Recap: The Entrepreneurial Buzzwords in The Bay Area

by Krisitan Brøndum


We are near the end of our trip to the most extreme entrepreneurial environment in the world, also called The Bay Area. It has been a great experience being here sensing what I have been reading about in books and academic papers during my studies at Aalborg University. But what have I learned about entrepreneurship and startups in the last 4 weeks, which I have not learned in my entrepreneurship program in Denmark?

Since this entry is a recap, I would like to start out by introducing the two entrepreneurial buzzwords I have heard the most out here: traction andscalability. Coincidentally, these “concepts” or words were kind of new to me but both appears to be some of the most important things to grasp when doing a startup in The Bay Area and wanting it to succeed. 

TRACTION

Firstly, traction has been named at every single event I have attended here; be it a talk at Stanford, a VC pitching event or a company visit. Generally speaking, "getting traction in the market" or "your product gaining traction" means that “your customers” is getting aware/showing interest in what you offer to them, i.e. your value proposition. So what I have learned out here is that it is important to get customers as early as possible. A better conceptual might be “early adopters”, as these adopters do not need to buy anything from you – that is not essential. Adoption is everything; you can make the smartest and most sustainable product in the world, but if nobody wants to buy it, it is not a success! So, regarding business startup you need to ask yourself: is this [read: value proposition] something someone would pay for? Is it something people would show interest in? Investors might not even consider you if cannot prove that your business idea has traction.  ¨

SCALABILITY

Scalability is another buzzword I have heard at every event in The Bay Area. Scalability of a business implies that the underlying business model offers the potential for economic growth. You need to be able to quickly extend your business into new markets and/or customer segments.  Now, out here this buzzword plays a vital role in the overall theme “entrepreneurship”, as entrepreneurship in The Bay Area is equal to funding. Bootstrapping your business is only a temporary thing - you need to have funding in order to succeed and become the next Facebook, Twitter etc. which every entrepreneur out here dreams of. Scalability and funding goes hand in hand, as VCs only want to fund businesses which are scalable, i.e. ideas that have the ability to scale. They invest in you because they want to flip over the company and get 7X or maybe even 10X in return of their initial investment. VCs will think: “how does this business turn into a billion dollar exit?” or they ask: “is this business scalable?”.    

In short, your business idea needs traction and your idea needs to be scalable, in order to raise funding – be it seed funding, angel funding or venture capital. Even though most entrepreneurs want to avoid giving up equity of their startup, out here it is the only way to go if you want to succeed. Scott Engler, CRO of Longboard Media, even stated that growing your business in a healthy way is by not taking in funding. When you take in money from the outside it becomes a little less fun, he said. However, if you are a technology company (which most of the startups in The Bay Area are) it is very hard to grow your company organically and not take funding from the outside, as technology is changing so fast.