Finding Traction for Early-Stage Startups
Alexander Sumin is a very driven and focused co-founder. Five and a half years ago he became part of a travel tech company that now operates globally and is one of the brands becoming synonymous with travel compensation – ClaimCompass.
ClaimCompass helps travelers get paid when their flights are disrupted. The startup was initially focused on Central and Eastern Europe, then expanded its reach in continental Europe. In 2020 expanded in the US and Canada by acquiring Service.
It now seems like ClaimCompass has a long way to grow its potential and expand its reach. But the early days of no startup are easy. So in our conversation, I took Alex back to the early days to talk about finding traction as a startup founder, scaling growth channels – and knowing the difference between the two.
The need for speed: early days of a startup founder
Alexander defines the initial idea from ClaimCompass as a "classical pen and paper turned into software and automation" case. The team saw that there were a lot of flight delay complaints getting field with attorneys. So they decided to look into the process and see if they could automate it.
Back in 2016, this was a rather new idea which meant less competition, but also little consumer trust. "At the time it wasn't something that was really known so there was a big awareness issue," says Alex and explains that people were very skeptical to the concept of essentially getting free money: "It sounded too good to be true."
Another hurdle was the fact that the claim process is a slow one in general. The claims take several months until they actually get processed and paid. So things were moving rather slowly. The team had seen some early traction, had seen the lifecycle of a claim but they "were nowhere near approaching an inflection point at that stage," as Alexander puts it.
At that time, they joined 500 Startups and learned their first big lesson: that speed is paramount. Before that point, the founding team hadn't really committed to the project full-time. "500 helped us go much faster and be more aggressive." Since the incubator was focused on quickly ramping up the valuations of their startups, it put some pressure on the team to achieve more by Demo Day – and that worked.
Early traction is about whatever you can get
The initial focus of the team was to secure a few hundred claims and test their process and their business model. To do that, they "began by doing stuff that was possible at the time". Which meant looking for organic distribution by posting manually in Facebook groups.
Alexander confesses: "I wish I could say that we had a process in place that we were following very closely, but we didn't." He went on to explain that he would even advise against some of their early efforts:
"We did a lot of things that we wouldn't do now – for instance, we started blogging from day 1 and we were blogging without having an idea of what the hell were we even trying to do. We were like "We're gonna blog about travel stuff, see what happens. There was no keyword research, there was no strategy in place. [...] We were posting on all of those expat channels and travel groups. We were doing Twitter, we were monitoring people tweeting to airlines. So we were trying to do everything that we could that would not require spending money."
Focusing on one channel at a time
In the end, they saw this scattered approach wasn't really bringing any results – and as soon as they got money coming in, they decided to focus on one channel that was most likely to succeed and stick with it. At the time, this was Facebook.
Focus really helped bring Facebook to full power. As Alexander explains, doing one ad channel right can be a full-time job — after all, you're not living only in the Ad Manager, but you need to focus on testing creatives, optimizing landing pages and subsequent user flows... It's not just about the ad. "We purely did only Facebook ads. If we were to do AdWords at the time, there wasn't a lot of expertise in our network that we could pick up relatively quickly. So we picked one channel and we did it right. We would otherwise have spread ourselves too thin."
One thing that really helped optimize Facebook acquisition was that ClaimCompass had set all the prerequisites right. The team had a Facebook Pixel installed early on. They were feeding all of that data and training the algorithm even before advertising efforts started. "When we were in a position to ramp this up, all of this data was working in our favor, we weren't starting from absolute scratch," Alex explains.
They started with a conservative budget of $150/week and doubled that every week while keeping a close eye on conversions. They got to a few thousand dollars of weekly ad spend relatively quickly. And this, in conjunction with a successful ProductHunt launch and media coverage finally helped in achieving a first inflection point: "We went from doing 100-200 claims a month to doing a 1000 claims a month within the scope of 4-5 weeks."
Measuring early traction
ClaimCompass had set up a KPI sheet early on and this was keeping the team focused on specific metrics.
By the time paid acquisition started to work, the team had figured out a baseline that helped them assess the performance of each channel. "We had a target CAC in mind," Alexander says but is quick to add that this was a rather vague number at the time as the startup still didn't have enough data to assess the long-term performance: "What we ended up doing since we didn't really know what the lifetime value is gonna be, we pretty much tried to aim for time to return – how long will it take us to recoup that initial CAC. That was kind of a ballpark estimate." This is a great example of how you can still keep a clear focus on the metrics even with limited data.
This informed the success criteria for scaling traction channels, too. Alex illustrates their approach with the Facebook ad channel: "We were extremely utilitarian [...] If it's not converting, I wouldn't even look at anything else. I'd kill this campaign, start a new one." They measured conversions, submitted claims, and the cost for each.
Scaling growth channels
Alexander explains that the market is very broad and they still haven't achieved saturation in their main growth channel: "We were ramping up our Facebook spend consistently up until covid times."
But nevertheless, the team started exploring search. They figured out that it will bring in high-intent users. Although these would be more expensive to acquire, they already had the mechanism in place to bring people back in. "This combination of intent and display ads in social worked really well because we also added retargeting and that kind of closed the cycle." They could get people who search to click, then retarget them with Facebook ads, building custom audiences and lookalike audiences to scale. At this point going bigger got easier: "We went from $1 000 to $60 000 a month on Search very quickly."
But still, Alex points out that not every channel they've tried has worked, even with their growing expertise and understanding of customer behavior. After all, growth is impacted by many external factors, too. As an example, ClaimCompass quickly gave up on its link-building efforts and running guest posts: "We were of a conviction that pursuing that strategy wouldn't get us where we want to be." It turned out that niche was already owned by one of their competitors. And they were well entrenched and doing everything right. It was clear that going head to head with them would require a lot of effort with no confidence in the success of the outcome.
It's a great reminder that saying "No" and dropping growth initiatives is just as important as hustling and pouring a ton of energy into the channels that are right for you.
Understanding the difference between traction vs growth
At the end of our talk, I asked Alex what would be his advice to a young startup. He didn't take long to think about it – it was clear he thought the point he was about to make was really important.
It was this: You need to understand if you're currently pursuing traction or growth and know the difference. "I know everyone is extremely eager to go into growth but in reality, in simple terms, there's traction and there's growth. The two are very different and they serve a different purpose."
Traction is all about understanding users and perfecting your unit economics. "If you're pre-product-market fit really your only objective is to get to product-market fit. So you take whatever you get – be it a ProductHunt launch, maybe you just spend a couple of thousand dollars on paid ads and you get those first users. But the whole point is you want to be able to put a little bit of users in your product as a black box so you can benchmark with and answer some of the basic metrics." This will tell you what's your retention, where are you seeing drop-offs, what are users doing with your product.
And it makes sense to focus on growth only after that: "Post product-market fit is different because you have already answered these questions. So now you're starting to optimize." You already have a baseline to benchmark against and you can test new channels to see which ones are fit to scale: "Now I can start looking where can my product fit within a channel that I could make this sustainable business work and deliver its growth. [...] Now you're changing your perception, you're looking for scale."
So make sure you have that clear understanding and get to work!