Top Ten Entrepreneurial Lies
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The Top Ten Entrepreneurial Lies (when raising VC capital)
According to Bill Joos, transcript by Brendon Wilson
- Lie #10: Our projections are conservative.
Now, most people don’t think that’s a lie, but it is. It is - your projections aren’t conservative, you know they’re not conservative, you know you’re going to miss those projections, just stop using the phrase “our projections are conservative”.
- Lie #9: Our target market is $56 billion.
You know, you may be able to add up all the economic activity in every sector in which you’re possibly going to do business, but that has nothing to do with your target market. This destroys your credibility when you say this.
- Lie #8: We have a world-class team.
Now, I know you’re proud of your team, I’m sure you have a great group of talent on your team, but it probably isn’t world-class unless, I don’t know - is Jim Clarke here in the audience? You may have a great team, but don’t tell us it’s a world-class team because it probably isn’t. They may be smarter than anyone else in the world on a specific topic - tell us that, and let us know why that is.
- Lie #7: Our average sales cycle is 90 days.
Well, you know, your first customer who ever bought your product only took ninety days from the time you started to the time you ended. But understand that is not an average. That is not an average - that is at the far end of the bell curve. The average is what happens over the long end - you have not yet sold all the guys you haven’t sold yet. The average is going to be much longer. Lots of entrepreneurs get trapped because they build into their model this ninety day sales cycle, when in fact it’s nine months. Or twelve months. Or longer. Be realistic about your sales cycle.
- Lie #6: We have no direct competition.
Almost certainly, you have competition and, as Bill said before, if you think you have no direct competition it’s because you haven’t done the work to find them, or it’s because you’re lying to us. Either way, we’re not that excited about the work you haven’t done.
- Lie #5: No one else can do what we do.
Well, you may be the first team to produce this particular prototype of this particular technology, but everybody knows that with enough resource and talent other people can do it. This is not a compelling competitive advantage. What we want to know is why your competitive advantage is sustainable. Why it is that because you have these three people on your team that your team will be able to sustain your technological advantage over multiple product cycles - that’s a competitive advantage, not the fact that you’ve tinkered together a technology that no one else has bothered to build yet.
- Lie #4: All we need is 2% of the market.
I want to target the company that wants to go after the 98% that you’re going to skip. That’s the company I want.
- Lie #3: We’ll be cash-flow positive in twelve months.
You know, God bless. From your lips to God’s ears - but it ain’t going to happen.
- Lie #2: Our contract with Nokia is going to be signed next week.
Well, don’t start talking about when that contract is going to be signed until after it is signed. You can talk about conversations you’re having with Nokia (if that’s OK with Nokia), you might even be able to get a reference-able relationship discussion. But don’t promise contract signature dates until after they’re done. Underpromise, overdeliver. Surprise investors with momentum. Don’t miss milestones and destroy your credibility.
- And Lie #1 is: I’ll be happy turn over the reins to a new CEO.
You know, as another venture capitalist likes to say, there’s a big difference between the CEO, the entrepreneur you’re talking to, who you know they understand the process, that they’re good at the early stage and they want to bring someone else in the later stage. But then there are those entrepreneurs whose fingers you have to pry off the steering wheels with a crowbar. It’s OK, some entrepreneurs can make that transition, others can’t and shouldn’t, and know that they shouldn’t. And there’s a big difference between the two.
