Unlocking Investor Interest: What Dubai Startups Need to Know About Traction

When you start raising funding, you're likely to hear investors tell you that you need more traction for them to invest in your startup. But what exactly does "needing more traction" mean?

Traction isn’t about the number of new subscribers, website views, or free trials. These metrics are important, but they don’t define traction. Traction boils down to one thing: REVENUE. When an investor tells you that you need more traction, it means you need more revenue to attract funding.

What to Do When an Investor Tells You to Get More Traction

Every investor you meet will have a different perspective on how much traction they need to invest. If one investor tells you that you need more traction, take note and ask, “How much traction do we need?”

Don't change your strategy immediately. However, if multiple investors echo this sentiment, take a closer look at your investment strategy.

Understanding Investor Expectations

The amount of traction needed can vary widely from investor to investor. For instance, if you’re trying to raise AED 18 million from venture capital firms and have a monthly revenue of AED 367,000, but investors pass because you lack traction, consider raising a smaller round from angel investors. Conversely, if you’re aiming to raise AED 3.67 million from angels and have a monthly revenue of AED 36,700, you might need to reduce the amount you're raising. Investors are signaling that you need to adjust your approach.

Strategies to Gain More Traction

Traction takes time, and sometimes, there's little you can do to accelerate revenue growth except to wait. This is often good news, as it indicates you're on the right path.

However, if you're not in this situation, here are some steps to consider:

1. Get Out and Sell: As a CEO, you are your company’s best salesperson. Your customers want to meet with you, and your involvement can significantly boost sales.
2. Increase Advertising Spend: If online advertising yields positive returns, increase your spend to boost revenue proportionally.
3. Reduce Sales Friction: Make it as easy as possible for customers to do business with you. Simplify your sales process to prevent customers from dropping out of your sales funnel.

Raising Funds Without Enough Traction

If you need more time to build traction, you must extend your runway, often by reducing costs.

1. Reduce Salaries: This painful step can buy you the time needed to close funding.
2. Negotiate Vendor Payments: Delay payments to vendors to conserve cash.
3. Layoffs: Reducing your team size is a common, albeit tough, measure to cut costs.
4. Prepayments from Customers: Offer discounts or extra services in exchange for upfront payments.

Adapting to the Fundraising Environment

The amount of traction required varies depending on your market and the current investing environment. The tougher the environment, the more traction you’ll need. Accept that the person with the money sets the rules. The sooner you understand this, the better off your company will be.

For Dubai startups, this means recognizing the unique dynamics of the local market and adapting quickly to investor feedback. Stay flexible, focus on revenue growth, and keep refining your strategy to meet investor expectations.

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