* 20MillionDinar (10 Lies Never to Tell Investors): DV 1/27/12
January 27th, 2012 11:02 am · Posted in CHATS & POSTS: Iraqi Dinar Exchange Rate & Buy Dinar Info
All the confidence in the world won’t convince a VC these statements are true. Here’s why these 10 fibs hurt you — and what to say instead.
By Erik Sherman Jan 23, 2012
- Serial entrepreneur and VC Guy Kawasaki recently wrote a post listing the 10 lies entrepreneurs tell investors. These are classic lines that he hears in virtually every company pitch he sits through. I’ve added my own analysis below as to how they translate to investors’ ears:
- “Our projections are conservative.” If you were really conservative with projections, you’d see that conditions could be bad enough to cause your venture could fail. When you pretend that failure is not an option, investors know that you haven’t done your homework.
- “Jupiter says our market will be $50 billion in 10 years.” It doesn’t matter what any analyst says. Their projections are often wrong. (How many times have they predicted the paperless office?) Even if they aren’t, that doesn’t mean you’ll get any slice of the eventual market size. A handful of giants might split it and leave you with nothing.
- “Several Fortune 500 companies are set to do business with us.” Either companies have signed a contract or they haven’t. If they haven’t, then they are at best a prospect. Hyping sales efforts is a bad habit to get into.
- “No one else can do what we’re doing.” No one and nothing is irreplaceable. You will have competition and you have to assume that they will be good.
- “Hurry up because other investors are about to do our deal.” If they’re about to do a deal, why do you have to talk to these people?
- “Our product will go viral.” Everything says their product will go viral. Almost none do. The odds are heavily against you—even if your mother likes your product or service.
- “The large companies in our market are too big, dumb, and slow to compete with us.” Large companies have enough money to crush you at the start, should they choose to. There are reasons those giant competitors grew to their present size.
- “Our management team is proven.” As your venture is new, no one has proven that he or she can make it work. Otherwise you wouldn’t still need funding. You’d be Charlie Sheen and winning.
- “We filed patents so our intellectual property is protected.” If you don’t have the money to sue other companies for infringement, then the number of patents doesn’t matter. If someone can design around your patent, they don’t even need to infringe.
- “All we have to do is get 1 percent of the market.” If everyone who sought “only” one percent of the market actually got it, markets would be 10 million percent in size.
Such lies, whether intended to be or not, are proof that you’re unrealistic and may not have the experience to succeed. When you’re trying to sell an investor on your start-up, assume that they’ve heard anything you could say a thousand times before.
Kawasaki’s advice is to at least tell investors new lies. You could say that he’s jaded, but that reaction is indicative of how thoroughly and often entrepreneurs fool themselves.
You don’t need to make up new lies. Try these 10 alternatives that will make you stand apart and appear competent and business-like:
- Instead of “conservative” projections, provide three options: a truly conservative one where things don’t go your way, a second that is realistic, and an optimistic third. Better to surprise investors with eventual good news.
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The * 20MillionDinar (10 Lies Never to Tell Investors): DV 1/27/12 by Dinar Daddy's Tidbits, unless otherwise expressly stated, is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.
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