Startups, channels and the importance of traction

I recently met with the founders of a promising new SaaS startup. After listening to their pitch and a bit of Q&A, we began talking about growth strategies. They asked how soon we could begin helping them build a channel program. They have a promising product with a large, well defined market and a clear value proposition. Their packaging and pricing have been iterated and refined considerably. There’s just one problem: no customers.

While being “pre-revenue” doesn’t present the broad challenge it once did for startups, it’s still a show-stopper for channel development. First, you need traction.

If you follow Lean Startup and Customer Development methodologies, you’re familiar with the term traction. It’s often used as shorthand for the proof of product viability sought by VCs and Angels when evaluating a potential investment. It’s also critical to building successful channels.

In the days before Google AdWords, viral effects and freemium, traction would be just another way of saying “paying customers.” Today, it’s not so simple, but ultimately if a software company (SaaS or otherwise) intends to build a channel, it comes down to demonstrating traction. As with prospective customers, potential partners rarely want to be the first to take the leap with your new technology. They want to know it’s demonstrated, proven and trusted.

In my conversations with founders of early stage software companies, they often question why a potential partner would not jump at the opportunity to be first to market with their new software product. These founders are understandably and necessarily deeply passionate about their creations. But that’s not the reality of how channel partners evaluate an opportunity. For them, new equals risk, and lack of traction—more often than not— equals unacceptable risk.

From the perspective of a potential partner, why should they take on the burden of doing for you what you’ve not yet done for yourself? That is: acquire new customers.

The solution to this problem is straight forward, if not trivial: go out and build traction. Develop and acquire customers, even if they aren’t paying customers—yet. Show that you have a market with buyers that value your product. Though you might be eager to build a new channel, chasing partners to influence and sell your product without traction will burn precious time and resources, and rarely produce profitable partnerships. Remember, signing an agreement is the easy part. Driving more sales is what matters.

Having customers in-hand before building a channel not only reduces the perceived risk of doing business with you, but helps a partner succeed once they are. Your customer wins are the basis of the marketing and sales tools that enable channel partners to influence and sell more, more predictably. They’re the core of your partner marketing materials and the blueprints for how partners will demonstrate value with your product, address buyers’ objections and ultimately close the sale. Without traction, you’re just taking shots in the dark.

As with all rules, this one has its exceptions. When and how can you get around not having an established customer base? When your product constitutes a new category or uniquely fills a market need, providing a partner with such significant opportunity that they’re willing to take the risk. But then that partner is less a channel and more a strategic alliance, a topic for another day. More often than not, however, they’ll want to see traction.

© 2024 Shawn Yeager. Made in Nashville.