In today's startup era, what do you prioritize, tractions or fund raising?
I know most of you will favor the tractions but will spend more efforts in preparing the pitch deck & go for fund raising. May be the ground reality is such, fund raising comes first, then the tractions but there must be a fine balance & some trade off here.
Where do we draw the line?
I think the answer will be different depending on the founding team. If the founding team has access to good capital (maintain control, good terms, value adding investors, etc.), it would be foolish for them to not to focus on securing that capital first. It is easier to get traction when you have a some funding and can build a reasonably good team and product than trying to do so with no funding. Which is why some investors purely invest in the team and not the idea/traction.
On the other hand, if the founding team has no access to capital and has technical/product chops. It would be best for them to focus energy on getting traction to later attract capital rather than pitching to dozens of investors just to get turned down. With enough traction (proof), you will have a lot more interested investors because you'd reduced their investment risk substantially.
This is easy. You always prioritize traction (not the word I would use, but it means something similar to my intent). If you have a product with a great fit and that attracts customers at a consistently strong pace you never need to fundraise, write a pitch deck, or beg people to join you. And you end up in a position where you own everything and get to decide what to do without answering to others or dealing with their priorities.
I feel that in many cases, a business that needs outside funding isn't a good business. Part of the plan should be how to start in a way that you have income to fund development. Or it might reveal that you shouldn't start at all, not that you should go ask for money to start. Yes, I understand the clear advantages of outside funding and that many people don't start with much of their own cash. I think that's bad in many ways, because you treat your own money differently than someone else's. And you better understand the equation of time versus money.
In my opinion (and it's just an opinion), many startups would do a lot better if they came from a place where they believed it was their personal responsibility to generate the source of funds with no help. It would be a very different way of more carefully planning, and seeing the detail of incremental growth, and a responsibility level very different than with the leap forward someone else's money provides. Some externally funded companies do a much worse job with durability precisely because they skipped over important lessons that come from working for every penny.
It depends how much of your company you want to give away when you raise. Traction is one of the elements of reducing the risk of the investment (it’s eveidence that there are customers that want to buy your product).
The aim of the game with fund raising is to raise just enough money (with a buffer) to get you to the next meaningfully reduced level of risk, (ie the ability to raise funds on better terms) without running so low on cash that you have to quit.
In short - derisk as much as you can on your current funding (build a proof of concept / MVP, get as much traction as you possibly can, convince other talented people to join you etc), then fundraise and repeat.
Traction is the proof that the idea is valid. If all goes well, you may not even need to do any pitching :)
Here is what hardly anyone will tell you and you won’t fogure out until you choose traction or making the idea sound good with a pretty deck. Unless you can get outrageous traction right off the bat, most investors are too incompetent to know the difference of value between a ready product and an idea. Do some surveys of potential customers, get a good information base from that then raise money if you are going to raise. Most investors will put you at the exact same value if you raise now or with a just completed product if you haven’t previously raised money.