I get this question fairly frequently from folks applying to the accelerator. Usually this comes from a team of 2-3 developers who have built an app and are looking to either a) raise a seed round or b) apply to an accelerator.
The question is a very difficult one to answer and requires a lot of context and specific knowledge about the problem the company is trying to solve.
Lets take an example. You have built a consumer mobile application, and have had the app out for about 1-3 months, and have “organically” grown your user base, with word-of-mouth or referrals. The question is what are “investors” looking for in terms of traction? Lots of users – meaning thousands of downloads and many active users? Or engagement – meaning a high rate of your “atomic unit” usage?
Or in other words should you spend your effort, trying to get more users or to get your current users to use the product more?
A similar example is one around many free users for a SaaS service vs. few paying users but relatively high usage.
The easiest answer is both. The best products and startups get many users and lots of usage.
The more nuanced answer is that it is dependent on what is tougher. Investors (Accelerators in this case, I assume, are investors as well), look for one very tough problem that has been solved by you as a metric for your future success.
That means, if they believe it will be harder for you to scale up the number of users (based on your app) then they would want empirical data to prove that you have cracked that problem. If, however, they believe that your solution has a harder “retention” rate, like a Twitter – (where signup is easy, but getting users to understand and use the product is harder), then they’d expect you to have solved that problem.
Either ways, they are looking for you to have a good answer and some initial experiments on how you will solve the other part of the problem you have not been able to crack.
So, leaves us with the question – What should you do about it? Lets say you have runway for about 3-6 months before you have to raise a round of funding. What should you prioritize between now and than time when you run out of funds?
How do you determine which problem is tougher? Getting lots of users or getting more usage?
This answer depends on your (eventual) monetization technique.
At steady state, you will make money from having lots of users doing the “atomic unit” action more often.
For the initial stage, though, investors (and you) should be looking for the easiest route to monetization and how you can scale that route faster.
So, if you will make more money from lots of users (e.g. social network) then that is tougher. If however, you will make more money by getting few users to use it more (e.g. in-app purchases), then that is tougher.
