How much traction do I need? And why am I having a tough time raising with more traction than some of my peers?

Raising money is not a linear game. It’s not like at $1M in ARR you can raise X, $5M you can raise Y, etc. Funds don’t work formulaically. Much of investing is about what the investor “feels” about the market, the founders, etc etc. Additionally, the goalposts are constantly changing. If the mega funds start wanting $2M ARR to do a Series A check instead of $1M, the market moves, and so forth. So there’s no magic answer to how much traction you need to raise a round. Exceptional founders can raise millions pre-product, and I’ve seen great companies with $1M in ARR struggle to raise a pre-seed round because of market headwinds. Also, hardware goes “in” and “out,” making it easy or extremely difficult to raise money for, and so on.

So if nobody can tell you how much traction you need to raise, how do you know if you’ll be successful. Well, there’s no way to know, but generally the following rules apply.

1) Your startup may not be fundable by anyone at the current level of traction, in the current market. If you get that feeling, quickly find meaningful milestones to propel the business forward — don’t waste cycles fundraising.

2) If you notice a pattern, that ¾ of investors are completely not interested but ¼ are interested, maybe it’s about your target. What size fund or angel should you be targeting, what focus, etc? Maybe your traction is good enough to raise from people with a specific focus or of a specific stage, but not others.

3) Revenue is king. If you’re being told you’re too early, coming back with more revenue will make you less early. Short of that, there’s very little you can do to change how “early” you are.

4) Investors never want to be nailed down by the question “how much revenue would I need for you to be interested,” but generally you can feel out their target ranges of deals they’re doing. That will give you a sense for where the state of the market is (if 3 investors all say they need $5M in ARR to write a check of the size you’re looking for, then that’s a pretty good indication you need a different type of investor with a different check size, because you’re not at that stage).

5) Raising money is a numbers game. One man’s trash truly is another man’s treasure. I know brilliant investors who passed multiple times on Pinterest and Facebook. So ensure you’ve got a wide enough funnel to get a real read on whether ANY investor will fund you at this point — if you only speak to a few investors, your chances of finding one who believes in you is much lower.