David Pakman(a partner at Venrock):
The aberrations occur when traction looks like value. When Slide was funded at a $500M pre-money valuation, that was an example of traction being confused for value. Sure people posted their pictures using a Slide widget 150M times, but there was no value created. Slide did not have a real relationship with those customers and it was a stretch to believe that an ad model would occur on top of those photo widgets.
As an entrepreneur, it’s always hard to tell the difference. Mostly because you’re first few releases are usually only the tip of the iceberg. Behind every startup there’s usually a planned path to world domination. It usually makes sense in a PowerPoint, but hard to put into practice.
In the past, I’ve downplayed several startups based on their first product released and have now learned not to do it. Traction is an important stepping stone towards value. You just have to make sure you transform fast enough to build that value.
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