How Much Traction is Needed Before Seeking Angel Investing?

When approaching angel investors, the level of traction required can vary significantly depending on the nature of your business and the investors' expectations. However, there are some general guidelines that can help you understand how much traction you should ideally have before seeking investment.

Early Stage Startups

For very early-stage startups, having a solid business plan, a prototype, or a minimum viable product (MVP) can often suffice. Traction may manifest as initial user engagement or feedback, or even early sales.

Product-Market Fit

It is ideal to demonstrate some level of product-market fit. This can be shown through metrics such as user growth, retention rates, or early revenue. Having a clear understanding of whether your product meets the needs of your target market is crucial.

Revenue

While not always necessary, having some form of revenue, even if it is modest, can significantly strengthen your position. Many angel investors prefer to see consistent monthly revenue growth. This indicates that your product or service is gaining traction in the market.

User Metrics

For businesses that are product-based, metrics like customer acquisition costs (CAC), lifetime value (LTV), and monthly active users (MAUs) can be compelling indicators of traction. These metrics demonstrate the efficiency and effectiveness of your business operations.

Evidence of market interest through waiting lists, partnerships, or letters of intent from potential customers can also serve as a form of traction. Such validation suggests that there is demand for your product or service in the market.

Clear Vision and Milestones

Even if traction is limited, presenting a clear vision and defined milestones can attract investors. They want to see that you have a plan for growth and how their investment will help you achieve that. A well-articulated roadmap can be a powerful tool in convincing investors to support your venture.

Do You Need an Angel Investor?

Based on your downloads and redeemed offers, they sound impressive. If you are generating revenue and are looking for capital to grow faster, it might be a good time to consider angel investment. However, it is important to ensure that you have a strong case for traction and growth potential.

Angel Investor Considerations for a Mobile App

Angel investors are often drawn to companies based on the quality of the team, the market space, the stage of growth or scale, and their assessment of the opportunity. If your business is a mobile app, additional considerations should include user engagement, plans for product expansion, uniqueness, defensibility, and customer retention.

Is your app unique? Does it overlap with other similar apps? How defensible is the space? How are users retained? How broad is the selection of restaurants? These are just a few of the many questions you should be prepared to answer.

Good luck on your journey!

Note: This article is intended to guide and provide insights to potential startups. The decision to seek angel investment should be based on a thorough assessment of your business’s current state and future growth potential.