Top 10 lies Entrepreneurs should definitely avoid

Entrepreneurs often fabricate evident facts in order to persuade investors and other stakeholders that their business is the golden goose in making. They definitely know their ventures strengths and weaknesses. If you are an entrepreneur and have still to figure flaws in your magic product then my friend you have a long way to go.

A typical venture capitalist or investor reviews more than 8-10 such golden goose pitches every day. Each company claims to represent an earth-shattering opportunity with a proven team, proven technology and proven market. No company claims to be a bunch of losers who don’t know what they are doing. The investors have grown smart and usually avoid such companies who tell the same old lies. Here are the top 10 lies entrepreneurs often tell, study them, so at least you can make new ones.

1.    “Our projections are conservative”

You say your projections are conservative yet you claim to reach $100 Million by year three. In fact, you claim to be the fastest growing venture ever. In reality, you have no clue how fast are you going to grow. The truth is that you have projected numbers that are high enough to interest an investor but low enough to not look like idiots. Honestly, you should say that you have no clue until you ship the 1st product and it is accepted by the market.

2.    “Experts say our market will be $50 billion in 5 years”

Numbers like these don’t impress the investors. No one is going to tell that they have a small crappy market. Instead, paint a story so good and compelling that they fantasize your potential. After that, they will do the math in their heads.

3.    “Amazon is signing our contract next week”

Such traction is definitely good and makes your company fundable. But until a contract is signed, it is not signed. Such contracts usually are not signed on the prospective dates. Next week when your investor asks you about it and you are not able to present it, you will have a credibility problem. It’s always good to mention about such deals after they are done.

4.    “Key employees will join us as soon as we get funded”

Let’s make things clear, you’re two guys in a garage, looking to raise a few hundred thousand dollars, your product is far from completion and you say that a top executive with a salary package of more than ₹250,000 + perks will come and join you. Take a break. It is often when the investor tries to contact such potential employees they hardly remember you. So make sure that whenever you say this lie, your potential employee is locked and ready to join.

5.    “Several investors are already in the due diligence”

It implies that if you don’t invest in us someone else will invest in us and you don’t stand a chance. It works once in a blue moon but often it is a silly laughable tactic. The investor network is strong and the investor might just call up his buddies to find out what your actual flaws are. There is always a reason behind an investor stalling you for a long time, usually, it leads to rejection.

6.    “Microsoft is too old, big, dumb and slow to be a threat”

Many entrepreneurs think that by making such statements they are convincing the investor of their determination and establishing a competitive advantage against their entrenched competitors. In reality, all you are doing is showing them how naïve you are about building a successful business. It’s scary enough for the investor that you are competing with established companies. Don’t seal the coffin by showing how clueless you are. Instead, you should acknowledge the fact that you are taking high-risks and are aware of the magnitude of the challenge.

7.    “Patents make our business defensible”

Patents only provide a little competitive advantage and that’s all. By all means file for patents, but don’t depend on them unless you have the time and money to go to court. Though you should mention it once as it shows that you hold some valuable intellectual property. Mentioning it more than once shows means that you are inexperienced.

8.    “All we have to do is get 1% of the market”

Venture capitalists call this the ‘Chinese Soda Lie’. That is, ‘if one per cent of China drinks our soda then we will be the most successful company in the world.’ There are many flaws in the statement, first, it is not easy to get 1% of people to drink your soda. Second very few entrepreneurs actually have the capability to go after a market like China. Third, they have heard this line and will be hearing this line in every second pitch. Fourth, 1% market share does not sound that interesting.

9.    “We have first mover advantage”

This lie has 2 major problems, first is it may not be true, how can you know that no one else is doing what you are doing? Second, it’s not always good to be a first mover. You can let someone else pioneer the concept and be a close second avoiding the mistakes made by the first one.

10.    “We have a world class proven team”

You can only say that you have a world class proven team is when the founder’s previous ventures have been enormously successful or they held highly respectable positions at large companies. Usually, minor roles at large companies for short durations do not count as proven entrepreneurial experience.