Tuesday, February 7, 2012

Top Ten Investor / Entrepreneur lies & What I Think
We work with a lot of companies that are either in the midst of raising capital, have done it already or are thinking about it in the future.  Many of the companies that want to raise capital won't be able to and will need to bootstrap it.  Some will get it via the 3f's Friends, Families and Fools and some will get it from Angels or Venture Capitalists.  Where ever the money comes from to either seed or expand a business the bottom line is that you have to make a pitch to get the money to start from someone.
Raising capital isn't easy and we have blogged about ways to do it, keeping your VC slide deck short & sweet and executive memorandums.  However, on the more humorous side I thought I would add some commentary to a post from one of the more entertaining and semi famous VC's I follow (Guy Kawasaki).  He recently posted the top ten lies of entrepreneurs and investors and I took the liberty of adding some tongue in cheek comments in bold (& where appropriate).
Guys post:
I leave you with two sets of top ten lies: one of entrepreneurs and one of investors so that you know what not to say and what not to believe.
Top Ten Lies of Entrepreneurs
  1. “Our projections are conservative.” (But if I don't show a hockey stick of growth you won't listen and tell me I can't make enough fast enough)
  2. “Jupiter says our market will be $50 billion in ten years.” (And if I show you it is only $500 million you will tell me it is to small for a VC of your stature - as you're only interest in home runs - not singles)
  3. “Several Fortune 500 companies are set to do business with us.” (yep and If I don't have name clients ready to go, you'll tell me to get go get them before you can consider funding us)
  4. “No one else can do what we’re doing.” (and if I tell you there is lots of competition and we're not very different except for our positive attitude..............)
  5. “Hurry up because other investors are about to do our deal.” (we all know you're going to drag your feet and take your time to do your due diligence and you know / we know we need your money  yesterday - so what would you like me to say, take your time you're the only game in town?)
  6. “Our product will go viral.” (hockey stick again - Entrepreneur speak "we're posed for slow steady growth and although you won't get your money back within the life of your current VC fund you can't lose!")
  7. “The large companies in our market are too big, dumb, and slow to compete with us.” (If we didn't think we could beat them why would we be here and why would you invest in us..?)
  8. “Our management team is proven.” (would you prefer "we're a bunch of propeller heads but we will learn on the way - with your money - forget about it...........we're good to go")
  9. “We filed patents so our intellectual property is protected.” (And if we didn't file you would tell us we don't have any IP so if we fail you have nothing to fall back on so go get some IP or you can't invest)
  10. “All we have to do is get 1% of the market.” (yep, didn't we hear that with China?)
The average number of these ten lies that I hear in most pitches is ten. At the very least, tell investors new lies.  (I like that at least Guy is being honest - twist the pitch in a new way so I don't get bored with the same ten slides I tell everyone to show me:-)!)
Top Ten Lies of Investors
  1. “I liked your company, but my partners didn’t.”  (happens, VC's don't want to be the only to pick a company within their own VC team - if something ever goes wrong guess where the finger points!)
  2. “We are patient investors who want to help you build a great company.”  (Ha, Ha - my fund is a 10 year closed one and I have 3 years to invest 3 more to re-invest and 4 to divest - you figure out the timing)
  3. “If you get a lead, we’ll invest too.” (Ummm, I didn't say I would invest with just any other lead investor, did I?)
  4. “There are no companies in our portfolio that conflict with what you’re doing.” (yep, there is also this game called liar's poker and man are we good at it!!!!!)
  5. “Show us some traction, and we’ll invest.” (can't laugh at this one because it is fair ... most of the time - but if I don't have money to gain traction - how can I do it......?)
  6. “We love to co-invest with other firms.” (as long as we take the lead, they follow what we want, our lawyer is bigger than them, we get our equity out first, we choose the next CEO+Board+management and.............)
  7. “We’re investing in your team.” (but wait, didn't we already say we don't think your team is proven....?)
  8. “We have lots of bandwith to dedicate to your company.” (As long as it doesn't interfere with our golf and sailing schedule - we're so busy you know. Oh and don't forget if one of our companies starts looking like the next Google, Facebook etc., we're really really busy )
  9. “This is a plain, vanilla termsheet.” (except for all the perks for us that will hurt you down the line - you have no idea how much we pay our lawyers to slide stuff in - and we know you can't afford a good lawyer)
  10. “We will get other companies in our portfolio to work with you.” (right.......................)
Do you know what the difference is between the lies of entrepreneurs and the lies of investors? The investors have money.
It’s not all bad news. Think of everything that an entrepreneur needs (tech ones, anyway), and you’ll see that most things are free or cheap.
  • Marketing: use blogs and social media to promote your products.
  • Tools: most tools are Open Source and free. Microsoft offers free versions of applications like Word, Excel and PowerPoint in the cloud!
  • Infrastructure: More cloud goodness—you don’t have to buy servers anymore.
  • People: callous for me to say, but in a recession, people are free or cheap.
  • Office space: what office space? You can work out of your garage (like David Hewlett and Bill Packard) or just form a virtual team.
(I think the above is great advice!  Keep your posts coming Guy - they are always entertaining and more often than not have some great pearls of wisdom!)


  1. Great piece Dave on this space. And every entrepreneur thinks they're on a winner, and every VC rarely knows how to pick one

  2. As a successful entrepreneur yourself I think that is sage wisdom! Most VC's tell me they want to see game changers (Google, Facebook,LinkedIn)/ homeruns but often do know how to evaluate them because they like to make comparisons which is challenging if there is nothing like them. Also causes a headache for the entrepreneur because valuing them becomes a challenge as well! Thanks for your comments Mark!