Fundraising is excruciatingly hard. No doubt.

Yet fundraising tends to be the hardest when a startup goes out to fundraise with what I call the “almost, but not yet” traction story.

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In a perfectly ideal world, startups would achieve their intended traction milestones that they set out to hit at the previous funding round.

But in true reality, often startups have to go out to raise with a traction story that is not as impressive as the founder wants it to be.

Maybe they didn’t achieve as much progress across customers or revenue with the last funding round as they set out to do, and now they find themselves between this dilemma:

“We have more traction than we did at our last fundraise…

…But we don’t have enough that the next round of investors would prefer to see in order to invest.”

They find themselves on the fundraising trail with an “almost but not yet” traction story. They have almost hit the next value inflection point - they have almost completed their product, they have almost signed that big customer, almost crossed over a revenue threshhold, but not yet. And… worst of all, the cash runway is tightening.

Happens all the time.

✅ In these moments, a re-frame is the founder’s most powerful tactic with investors. ✅

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.

✅ I recommend that founders do something that may feel counterintuitive - get the customer and revenue question out-of-the-way first and then move the spotlight to something else. ✅

Specifically, I recommend the founder frames up three things:

✅ 1) Get the customer and revenue question out-of-the-way first

2) Move the spotlight to the risks that were present at the last fundraise.

3) Detail how those risks have been removed since the last fundraise ✅

These three points should be like a literal script that you have that you tell investors.

You may find it odd that I encourage founders to get the customer / revenue question out of the way first. But there is a psychological reason why.

Investors can often tell when a founder is not saying what one would expect them to say.

Over time, I have been conditioned to hear what the founder is saying, but also seeing what the founder is not saying. I then move in to discover why they're not saying it.

Are they not saying it because there's not much there? Do they think I’ll not like the answer? I felt this as a founder, so I get the tension.

Here is the huge hazard through - this lack of straightforwardness can be misinterpreted in a negative way.

Let me share a story.

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.

There is a dynamic when talking about startup traction that almost is universally true:

But the hack re-frame here is: Instead of hiding what you're not confident about, you lead with it and then move the spotlight onto something else.

What does this look like in practice? Let’s go the three tactical moves to this re-frame:

If you have an “almost but not yet” traction story, your first line could sound like…

Why come out and say it instead of saving the customer and revenue numbers until the investor asks? Because just to be straight up here, the traction story, customers, revenue, product stage, etc. is the elephant in the room. The investor will ask. You can be 100% sure of that. So don't give any perception that you're hiding something.

If brought up right out of the gate, 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.

Using a tightly scripted statement, state the “almost but not yet” part of your traction up front and then say, “but,” which leads to the next part.

✅ 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. 

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.

✅ 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. ✅

At this point, you should be able to reframe your "almost but not yet" traction story to an investor in the following way,

✅ “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.]” ✅

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.

✅ 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,

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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