What happens when your car doesn’t have traction? If you lose traction before you get moving, your wheels may spin, but you won’t be going anywhere. Worse than that is losing traction while you have momentum. If you lose traction on an icy road, for instance, you could easily crash.

The same basic principles of traction apply in business. When a startup is young and most vulnerable, gaining traction in the market is hugely important to making progress. For more established businesses, losing traction can all too easily result in disaster.

Not long ago, I invited Venture Asheville’s Josh Dorfman to speak to a group of local entrepreneurs. Josh works closely with angel investors, and it was no surprise that he was bombarded with questions about what investors are looking for. Then, one member of the group asked him “What’s the most important criteria you look for before investing?”

Right away, Josh said “Traction. If you don’t have traction, you will likely not get funded.”

In fact, many investors won’t even look at a pre-revenue company. Even when a startup has a really good idea, it’s extremely common for investors to say “Come back when you have some more traction.”

It should be no surprise that sales is generally considered to be the best kind of traction. Paying customers are a great indicator of traction, and repeat customers are even better. There are few things more compelling to an investor than a proven track record of repeat orders.

This may seem like I’m putting the cart before the horse, as it’s hard to build up a great business and generate demand with limited investment. But demonstrating traction from sales isn’t necessarily that difficult. As I mentioned on a recent podcast, even something as simple as pre-orders on Kickstarter can help you make your case.

Sales isn’t the the only kind of traction that’s meaningful to an investor, however. Other good indicators include things like the number of subscribers or users your project has. Anything that suggests that the market is receptive to the business, and that interest is growing, can go a long way towards demonstrating traction.

For instance, Facebook and Twitter clearly had traction early in their development, but it took years for their revenue numbers to reflect this. In fact, Twitter still isn’t profitable. Their user adoption numbers, however, made a strong case for investment.

At the same time, interest generated from free stuff, like free demos or giveaways, isn’t particularly valuable. If people aren’t interested in paying for your product, that can have a negative impact on your traction.

This is one reason why I’m a big fan of “subject to” agreements. It allows customers to indicate interest, but also gives them the option to cancel and walk away if something goes wrong. Purchase orders, letters of intent and freemiums can also fill this role when it comes to indicating traction. These aren’t as convincing to an investor as completed sales, but they are far better than an untested idea.

There are also some milestones that can serve as indicators of traction, such as securing your intellectual property. Things like patents and trademarks are very helpful, and definitely worth pursuing. If nothing else, they demonstrate that you’re taking your business seriously.

Just remember: Strong sales trumps all of these. Nothing is more convincing than saying “I just sold 1,000 units,” or being completely pre-sold before you even officially launch. Selling out before you’ve even made your product will always catch the attention of an investor.