Why a Vision Statement is the most important line of code a startup will ever write.
Traditional Vision Statements are Exciting for the Company
A traditional vision statement is aspirational for a company; it describes where the company is going if it’s successful. It can also be limiting when viewed through the lens of a venture capitalist.
Dramatically improve the odds of your venture’s success by rooting out and mitigating knowable risks with a premortem.
In startup culture, optimism tends to flourish at the expense of honest pessimism. At Foundational, we embrace this by starting our strategy engagements collaborating with our clients to agree on how the world must be changing, what their teams are doing to bring about that change, and how we will measure the achievement of their inevitable success… we also use a novel process that quickly identifies the likely causes of failure well before they occur. It’s a simple and impactful technique that any team can do for themselves in under an hour.
What is Traction? Where does it come from? And, most importantly, how do you generate it?
Startups are in an endless pursuit of product-market fit. If they are very young, they might still be defining their vision of what the world will look like should they find it. If they are more mature, they are justifying to their next round of investors and strategic hires that they are strengthening their understanding of the early fit they’ve already established. This road is so well-traveled that the industry has adopted a name for the story of this pursuit: traction.
…and how to get VCs to give them to you. These common traits define every startup successfully raising venture capital in today’s traction-centric market.
What it Takes to Raise a First Round
VCs are ultimately judged by their own investors on their Internal Rate of Return (IRR). In order to optimize that metric they need to time their investments so they’re getting in at exactly the right point in history… or at least they need to feel that way. It’s up to startup founders to create the sense that this time is NOW.
An early-stage investor will back a company once they believe they will see a substantial return on their capital in a reasonably short time horizon. For a seed-stage fund that’s about 20x in a 5-7 year time-frame (or about 1x the entire fund’s size). In today’s market of rising seed valuations, GPs at funds are looking for real product traction and simply won’t be interested if they think a startup still has major go-to-market assumptions to figure out.
If you are successful at defining metrics that tell a narrative of traction, measure progress towards increasing them, and regularly update your most interested potential investors on that progress, then the barriers to raising capital will begin to crumble quickly.
The precondition for this is that founders need to have effective conversations with actual VCs in order to understand what investors perceive as the venture’s core assumptions. Here’s the trick for how to get started…
Our perspectives, learnings, and insights on Traction Science, venture capital, product-market fit and startup best practices.