I have seen this repeatedly from the lawyer side. Founders beat the bushes to raise initial funds with varying degrees of success. But, once they can say, we ar

I have seen this repeatedly from the lawyer side. Founders beat the bushes to raise initial funds with varying degrees of success. But, once they can say, we are adding x number of real customers per month - or, just as good (sometimes even better), we just signed contracts with a, b, and c enterprise customers (even if these are just entry-point contracts for consulting services that will be a precursor to product sales) - the interest level among investors can go quickly off the charts. Investors are always eager to sign on with a winner, especially at an early stage when even a small piece of the company can ultimately acquire great value, and this I think explains why the "traction" point can be a great spur to excitement for them. That said, I have also seen a number of cases where early customer sign-ups ultimately led to little once the initial excitement faded. Startups targeting the enterprise market are particularly vulnerable to this, where they may get all sorts of customers signing up for trials of a product but then are ultimately unable to convert them into large, paying customers owing to the small and untested nature of the startup involved. In such cases, if traction does not reach a critical level, the early gains may sputter. But this doesn't change the basic point, which is that investors will often want to scramble to sign on once they see the initial signs of such traction (even if it later proves illusory). This is a nice piece highlighting this important point.