 

One of the most critical moments to frame is when the startup is raising a bridge round with an “almost, but not yet” traction story. In this case, I recommend that founders get the customer and revenue question out-of-the-way first and then put the spotlight on something else.

Using the statement above as a template,

• State your customer and revenue traction up front.

• Put a spotlight on the risks that were present at the last fundraise.

• Detail the accomplishments that show how those risks have been addressed.

Using the categories as time spent versus risks removed, you will likely find that you’ve accomplished more than you think and your traction story is more impressive that you originally thought. And that’s exactly what everyone wants to hear.

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