Of all the seed deals we receive, there is a basic
assumption of required traction. At today's web costs, it is fairly inexpensive
for an entrepreneur to test his startup's appeal to users. Using social
networks and basic viral marketing techniques, he/she can demonstrate initial
traction. Each investor can define his own criteria for good traction, however
we've summarized our own along the following 7 criteria.
7. Downloads over 6 months with Free version - "Gross
Tract"
6. Churn rate or utilization rate from Free Downloads -
"Drops"
5. Conversion rate from Free to Subscriber (basic) -
"Uptake"
4. Lead time of conversion from Free to Pay -
"Drag"
3. Acquisition Cost
per Subscriber - "CPS"
2. Churn rate of paying Subscribers - "Money
Drops"
1. Net contribution
margin per Subscriber, post infrastructure costs - "NetCoM"
Basic FF&A money can finance an initial cost of getting
traction measured along the above criteria, then it becomes more of a company
structuring discussion with an Angel investor: Team, BizPlan, Key Milestones,
Cash burn, Building to a Company versus a Project, etc.
