Tag Archive for: Startups

By Ellie Pigott

Venture Capital (VC) can be a game-changer for startups, providing essential capital and strategic guidance to fuel growth. However, amidst the promises and potential benefits, founders often grapple with misconceptions that can shape their perception of engaging with VC firms. In this blog, we’ll delve into three common misconceptions that frequently surface in the startup ecosystem: misaligned interests, unhealthy growth rates, and the fear of loss of control. It is important to note that not all VC’s are created equal, but by unraveling general VC misconceptions, we aim to provide a clearer understanding for founders considering VC partnerships.

1. Misaligned Interests: VC’s Will Put Their Own Interests Before Their Portfolio Companies

One key to avoiding misaligned interests with any potential partners is to be clear in expectations from the beginning. During any initial or diligence meetings with potential venture capital partners, be honest in your vision, perceived feasible growth rate, and personal interests for your company. Tailoring or fudging your answers to better increase your odds of receiving funding will only hurt both parties down the line. Likewise, it is also important to ask your potential VC tough and direct questions about their intentions with the company. Examples include, what kind of growth would be expected if we received funding? What would happen if we were not hitting the expected growth? How have you handled previous difficult situations in your portfolio? How involved are you in your portfolio companies?

A VC’s level of portfolio involvement can often be an indicator of how they handle struggles within their portfolio. A larger, more hands-off VC may be more inclined to cut their losses at the first sign of trouble, while a smaller more involved VC may be more likely to put the time and energy into a struggling company to help it be more successful.

Overall, your venture investors are betting on your success and will benefit more if you succeed. Although they have a duty to create returns for shareholders, creating value for their portfolio companies and founders will ultimately help them to generate a higher return.

2. Unhealthy Growth Rates: VC’s Will Push You to Grow Faster Than What is Best for the Company

High growth rates can be daunting, especially when considering the short time span many VCs are built around. It’s important to understand that not all VC’s are built the same, meaning some are designed around portfolio companies achieving a 30X return in 5 years, while others are created around a thesis that allows for 10X growth in 3-5 years. Doing research on or inquiring about potential VC’s growth expectations is a crucial step in finding the right partner. This is also a great step in considering if your company is a good candidate for venture capital. If a minimum of 10X growth within 3-7 years doesn’t feel feasible with your business model or doesn’t align with your vision and values for the company, you may be a better candidate for traditional financing like bank loans.

As mentioned previously, the most important part of a successful VC partnership and the best way to avoid unhealthy growth rates is clear communication. VCs want to generate a successful return but will structure your investment with an exit number already in mind. These expectations could be adjusted down the road if there is a significant change in market size but will likely come with a plan to increase staff, strategy and general support.

3. Fear of Losing Control: VC’s Will Take Control of My Company

Fear of giving up equity in your company can stem from a variety of concerns, often completely justified, but also commonly misunderstood. Are you nervous that giving up equity will result in lower cash in your pocket when your exit? Do you worry VC partners will exert influence over crucial decisions, and limit your autonomy in steering the company’s direction? Does the possibility of a board takeover keep you up at night? All of the above are common VC misconceptions many founders face around investor control, but are any of these true?

  • Giving Up Equity: Many founders have in mind that the more equity they retain, the more money they’ll receive in an exit. This can be true, up to a certain point, which is why the complexity of equity in startups is often compared to pie. Founders tend to think of giving up equity as giving up a piece of the pie, and every time you give up equity, your piece of the pie shrinks. In reality, the pie is continually growing. For example, after two rounds of funding you may only own 40% of your company. But because you took funding and used it to strategically scale, you now own 40% of a $30M business, instead of 100% of a $1M business. In this example, the option with less equity would produce you a higher return. This analogy is great to consider when selecting the right partner. Is the partner you’re adding going to provide an adequate amount of value for the equity they’re receiving?
  • Exerting Influence: When vetting potential investments, a commonly heavily weighed factor is the team. VC’s look for strong founders that are experts in their industry. Knowing that you are an industry expert allows VC’s to only get involved at a high level and helps them avoid power struggles with founders. Another structure in place that helps avoid investors having too much influence is the structure of your board. More info on boards below.
  • Board Takeover: Has the Sam Altman Open Ai board situation made you wary of board structure? As mentioned above, curating a sound board can be a great way to balance power. Many founders limit boards to contain only one seat per round, this seat typically goes to the lead investor and helps to avoid too many voices in the room. It is also standard for founders to secure their board spot and a seat for other key members through seats referred to as “Common Control Members”. It is also important to classify voting rights amongst board members and designate in your bylaws what specific actions require board approval. For more information on board composition, check out this resource: https://www.ycombinator.com/library/3w-how-to-create-and-manage-a-board

Mastering the VC Landscape:

Navigating the realm of Venture Capital can be difficult and at times nerve racking. VC’s can be a great resource for founders looking to scale, but lack of upfront communication can at times be fatal. To address misaligned interests, clear communication during initial meetings with potential VC partners is crucial. Do diligence on any potential partner and have an idea of where you stand on important issues (company vision, growth rates, board seats, etc) ahead of time.

If you’re interested in taking the first step and exploring VC funding, check out our Investment Criteria and select Apply Now to fill out a funding application!

By Cooper Eral

Private Equity (PE) is a complex and intriguing realm of investment that often raises many questions for those considering it. As you contemplate the prospect of investing in private equity, you’re likely to encounter a myriad of questions that delve into the intricacies of how PE firms operate, generate returns, and conduct their business. To help you navigate this world of investment with confidence, this blog aims to address some of the most frequently asked questions regarding private equity. We will demystify the process, explore the strategies that PE firms employ, and provide you with a comprehensive understanding of what to expect when considering PE as an investment avenue.

  • How do private equity firms generate returns for their investors and themselves? Private equity funds primarily generate income for themselves through what is known as 20 and 2. The 20 being “carried interest” and 2 being the “management fee”. This 2% is derived from the total committed capital and helps to sustain operations at the fund. The 20% is a crucial component in keeping the priorities of the fund and its Limited Partners aligned.  With 20% being the primary source of returns to the fund, it encourages its agents to source deals and grow companies with the greatest returns.
  • Do I receive dividends from profitable portfolio companies or are they used elsewhere? Unless explicitly laid out in an investor subscription agreement, this is largely left to the discretion of the fund.  If the firm feels dividends could be best reinvested and focused on growing the PortCo, they will be used in this way. Alternatively, the company may require more guidance rather than continual capital needs, in this case distributions would be made equally across LPs, following the 20% carried interest allocated to the fund.
  • How do private equity firms conduct due diligence and valuation of target companies? This can vary from fund to fund but all groups will consider factors such as financial, legal, operational, management, and ESG due diligence. Depending on the specific thesis of the fund there may be greater scrutiny over a particular area, whether to avoid risk or ensure their unique value-add aligns with the needs of the potential portfolio company. Similarly, smaller funds may determine it is best to outsource specific aspects of due diligence in areas where they are not particularly knowledgeable or if they are focused on other areas. This will be determined prior to the commitment of capital.
  • When will I need to provide the capital for my investment? Depending on the opportunity you take advantage of, whether a Special Purpose Vehicle (both debt and equity format) or buy in to a fund, this will vary. For a SPV, all capital invested is collected up front as this contribution is going directly to a specific need of a portfolio company. On the flip side, when committing capital to a fund there are capital calls and an upfront drawdown. The upfront drawdown is often 10 – 20% of the total agreed contribution. Capital calls occur (typically) at predetermined periods throughout the designated life of the fund. These capital calls are often enforceable by law based on contractual agreements between limited partners and the fund.
  • What are the key terms and conditions of a private equity deal, such as equity stake, debt financing, governance rights, exit clauses, etc.?
    • Equity stake: This is the percentage of the company’s shares that the private equity firm acquires in exchange for its investment. The equity stake determines the ownership and control rights of the PE firm over the target company.
    • Debt financing: This is the use of borrowed money to fund a private equity deal, usually in the form of bank loans or bonds. Debt financing increases the leverage and returns of the PE firm, but also increases the risk and interest payments. The amount and terms of debt financing depend on the creditworthiness of the target company, the availability and cost of credit in the market, and the structure and covenants of the debt instruments.
    • Governance rights: These are the rights and obligations of the PE firm and the target company’s management regarding the strategic and operational decisions of the company. Governance rights can include board representation, voting rights, veto rights, information rights, consent rights, and anti-dilution rights. Governance rights aim to align the interests and incentives of the PE firm and the management, and to protect the PE firm from adverse actions by the management or other shareholders.
    • Exit clauses: These are the provisions that specify how and when the PE firm can sell its stake in the target company and realize its returns. Exit clauses can include put options, drag-along rights, tag-along rights, pre-emption rights, and redemption rights. Exit clauses aim to ensure that the PE firm has sufficient liquidity and flexibility to exit the investment at an optimal time and price.
  • How do private equity firms create value in their portfolio companies through operational improvements, financial engineering, strategic initiatives, etc.? As the question suggests, this is one area where funds can delimitate themselves from others in the market. Funds such as Traction Capital’s Focus Fund I seek to help founders and management teams expand upon their current strengths while offering resources to build up their weaknesses. Traction Capital (TC) strongly believes in the fundamental ability of Entrepreneurial Operating SystemÒ (EOS) to efficiently go about these transformations within a newly acquired company. Any area with needs beyond the scope of EOS will be advised by an internal member of TC who also is a seasoned entrepreneur with relevant experience.
  • How can I invest in private equity? There are different ways to invest in private equity, depending on risk tolerance and financial objectives; here are some of the most common ways. (listed in order from most to least knowledge and experience required).
    • Direct investing: This involves investing directly in a private company or a private equity fund. This can require a large amount of capital, due diligence, and expertise.
    • Co-investing: This involves investing alongside a private equity fund in a specific deal or company. This allows investors to reduce fees and increase exposure to a particular sector or opportunity.
    • Fund-of-funds: This involves investing in a fund that invests in multiple private equity funds. This allows investors to diversify their portfolio and access different strategies and geographies.
    • Secondary market: This involves buying or selling existing stakes in private equity funds or companies from other investors. This allows investors to enter or exit the market at different stages of the investment cycle.
    • Publicly traded vehicles: This involves investing in publicly listed companies that invest in private equity or operate as private equity firms. This allows investors to access the public market liquidity and transparency while benefiting from the private market returns.
    • Traction Capital Focus Funds: While this is a form of direct investing, there is nothing typical about the investment Traction Capital makes. Beyond the deployment of capital, TC offers their expertise, resources, and network to maximize the growth potential of each PortCo. To get updates on how to get involved with Focus Fund II or sidecar options, reach out to Ellie at Ellie@tractioncapital.com to learn more!

  

Investing in private equity can be a rewarding endeavor, but it comes with its unique set of considerations and complexities. The questions covered in this blog are just the starting point in your journey to grasp the world of PE investments. As you explore further and consider your investment options, it’s vital to engage with trusted advisors, conduct thorough due diligence, and remain informed about the ever-evolving landscape of private equity. By understanding how PE firms generate returns, how dividends are distributed, the due diligence process, capital requirements, key terms and conditions, value creation strategies, and the various ways to invest, you’ll be better equipped to make informed investment decisions. Remember that the world of private equity is dynamic, and a well-informed investor is best positioned to navigate its intricacies and reap the potential benefits it offers.

By Chris Carey

Welcome to the second edition of Traction Capital’s AI Insights! We are thrilled to continue our exploration of the transformative power of Artificial Intelligence (AI) in the world of entrepreneurship.

“There are decades where nothing happens, and there are weeks where decades happen.” 

In this edition, we present several compelling articles that highlight the latest AI trends and practical applications for your businesses:

Midjourney Beginners Tutorial

Getting Started & Creating Your First AI Art

Learn how to create AI-generated images using one of the most popular tools available.  This 5-minute video will show you how to create a discord account (which is where Midjourney lives), utilize relevant tools, and create your first piece of art!

If you’re looking to dive a bit deeper into Midjourney our portfolio company founder Shane Smith of Prime Party got hooked after coming across this video. He also shared a PDF demonstrating how he used Midjourney to create lifestyle product images for his website – check it out here!

AI-Generated Job Descriptions

For those of you that are hiring, take a look at AI-JD, a free AI job description generator. The result may not be exactly what you’re looking for, but you can count on a significant head start.  Check out what it came up with for a Traction Capital “Business Analyst” with nothing more than my email address and a job title!

ChatGPT Prompts for Startup Founders

Unsure how to leverage ChatGPT?

Here are some prompt suggestions ChatGPT generated as a result of the prompt above:

  1. Goal Setting and Planning
    • Help me set SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals for this quarter.
    • Generate a weekly plan based on the following tasks and priorities…
    • Could you help me break down this large project into smaller, manageable tasks?
    • What is a good way to plan and approach this specific task? (provide details about the task)
  2. Task Prioritization
    • Can you help me prioritize these tasks? (provide a list of tasks)
    • Considering the deadlines and the impact on the business, how should I prioritize these projects? (provide details about the projects)
    • How can I differentiate high-value tasks from low-value ones?
  3. Time Management
    • Can you help me create a daily schedule to manage these tasks? (provide a list of tasks)
    • Can you suggest a method for time-blocking these tasks? (provide details about tasks and available time)
    • What are some time management techniques I could use in my daily routine?
  4. Decision Making
    • Can you provide pros and cons for the following decisions? (provide details about decisions)
    • How can I make a decision matrix for these options? (provide details about the options)
    • How do I use the Eisenhower Matrix to decide on these tasks? (provide a list of tasks)
  5. Efficiency and Productivity
    • What are some strategies to increase productivity for these tasks? (provide details about the tasks)
    • What kind of productivity techniques can I use to speed up my work without compromising quality?
    • How can I eliminate or reduce distractions while working on these tasks? (provide details about the tasks)
  6. Learning and Development
    • Can you suggest some resources for improving my skills in (specific skill)?
    • How can I apply the concept of “learning how to learn” to improve my proficiency in (specific area)?

 

It is our hope that these articles offer valuable perspectives and strategies to help you navigate the AI landscape and harness its potential for growth and innovation.

We encourage your active engagement with us! Share your thoughts, questions, and specific AI topics or challenges you’d like us to cover in future editions. Your input drives the customization of our content to meet your needs effectively.

Together, let’s unlock the full potential of AI and propel your businesses to new heights of success!

Every year Inc. releases a list of the Top 5000 Fastest Growing Companies in the U.S. We are pleased to congratulate Traction Capital portfolio company, Kwikly, for making the list for the second year in a row! This year Kwikly was ranked #169, up from #491 last year.

Kwikly was the first investment in our fund back in 2021 and has had phenomenal growth ever since. In the past three years alone, the company has grown 3,132%! We are tremendously proud of Pedram Nastaean and Yomiyu Hirpa’s hard work and success.

In addition to their national ranking, Kwikly placed 3rd in the state and 24th in the Midwest. Last year the company was ranked 13th in the state and 26th in their industry.

Being named on Inc.’s Top 500 is a huge opportunity for growing the team and further establishing their brand name. Just last year, the list generated millions of impressions on the Inc website.

Make sure to follow Kwikly on LinkedIn to stay up to date on all other news and hiring opportunities.

By Cooper Eral

For startups seeking funding, demonstrating traction is an essential factor that investors look for. Traction proves that your business idea is gaining momentum, attracting customers, and holding growth potential. Whether you are a pre-revenue or post-revenue startup, effectively conveying your traction can significantly increase your chances of securing funding. This blog post will explore the best ways for startups to show traction, with specific tips for pitch decks.

Pre-Revenue Companies

For startups yet to generate revenue, conveying traction revolves around showcasing the interest and demand for your product or service. Consider the following examples of strategies a pre-revenue founder can use to demonstrate traction:

  • Feedback and Validation: Share feedback received from beta testers and potential customers who have experienced your product or service. Positive reviews and testimonials can be powerful in establishing the credibility of your offering.
  • Research and Market Validation: Present any research conducted in your target market to demonstrate the demand for your solution. Showcase studies, surveys, or market analyses that support your value proposition.
  • Early Access Sign-ups and Smoke Tests: If applicable, mention the number of early access sign-ups you have received. Smoke tests, where you gauge interest through mock offerings or ads, can also provide valuable data.
  • Intellectual Property: Highlight any patents filed or unique intellectual property you possess. This can demonstrate a competitive advantage and barriers to entry for potential competitors. Be sure to include any regulatory milestones you have surpassed as well; these often take time and can be costly.

Post-Revenue Companies

For startups that have started generating revenue, the focus shifts to financial performance and sustainable growth. Here are some key metrics to convey traction:

  • Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR): MRR and ARR are critical indicators of your revenue stream’s predictability and growth potential. This provides clarity on the sustainability of your revenue streams.
  • Profitability: Investors are keen on businesses that can demonstrate profitability or a clear path to it. Showcase your progress towards becoming a sustainable and profitable enterprise.
  • Customer Acquisition Costs (CAC): For business-to-consumer (B2C) startups, understanding and conveying your CAC can showcase the efficiency of your marketing and sales strategies.
  • Segment Progress: Highlight your success in penetrating your initial customer segment. This shows that your product-market fit is effective.

Tips for Traction in a Pitch Deck

Incorporate traction strategically into your pitch deck to make a strong impact:

  • Timing is Key: Introduce traction sparingly in the early slides of your deck, building up the problem, your story, and the solution. Reserve the bulk of the traction-related information for later in the presentation.
  • Explain Significant Boosts: If there has been a sudden and substantial increase in traction, be prepared to explain why. This can help instill confidence in potential investors.
  • Focus on the Core Product: Stick to presenting traction related to the product or service you are pitching. Avoid including information about legacy products or unrelated services.

For a deeper dive into how your startup can demonstrate traction, check out this great video by Wayne Hu regarding metrics VC firms seek to hear.

Take Your Traction to the Next Level

Conveying traction effectively is crucial for startups seeking funding. Whether you are a pre-revenue or post-revenue company, showcasing customer interest, market validation, revenue growth, and profitability are vital. By following these tips and structuring your pitch deck thoughtfully, you can significantly enhance your chances of attracting the investment needed to take your startup to new heights. Remember, traction is not just about numbers; it is about demonstrating the potential and viability of your business in the market.

If your startup has traction and you’re interested in learning more about funding options, reach out to Ellie at ellie@tractioncapital.com.

 

By Ellie Pigott

In the fast-paced and ever-evolving world of venture capital (VC), any calculated risks can disrupt the carefully cultivated ecosystem. One such risk caused a catastrophic event that has sent shockwaves through the VC community, the crash of SVB (Silicon Valley Bank), a prominent financial institution that has been instrumental in financing countless startups. The SVB crash has not only affected the bank itself but has also raised concerns about its ripple effects on the wider VC landscape. In this blog post, we will explore the potential implications of the SVB crash on the VC world and discuss how investors and startups may navigate this challenging situation.

The Potential Implications

1. The Unsettling Effects on Investor Confidence:

The collapse of a prominent player like SVB has undoubtedly shaken investor confidence in the VC industry. Investors are likely to become more cautious and re-evaluate their risk tolerance. The incident may prompt a surge in due diligence processes and stricter investment criteria, as investors strive to avoid potential risks associated with unstable financial institutions. Consequently, startup founders may experience increased scrutiny and a more demanding negotiation process when seeking funding. Not only does this mean a rocky future for startups raising, but for venture firms looking to raise funds as well.

2. Funding Challenges for Early-Stage Startups:

SVB’s crash could particularly impact early-stage startups, which heavily rely on venture capital to fuel their growth. With SVB’s absence, there could be a significant reduction in the available capital for seed and Series A funding rounds. Startups may face difficulties in securing the necessary resources to validate their ideas, develop their products, and scale their operations. This may result in a more competitive funding landscape, with startups vying for the attention of a smaller pool of investors. In addition, with a decrease in investor confidence, valuations will continue trending downward.

3. Emergence of Alternative Financing Options:

While the SVB crash poses challenges, it may also stimulate the emergence of alternative financing options. As startups seek alternative sources of capital, we can expect a rise in other financial institutions and non-traditional funding models stepping in to fill the gap. For instance, crowdfunding platforms, angel investors, corporate venture capital, and strategic partnerships might gain prominence as viable alternatives to traditional VC funding. This shift could introduce a new dynamic into the startup ecosystem, promoting diversification and resilience.

4. A Focus on Financial Stability and Risk Management:

The SVB crash serves as a stark reminder of the importance of financial stability and robust risk management in the VC industry. The bank failed because it bought too many long-term notes at low rates, after word of this slipped that they were under water, many depositors pulled deposits, causing a bank run.  Going forward investors will likely demand greater transparency and accountability from the startups they fund. In turn, startups may need to enhance their financial management practices, establish contingency plans, and demonstrate a solid risk mitigation strategy. This increased emphasis on financial stability may lead to a healthier and more sustainable VC ecosystem in the long run.

5. Potential Regulatory Changes:

Following the SVB crash, regulators might review and revise existing regulations to prevent similar incidents in the future. Increased scrutiny and stricter regulations surrounding the operations of financial institutions could be expected. This may include enhanced oversight, mandatory stress tests, and measures to ensure the stability of banks and their relationships with the VC industry. While such changes might bring additional compliance burdens, they could also foster greater stability and resilience within the financial ecosystem.

 

The crash of SVB has sent shockwaves through the VC world, introducing uncertainty, and raising concerns among investors and startups alike. While the full extent of its impact remains uncertain, the event calls for a careful evaluation of the VC landscape. The challenges posed by the SVB crash will likely prompt investors to exercise greater caution, potentially leading to a more selective funding environment. Startups, particularly those in the early stages, may face funding challenges and will need to explore alternative financing options. This period of transition could pave the way for the emergence of new players and funding models, fostering a more diverse and resilient VC ecosystem. Ultimately, the SVB crash should serve as a catalyst for greater emphasis on financial stability and risk management.

The Traction Difference

Funds like Traction Capital, among others, are taking a more wholistic approach, in both the way we hold our money and the way we invest. When evaluating startups, Traction assesses the financial risk, the team, and the market. One way we minimize the risk of our investments is by exclusively investing in post revenue companies. This shows proof of product market fit, and evidence of founder follow through. When handling our firm’s finances, we practice banking diversification and to drive a higher return for investors while building relationships with other banks to assist our Founders better with their banking needs. When managing our investor’s money, whether already invested in a company or waiting for deployment in the bank, we believe in transparency.  Traction keeps investors front of mind by sending frequent updates on the status of the portfolio companies, their money and anything in the market that may be cause for concern.

Still Unsure about Banking or Raising Capital?

Traction Capital is dedicated to helping the startup community thrive, especially in this uncertain climate. If you’re interested in changing banks but don’t know where to start, we have a handful of great local banks we would be happy to recommend. In addition, if you’re a startup raising capital or a business owner looking to sell, reach out to Peyton Green at peyton@tractioncapital.com .

By Chris Carey

Welcome to Traction Capital’s AI Insights!

At Traction Capital, we are committed to supporting startups by providing them with valuable resources and industry trends that can drive their success. Artificial Intelligence (AI) has become an integral part of the business landscape, revolutionizing various sectors and opening up countless opportunities for innovation and growth. With AI rapidly transforming industries and reshaping customer expectations, it is crucial for entrepreneurs to stay informed and harness the power of this transformative technology.

With our AI Insights series, we aim to deliver periodic blogs packed with curated content, expert insights, and practical applications of AI that can directly benefit your businesses. Our goal is to keep you ahead of the curve, empower you to leverage AI effectively and unlock new avenues of growth and profitability.

In this inaugural edition, I’m delighted to share with you four key insights that can add value to your entrepreneurial journey:


ChatGPT Tutorial

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ChatGPT Tutorial – A Crash Course on Chat GPT for Beginners – Adrian Twarog

A Crash Course on Chat GPT

This 34-minute video is one of the best introductions to ChatGPT that I’ve come across to date. It begins by helping you gain access to the tool and even includes examples of some of the most popular use cases. Click “Show more” in the description for timestamps to jump to specific topics of interest.


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Google’s Stance on AI Content

“At Google, we’ve long believed in the power of AI to transform the ability to deliver helpful information. In this post, we’ll share more about how AI-generated content fits into our long-standing approach to show helpful content to people on Search.”


AI Tips & Tricks: Prompt Generation

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Having trouble coming up with great prompts?

Use the 3-step process illustrated above or click here to learn how to turn ChatGPT itself into a prompt generator!


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Chris Munn (@chrisxmunn) on Twitter

AI Use Case: Automate SOP’s

One of the hardest parts of running a business is documenting everything. Check out how Chris Munn utilized ChatGPT to create a QuickBooks related SOP in no time!

Read more


These insights merely scratch the surface of the immense potential AI holds for entrepreneurs like yourselves. Our AI Insights series will continue to dive deeper into various aspects of AI for entrepreneurs, providing you with valuable knowledge, practical tips, and thought-provoking ideas to stay at the forefront of AI-driven innovation.

We value your feedback and encourage you to share your thoughts, suggestions, and topics of interest that you would like us to explore in future editions. Together, we can leverage the power of AI to create better businesses and achieve new heights of success.

 

P.S. The verbiage and format of this blog were created by ChatGPT with minimal human editing!

 

E-commerce party supply company, Prime Party, has received a $500,000 investment from Traction Capital. The Washington-based company is making themed parties easier than ever before. Traction Capital looks forward to working closely with Prime Party as they roll out new brands and scale their business.

Prime Party is a direct to consumer, TV show themed party supply company. They design and create exclusive licensed and non-licensed party products across multiple product categories. One of their current top sellers is their Golden Girls party line, which includes tableware, decorations, yard signs, games and more. With their extensive knowledge of the industry, Prime Party’s team has been hard at work securing licenses for future lines, including The Office.

“We are excited with the new partnership with Traction Capital” commented Shane Smith, CEO of Prime Party. “Their growth capital combined with the extensive use of self-implemented EOS strategy sessions is sure to advance our company to new heights.”

With their funding from Traction Capital, Prime Party plans to roll out new products for existing themes, increase SEO presence, launch B2B corporate gifting and more. The team will be immediately hiring a warehouse manager and a marketing manager at their headquarter operations in Monroe, WA.

Only 4 years old, the company has already shown great success. Traction has seen the huge potential of Prime Party and is eager to be a part of their team. “We were drawn to Prime Party because of their significant traction, unique IP and experienced founding team. We see incredible potential in terms of product line expansion, combined with the EOS and e-commerce expertise of the Traction team. It’s been a pleasure working with Paul and Shane thus far and were excited to join forces moving forward” says Chris Carey, VP of Acquisitions at Traction Capital.

By Ellie Pigott

Startups face many challenges in their journey to success, but perhaps the most critical is finding product-market fit. This is the stage where a startup has developed a product or service that meets the needs of a specific group of people, otherwise known as their target market. When achieved, the startup has found a sustainable business model that generates revenue and customer satisfaction. In this blog, we will explore the importance of having product-market fit for startups.

What is product-market fit?

Product-market fit is the intersection between the needs of the market and the product or service being offered by a startup. It is the point where the product is fulfilling a real need for customers and generating revenue for the business. This is not a static state, but rather an ongoing process of fine-tuning and improving the product to meet the changing needs of the market. Another way this is sometimes measured is by surveying what percentage of your customers would be greatly disappointed if they could no longer use your product or service.

Why is product-market fit important?

Product-market fit is critical for startups for several reasons:

1.   Customer satisfaction and retention

Solving the problem of your audience means that the product or service is meeting the needs of the target market. Customers are satisfied with the product, and as a result, are more likely to continue using it and recommend it to others. This can lead to higher customer retention rates and a strong word-of-mouth marketing campaign, which can be essential for startups with limited marketing budgets.

2.   Revenue growth

Another way product market fit can be detected is if there is a strong demand for the product. This demand can lead to increased sales, higher profit margins, and a sustainable business model. Without first checking for product-market fit, startups risk launching products that nobody wants, which can lead to low sales and a lack of revenue.

3.   Competitive advantage

When a startup has a product or service that is meeting the needs of the market, it can set itself apart from competitors. This can lead to a stronger market position, higher market share, and increased profitability.

How to achieve product-market fit?

Achieving product-market fit is a complex process that requires a deep understanding of the target customer and the solution being offered. Here are some steps that startups can take to achieve product-market fit:

1.     Identify the target market

The first step in designing for the market is identifying the target market. Startups need to have a clear understanding of who their ideal customer is, what their pain points are, and what their needs are. This can be achieved through market research, customer surveys, and other forms of feedback.

2.   Develop the product

Once the target market has been identified, startups need to develop a product or service that meets their specific needs. The product needs to be designed with the customer in mind and should be user-friendly and easy to use. Startups should also focus on creating a unique value proposition that sets them apart from competitors.

3.   Test the product

Startups need to gather feedback from customers and use it to improve the product. This can be done through customer surveys, focus groups, or beta testing. The feedback should be used to refine the product and make it more aligned with the needs of the target market.

4.   Monitor metrics

Startups need to monitor metrics to determine whether they have achieved product-market fit. Metrics such as customer acquisition, retention, and revenue growth can provide insights into whether the product is meeting the needs of the target market. Startups should use these metrics to refine the product and make improvements.

Next Steps

Product-market fit is critical for startups that want to achieve sustainable growth and success. It is the point where a startup has developed a product or service that meets the needs of the target market and generates revenue for the business. Achieving this requires a deep understanding of the target market, a user-friendly product, testing, and monitoring metrics. By achieving product-market fit, startups can establish a strong foundation for growth and success.

Traction Capital

As a Venture Capital firm that invests in early-stage, post-revenue businesses, product market fit through customer satisfaction, sales and retention is something we analyze closely. Traction Capital looks to invest in companies who have already shown success in these areas. If you or someone you know is interested in raising capital, reach out to us at ellie@tractioncapital.com. In addition, be sure to watch our Resources page for future blogs and startup events.

 

Traction Capital has invested $500,000 in a St. Cloud based startup making school supplies more convenient and accessible. Impacks provides families with pre-packed school supply kits, tailored specifically to their school and grade. The Minneapolis venture capital firm looks forward to helping Impacks expand their customer base and give back to their community.

Impacks is a tech powered company that simplifies the way parents and educators access critical school supplies for students. Their platform customizes the back-to-school experience for parents, educators and administration through teacher approved school supply kits and bulk supply purchases for schools. Striving to create a world where all students can flourish, Impacks allows schools to fundraise and matches a percentage of each donation.

“Brandon and I, along with our Impacks team, are thrilled to join the Traction Capital portfolio. We believe Traction Capital offers a unique perspective and value through the depth of experience represented across their team and investors. We’ve already seen the impact of their process from just one strategy session with the Traction Capital team. We believe in the system, and we’re proud to align with an organization that leverages tools they use to elevate startups in MN and beyond. One thing that stood out to me in our early conversations with Traction Capital team is the blend of practicality, strategy, and ambition this organization applies to mentoring their portfolio of companies. We have a big goals for Impacks over the next few years, and we’re grateful to have Traction Capital’s support in those goals” says Clare Richards, CEO of Impacks.

Impacks has partnerships with over 50 schools across MN and Wisconsin, has sold over 6,000 school supply kits, and has generated over $18,000 in donations for partner schools.

The founders Clare and Brandon Richards were inspired to solve the issues facing parents and schools after volunteering at a school supply event in their community. Truly a dynamic duo, Clare has over 8 years of experience in marketing strategy and brand building, and Brandon has over 8 years of experience in the school supply industry and sales. Since founding Impacks, the team has participated in multiple accelerators including gBETA, BETA and ILT Academy. After seeing high growth in their company over the last 3 years, Clare and Brandon are excited to take their platform even further with the help of Traction Capital.

As Impacks begins putting their investment to use, they plan to expand their team, grow their facilities, and further develop their platform.

Traction and Impacks are eager to continue working together as Impacks prepares for further expansion. With strong growth and an impressive team, Traction looks forward to helping Impacks succeed. “Clare and Brandon are quite impressive and a pleasure to work with. They’re thoughtful and on top of things. Always prepared when we meet and well thought out. Impacks will fix a problem that has not yet been addressed that will resolve a major piece of the back-to-school headaches parents struggle with. We’re excited to be a part of what they’re doing”, says Brian Cox, President and Integrator of Traction Capital.

Clean Waste Systems (“CWS”) has received a $500,000 investment from Traction Capital. The Maple Lake, MN based company manufactures and sells equipment utilizing its own proprietary, patented ozone technology for sterilizing infectious medical waste. The process uses significantly less energy and water to operate and produces a fraction of the greenhouse gas emissions as traditional technologies currently in use today. Traction Capital looks forward to working with the company as they continue to grow.

Clean Waste Systems has been in business since 2011. The company is registered with the Environmental Protection Agency (EPA) and its technology is approved in 30 states and has been licensed and is in use abroad. The company’s customers consist primarily of large hospitals and third-party medical waste processors.

Due to COVID, surgeries and other medical procedures that produce infectious medical waste were significantly curtailed the past few years, which, in turn, reduced hospital revenues and profits, which, in turn, reduced hospital budgets for any type of capital equipment acquisitions. “It’s been a rough couple of years,” said Peter Jude, one of the company’s founders, “but COVID appears to be largely behind us now and some of the sales that we were working on prior to 2020 seem to be getting back on track. Traction Capital had the foresight to see what we saw going forward and we’re really excited to have them on board with us.”

“Prior to their investment in our company, Traction Capital introduced us to EOS (The Entrepreneurial Operating System), and we’ve been using it since October of last year”, said Steve Pellegrene, also a founder of Clean Waste Systems. “We love the discipline and accountability that EOS has brought to us. It forces us to keep our eye on the ball and make sure that we have the right people in the right seats doing what is necessary to be successful. It’s a new day around here and we could not be more excited about our future.”

“We’re excited too.” said Shane Erickson, CEO and Managing Partner at Traction Capital. “We think CWS is going to be a big winner for us and for our investors. The ability to substantially reduce a hospital’s carbon footprint, along with ongoing operating expenses is huge. We believe the future is very bright for CWS and we’re delighted to be on board.”

By Carrie Emslander

What is cash flow?

Cash flow is a crucial aspect of any business, as it refers to the inflow and outflow of money. It’s the lifeblood of an organization and, if managed properly, can help ensure its long-term success. In this blog, we’ll take a closer look at what cash flow is, why it’s important, and how you can manage it effectively.

Cash flow refers to the movement of money into and out of a business. It can be divided into two categories: positive and negative. Positive cash flow occurs when a business has more money coming in than going out, which is desirable. Negative cash flow, on the other hand, occurs when a business has more money going out than coming in. This can be due to seasonality, decrease in revenue, over-extension of expenses, and more.

Why is cash flow important?

Some of the top reported reasons for small business failure are connected to cash flow management, including undercapitalization, creditor problems, and slow collection of accounts receivable.

Cash flow is important because it determines the financial health of a business. If a business has positive cash flow, it has the financial stability to cover its expenses, make investments, and grow. However, if a business has negative cash flow, it may struggle to pay its bills, meet its financial obligations, and even stay in business.

Being aware of your cash flow allows you to better reach your financial goals, adds clarity, and helps alleviate concerns around money management. This is especially true for seasonal businesses or those with large cash swings.

Being aware of aging accounts receivable gives you an opportunity to attempt collection and avoids the problem of inflated profit statements or even insolvency.

Proper cash flow management helps you make good decisions and stay afloat. With proper cash flow management, you can avoid spending more than you are bringing in by forecasting any potential shortfalls. Shortfalls can be mitigated using better timing of expense or debt payments or being prepared with a backup line of credit or loan, or requiring advance payments from customers for products or services.

Tips

Managing cash flow effectively requires a combination of forecasting, budgeting, and planning. Here are some steps you can take to manage your cash flow effectively:

  1. Forecast your cash flow regularly: Regularly forecasting your cash flow can help you identify potential cash flow problems and take steps to address them before they become serious.
  2. Monitor your expenses: Keeping a close eye on your expenses can help you identify areas where you can reduce costs, freeing up more cash for other areas of the business.
  3. Improve your accounts receivable process: Making sure you get paid on time can have a big impact on your cash flow. You can improve your accounts receivable process by sending invoices promptly, following up on past due accounts, and offering incentives for early payment. In some cases, requiring deposits from customers for products or services, or offering a small discount for prepayment can go a long way.
  4. Increase your sales: Increasing your sales is a great way to improve your cash flow. You can do this by offering promotions, expanding your customer base, and improving the customer experience.
  5. Plan for the future: Having a solid plan in place for the future can help you manage your cash flow more effectively. This may include setting aside money for taxes, unexpected expenses, or future investments. Companies with tighter cash flow constraints need to look at cashflow projections on a monthly and weekly basis. Sometimes even daily.
  6. Find a mentor. An experienced business owner may be willing to share their experience with you. Groups like Entrepreneur’s Organization (EO – for companies over $1M in revenue) and EO Accelerator (companies with revenues of $250k-$1M) are great resources.
  7. Another option to solve cashflow is to work with an experienced group that not only provides financing but also has years of business experience to help guide you. At Traction Capital, we provide smart capital, are an Entrepreneurial team, and love to help companies and founders grow.

Cash flow is a crucial aspect of any business and managing it effectively can help ensure its long-term success. By forecasting your cash flow regularly, monitoring your expenses, improving your accounts receivable process, increasing your sales, and planning for the future, you can help ensure that your business has the financial stability it needs to succeed.

If you or someone you know is interested in raising capital, reach out to us at peyton@tractioncapital.com. In addition, be sure to watch our resources page for future blogs and startup events.  

B2B marketing technology company, Scribe, has received a $400,000 investment from Traction Capital. The Minnesota based company provides businesses with handwritten notes scribed by robots to be mailed to customers. Traction Capital looks forward to working with the Scribe team as they continue to grow.

Scribe provides businesses with personalized, handwritten mailers for existing clients and lead generation. In addition to the letters, Scribe supplies its customers with segmented data farming, tracking numbers, and optimized ad copy. The mailers can be written in 20 different fonts with 20 variations of each letter, providing customers with an authentic letter. Once approved by their customer, Scribe can write and send the mailers within 48 hours.

“Here at Scribe, our bullish team’s vision is dedicated to creating an intimate, automated, personalized sales touch in a crowded digital world. The pairing of this principle with technology, marketing strategies, and strategic, data-driven white glove consulting, results in new a tool that connects business to their audiences. All with a track record other marketing channels or tools can’t match. Traction and its team have become the ideal partner in our vision. Their unique approach to supporting their founders is not only why we partnered, but why together, we will reach our disruptive goal, ” says James Schutrop, founder and CEO of Scribe.

With their recent investment, Scribe plans to scale their current model and team along with working to improve their product and portal interface and connecting directly to the top CRMs. All to create the gold standard of all automated nurturing touches.

Key advantages of Scribe’s solution include:

  • Fast and easy targeted campaigns
  • Trackable and profitable marketing
  • Increase in marketing ROI
  • Automated CRM triggered handwritten touches (Coming Soon)

Traction Capital and Scribe are excited to work hand in hand as the company’s success grows. With like-minded values, Traction looks forward to helping Scribe continue to expand their business. “As a business owner myself, I see a huge amount of value in handwritten notes to communicate with current and prospective customers. Scribe’s offering resonates with me, and I believe their product and service will be very successful. James Schutrop has a great vision for the company growth and enthusiasm for what he’s doing”, says Brian Cox, President of Traction Capital.

By Ellie Pigott

1. Liquidation Preference

Liquidation Preference refers to the order of which the investors in the company get paid in the event the company goes under. Typically the order is as follows; senior debt (long term loans- commercial banks, etc.), subordinated debt (seed funds, angel investor, venture capitalist and friends/family), preferred stock (investors other than the founder), and lastly common stock (founders and employees).  

 2. Deal Flow 

Deal flow describes the rate at which new investment opportunities are being presented to a company. Typically deal flow is evaluated quarterly but can be broken down and measured month to month or week by week. If a firm is experiencing high deal flow, this can make the environment more competitive for startups and make it more challenging to get a deal.  

 3. LOI (Letter of Intent)  

An LOI or Letter of Intent, is used in the later stage of a deal process. These documents can be very broad or in some cases very detailed. The more detailed LOIs outline what a deal would look like and present the terms for both parties to agree on. A VC will offer this document to a startup they’re pursuing and once the terms can be agreed on and signed, the firm will begin the process to move the deal to close.  

 4. Terms Sheet 

Similar to the LOI, the term sheet outlines the specifics of the deal. Depending on the depth on the LOI, the terms sheet may include a lot of the same information. A terms sheet will include details on equity, liquidation, board structure, dividends and more.

5. Pre Money vs Post Money Valuation  

Pre Money valuation is the value of the company before the investment is made. This number is typically negotiated between the VC and the startup, as it helps to determine what percent equity the VC firm will receive. Post Money Valuation is the value of the company after the investment (pre money value + investment amount = post money value). For example, if a startup is valued at $1.5 million before the investment, and a firm invests $1 million, the pre money value is $1.5 million and the post money value is $2.5 million. When calculating ownership of the company, VC’s will base their ownership on the post money valuation.  

 6. Burn Rate  

Burn Rate refers to the rate at which a company deploys their capital. To calculate burn you can take your starting balance – existing balance / your number of months. Although burn rates vary depending on industry, a general rule of thumb is to keep your burn rate near 1/12 of your available cash. Ensuring you have enough cash on hand to make it through the year.  

7. Churn Rate  

Churn is often used with SaaS companies and apps, as it refers to the customers they’re losing at a monthly or annual rate and the associated revenue being lost. For an existing company, 6-8% annual churn is average, but for startups an average annual churn is closer to 45% (which breaks down to about 7% monthly). 

 8. Bootstrapping  

Bootstrapping is slang for being completely self-funded, or “pulling oneself up by one’s bootstraps,” meaning building the business from the ground up only using personal or family funds. This can also be shown through the flexing of personal skills and knowledge to build the business with existing resources.  

 9 . Convertible Note 

A convertible note, otherwise known as convertible debt, begins as debt in the form of a loan from an investor and later is converted to equity. The number of shares received depends on the amount of the loan, plus interest that has accrued, and whether a conversion discount is in place. A conversion discount would allow the investor to purchase the shares at a cheaper price than the current valuation, giving them an incentive for loaning money at an earlier stage. This form of financing can help the deal move quicker while also helping to avoid fees on either party (investor or investee).  

 10. Due Diligence  

Due diligence is the research done by the VC firm before investing in the company. This can be done at multiple stages in the process, and will typically include research on competitors, founder experience, traction and more. Due diligence in the later stages of a deal process will also include more financial and legal vetting.  

11. Down Round  

A down round refers to an additional raise after the previous use of funds did not yield the expected performance, or there was a change in the market. Since the company did not perform as well as expected, this next round of shares will be sold at a cheaper price. This can be seen with early startups who set their valuations too high and can range all the way to highly successful and established startups whose growth has slowed after increasing at an exponential rate. A down round is viewed as negative by prior investors as their investment has now been “marked down” or decreased in value. It is important to have the “right” priced valuations to avoid a down round.  

 12. EBIT/EBITDA Multiple 

EBIT and EBITA stand for Earnings Before Interest, Tax, Depreciation and Amortization. When determining a company’s trajectory from a growth standpoint and a return on investment perspective, the EBIT/EBITDA multiple can determine its value. The multiple used can be calculated in a variety of different ways including taking the enterprise value divided by EBIT, or by looking at the multiples of companies in the same industry or who use the same model. EBIT/EBITDA is typically used in more mature companies raising funds or exiting, as opposed to earlier stage companies raising a Seed or Series A round and may still be burning cash and not yet profitable. 

 13. Entrepreneur in Residence  

An entrepreneur in residence is an individual with experience successfully running a business, who supplies a startup with advice and knowledge on how to help their company. This can be done as a hired mentor or even make the entrepreneur in residence the temporary CEO. In the case of becoming the temporary CEO, the EIR is usually brought on by a VC firm either at the time of the investment or acquisition.  

 14. Use of Capital 

Use of capital is exactly what it sounds like, it describes how the capital will be used. This is extremely important when talking to investors because they want to know that you have a plan for using their funds in an effective manner. This can be a variety of things but the most common are growing the team through hiring, investing in building out the platform or product, scaling production, etc.  

 15. Option Pool 

Option pool describes the set of shares set aside for current and future employees. Giving key employees a small share in the company is often done as part of their employment package because startups typically cannot afford larger salaries. This helps startups remain competitive with larger companies who may be able to offer higher employment compensation.  

 

If you or someone you know is interested in raising capital, reach out to us at peyton@tractioncapital.com. In addition, be sure to watch our Resources page for future blogs and startup events.  

 Delve Health on Track to Transform Clinical Trials Worldwide

Traction Capital has invested in an on-going partnership with a local Minnesota MedTech company with experience in clinical studies around the world. Delve Health reduces clinical trial costs and accelerated drug development by bringing the trials to patient homes, enabling more accurate data collection, and processing from wearables, digital health apps and sensors. The Minneapolis venture capital firm looks forward to helping the company continue their expansion.

Delve Health’s end-to-end solution combines web, mobile, SMS and wearables to make clinical trials more accessible to a broader group of patients to increase patient diversity and engagement. Ultimately, Delve Health’s technology platform improves clinical trial outcomes for pharma and medical device companies.

“We are very excited about partnering with Traction Capital. Their investment will allow us to nearly double our staff, while updating and strengthening our platform—all of which will allow us to continue to effectively help patients around the world” says Wessam Sonbol, co-founder and CEO of Delve Health. Delve Health has already supported 100+ studies and 26 registries in a variety of therapeutic areas. Their clients include medical device, pharmaceutical, and biotech manufacturers; clinical research organizations (CROs); as well as specific therapeutic area organizations.

The founders, Wessam Sonbol and Tamer Swidan, each have over 20 years of experience in healthcare and technology industries—making them extremely qualified to enter the MedTech world. With big goals on the horizon, they are looking to hire for a variety of positions, including individuals with expertise in sales, marketing, operations, and software development. Follow Delve Health as well as Traction Capital’s LinkedIn pages for more details and up-to-date information.

As they begin putting their investment to use, they plan to grow their team, expand their marketing efforts, and continue to work on product enhancements.

Key advantages of Delve Health’s solution include:

  • Access to a large, diverse patient pool
  • Reduction in patient burden and increase in patient data
  • Minimized patient dropouts

Traction Capital and Delve Health are delighted to partner in pursuit of this growth opportunity. With similar principles, Traction Capital looks forward to helping Delve Health enhance their values and achieve high growth. “The Traction Capital team is looking forward to working with Delve Health as they remain focused on growing their business and making clinical trials more accessible to a greater number of people. We believe the industry is ready to embrace Delve Health’s innovative solution to virtual and hybrid clinical trials (e.g., decentralized clinical trials (DCTs)), which is validated by their growing number of contracts with major clinics around the world. We are excited to work with Wessam and his team as we implement processes and leverage our experienced network to add value and grow the business,” says Shane Erickson, Founder and Managing Partner of Traction Capital.

 

By Ellie Pigott

In the midst of a labor shortage, seeking the right talent for your startup may seem intimidating. But you might be in luck.

People are leaving their jobs because they want something new and different, and working for a startup that shares their values could be a strong point of attraction.

Attracting good talent doesn’t always have to mean fancy offices and catered lunch. We’ll outline five key things to keep in mind when hiring during this unpredictable time.

1.     Offer Remote Work

In a post-pandemic world remote working has become very normalized. In 2022, statistics show nearly 60% of Americans work at least part time remotely. While it is important to have rapport between team members, offering optional remote is a great way to keep up with today’s changing societies.

If you haven’t yet integrated this or you’re wary of committing to fully remote, offer some in between options. Set a two or three day a week minimum for in office work and let your work force determine the rest of the week.

Even if you may think your employees prefer working in person, giving them the power to choose allows them to feel like a more valued member of your company.

However, be careful when offering this, don’t throw around promises you can’t keep. If the kind of work you’re seeking requires someone fully in person, be upfront.

2.   Develop a Strong Mission, Vision and Values

More than ever, people are seeking work that they align with, not just from a skillset perspective, but with their mission as well.

Has your company dedicated time to construct your mission statement? If so, is that mission statement somewhere potential employees can see it?

Displaying your mission statement on your website or LinkedIn is a great way to show people what you’re about when they’re considering applying. It’s important that your mission statement actually holds your values. A generic mission statement isn’t any better than not having one at all.

Take Patagonia for example, their mission is to “build the best product, cause no unnecessary harm, use business to protect nature, and not bound by convention”.

People strive to work for their company not just because they have openings in product design, but because their personal values align with that of the company’s.

By having a mission statement or core values and showcasing them in your job description, you’ll be more likely to find candidates who align with your work. This then increases the chances of them sticking around.

3.   Don’t Sacrifice Values for Convenience

When the need for labor is high it can be easy to sacrifice values for a quick and easy hire. However, this type of convenient mistake can often lead to high turnover and dissatisfaction by both the employer and the employee.

Your company’s values are at the core of what you do, if you don’t have employees that align with them it’s impossible to be confident in their ability to deliver on those values to your customers.

Remember, values are soft skills that greatly affect someone’s work but can’t be taught. On the contrary, hard skills may be more directly related to the specific position but can be learned by someone who may not be an expert.

If someone is a good fit for your company but lacks some of the hard skills in your job description, consider finding ways to incorporate that needed hands-on learning in their first month of onboarding.

4.  Include Statements to Deter People

A large contributor to the labor shortage is employees being unhappy in their jobs or employees leaving their jobs shortly after accepting due to being misled.

Oftentimes the job description does not fit the reality. To help avoid this turnover many businesses are turning to “what we’re not” statements.

This sets realistic expectations with those applying. Some companies will even go as far as to include statements like “you are not the right fit if you…”. While it may sound harsh to some, you’re saving yourself time in the interview process by weeding out people who don’t meet your company’s needs.

By including “what we’re not” statements, you’re establishing a level of trust and honesty with the applicants. You’re being upfront in ways other companies aren’t and you’re saving them time that they could use to apply for jobs they might be a better fit for.

5.   Provide More Than a Salary

Fair compensation and benefits are a must, but nowadays employees are looking for more.

Consider what additional unique advantages your company can provide. This could be strategic growth, individualized mentorship, extra certifications relevant to the role, and more.

The level at which a potential employee feels they can grow as an individual may be the deciding factor between your company and another. Being “taken care of” by an employer has an entirely new meaning than it did 20 years ago.

Your company might be their next job but it’s unlikely to be their last. They want to know your company is dedicated to their growth. And when the time comes, they’ll be prepared for whatever comes next.

The Next Step

With a toolkit of good practices in mind it’s time to start drafting your job description. Remember that transparency and honesty are both at the core of finding a great new member of your team.

By being open about your company’s values, growth opportunities and offerings, you’ll be sure to find a candidate who aligns well with your role.

If you have specific questions about hiring or how to help your startup succeed, reach out to us at peyton@tractioncapital.com.

Traction Capital has invested in a Minnesota Technology company revolutionizing the way people fly fish. The company provides anglers with the knowledge and technology to optimize their trout fishing experience. The Minneapolis venture capital firm looks forward to helping TroutRoutes grow their platform as they tackle the U.S market.

TroutRoutes is revolutionizing a sport that began over 1,000 years ago. Their mobile app and desktop service provides anglers with maps of public streams, water conditions, access points, elevation levels, GPS services, locations of local fly shops and more.

“What we’re most excited about is the mentorship and integrated approach to Traction as a capital partner,” says TroutRoutes founder Zach Pope. “The next phase of our project will require more than an early product and an excited early adopter cohort; we’ll need structure, process and people and I can’t think of a better partner for this than Traction Capital and the leadership with Shane Erickson.”

TroutRoutes is already active in 33 states and has mapped over 25,000 streams. With over 100,000 users, they are changing the way new and accomplished anglers experience trout fishing.

Founder Zach Pope is an avid trout angler himself and noticed firsthand the opportunity in the market. In addition to angling, Pope also has experience in technology engineering and management in the medical device space with a Masters in Management of Technology from the University of Minnesota. TroutRoutes has grown rapidly in 2022 and now has 4 employees, with several active openings in technology (software engineering), marketing and operations.

As TroutRoutes begins putting their investment to use, they plan to grow their team, expand to the rest of the U.S and continue to work on product enhancement.

Key advantages of TroutRoutes include:

  • Every trout stream with proprietary rating system
  • Public land access
  • GPS and Navigation
  • 750,000 Designated Access Points
  • Real-time Stream Flows and Elevation Map
  • Personal Notebook (make notes, create markers, plan trips)

Traction Capital and TroutRoutes are excited to join forces during this period of rapid growth. With strong entrepreneurial spirit, Traction Capital looks forward to helping Zach grow his team with more like-minded, hardworking individuals. “Zach is an incredibly smart and driven individual. The Traction Capital team and I are very impressed by the platform he’s developed and can’t wait to see the company accelerate as he grows his team,” says Shane Erickson, Founder and Managing Partner of Traction Capital.

B2B sales company, Saltbox, has received a $500,000 investment from Traction Capital to finish out their $675,000 raise. The Minneapolis-based company is revolutionizing the way B2B organizations improve the buying experience of their customers. As Saltbox continues to grow, Traction Capital looks forward to working closely with their team.

Saltbox is a Salesforce startup that helps to digitize, personalize and automate a B2B consumer’s buying experience. With their extensive knowledge of Salesforce, they are able to improve storefront experiences and purchases, in addition to streamlining order management. As B2B buyer personas shifts, B2B buyers are expecting more B2C– like experiences and Saltbox assists organizations in identifying and catering to that shift.

“The investment and partnership from Traction Capital will play a pivotal role in helping Saltbox accelerate our mission of helping B2B companies reimagine the buying experiences of their customers through the use of Salesforce. I’m also excited to bring Traction’s experience as operators to our board of directors, as their guidance will be just as important as their capital as we look to scale the business and capitalize on the tremendous opportunity for rapid growth that the salesforce ecosystem provides,” says David Blue, founder of Saltbox.

The company strives to deliver engaging, frictionless, B2C-like buying experiences to their customers. Unlike their competitors, Saltbox specializes in B2B commerce and order management, with capabilities spanning the entire Salesforce platform. Their expertise and ability to serve end-to-end buyer transformation use-cases also helps them stand out. Saltbox’s three main industries of focus include manufacturing/consumer goods, high-tech/software and medical devices/pharma.

For the immediate future David’s focus will be expanding their software, growing their team, and continuing to innovate within the company. They are currently hiring a Salesforce Account Executive, multiple positions within the delivery organization, and will continue to post as more positions become available. Check out their LinkedIn for more details.

Both experts in their field, Traction Capital and Saltbox are eager to join forces. “We are excited by David’s extensive experience in the field and his ambition to make Saltbox succeed. Traction Capital looks forward to helping Saltbox grow their team and continue to innovate with the implementation of EOS. Our Traction team believes Saltbox has what it takes to transform the way B2B organizations interact and we are eager to help them accomplish that,” says Shane Erickson, founder and Managing Partner of Traction Capital.

Traction Capital has invested $500,000 in Froogle, a Software company that focuses on the hospitality industry. The company utilizes its location-based technology and online ordering software to help small and medium sized businesses draw in new consumers while also saving money and manpower. The Minneapolis venture capital firm is excited to be a key partner in Froogle’s growth and development.

Froogle is a SaaS startup that uses its technology to enable restaurants to offer mobile contactless order and pay for pickup and delivery. This software is free for businesses to use. Froogle also assists with social media, marketing/advertising and web development, this lessens the marketing hassle for restaurants and helps them compete with their larger competitors.

“When I met Shane and Brian at Traction Capital I felt they understood the vision of Froogle and what it offers to small and medium size businesses. I am extremely impressed with Traction Capital, their knowledge and support in growing businesses is what attracted me to them. Froogle’s Free online ordering software and assistance in helping with marketing, advertising and web development takes a lot of pressure off the small business owner.  We are growing so fast that we are seeing 15-20% month to month growth,” says, Michael Juszczak ,founder and CEO of Froogle.

Froogle currently has clients across 25 states and they have seen over a 90% retention rate. As Froogle continues to grow, they are looking to hire 8 employees in a variety of different roles including sales, social media manager and a content manager. Keep an eye on Froogle as well as Traction Capital’s LinkedIn for more details.

Key advantages and features of Froogle include:

  • Free White label ecommerce platform
  • Online marketing
  • Web development
  • Social Media Engagement
  • Cost Reduction for restaurants

Traction and Froogle are excited to focus on growth and more national expansion. With both companies’ EOS backgrounds, the joining of forces will only drive more success. “Mike and Corey of Froogle specifically sought out our Traction Capital team at Twin Cities Startup Week in fall of 2021. Their experience and interest in running Traction EOS aligns perfectly with Traction Capital’s thesis and value add. Mike and Corey are hustlers, go getters and have what it takes to be successful with Froogle in a high demand marketplace, while adding value to their customers,” says Brian Cox, Integrator and President at Traction Capital.

After raising $500,000 in capital in recent months, ControlBright is set for growth and has chosen veteran technology executive and private equity trailblazer Barbara Stinnett to lead the charge. Stinnett’s role as President began on 3/15/2022.

Barbara Stinnett is a highly respected industry executive who brings a wealth of global leadership experience in high-tech organizations. Stinnett served and led operationally in the C Suite at Hewlett Packard, Sybase/SAP, Oracle, & Cisco where she was directly responsible for global sales, services, and support groups. She was also the first female CEO for one of the largest global Private Equity firms. In 2008, she founded Timmaron Group, based on her passion to work with companies to address their strategic desires by applying technologies to be the best they can be.

“Barb brings unparalleled leadership skills and a deep skill set in technology,” says ControlBright Founder Chad Behling. “We are excited to have her join our team. With her industry acumen, financial expertise, and extensive connections, we have no doubt that Barbara will position ControlBright for considerable growth.”

Stinnett holds degrees in International Business and Management Information Technologies, Applied Technologies, and International Studies from the University of Wisconsin. She is a National Association of Corporate Directors certified fellow and seasoned board member serving on over 15 public, private, and non-profit boards.

Over the next year and beyond, Stinnett and ControlBright will work to build out their team to scale up production and sales. With Stinnett in place, Behling will be able to shift his focus to spending time on the company vision and areas of the business he is best at.