A lot of my schoolmates and colleagues in life are in a point in life where they are jumping into the entrepreneur bandwagon. They have had the job for long, now they have the experience, technical knowledge and the best idea of the world. All that is required to start this world changing success story is a Venture Capitalist with wads of cash. In the quest for capital, many entrepreneurs stretch the truth.
Understand a venture capitalist is pitched dozens of times every year, and every pitch contains at least three or four of the lies below. And there goes the biggest idea into the trash bin. Are you too guilty?
1. “Our projections are conservative.”
An entrepreneur’s projections are never conservative. If they were, they would be 0. It is very rare and seldom that an entrepreneur achieve even their most conservative projections. As a rule of thumb, when VC sees a projection, they add one year to delivery time and multiply by 0.1.
2. “(Big-name research firm) says our market will be this many Hundred crores or billion in 2015.” Even if the product is c grade soap bar or a stupid gaming software, every entrepreneur claims the market potential is tens of billions. Do yourself a favor: Remove any reference to market size estimates.
3. “(Big-name company) is going to sign our purchase order next month.” Only play this card after the purchase order is signed, because no investor will fall for this one.
4. “Key employees are set to join us as soon as we get funded.” When a venture capitalist calls these key employees, he usually gets the following response: “yes, I met him, but I certainly didn’t say I would leave my 6 figure-a- month job to join his company.” If key employees are ready to rock ’n’ roll, have them call the venture capitalist and confirm it.
5. “No one else is doing what we’re doing.” Now this is outrageous . Know what would the VC interpret, either there’s no market for it, or you’re so clueless that you can’t Google for competition. Neither is conducive to securing an investment.
6. “No one else can do what we’re doing.” Now, the only thing worse than cluelessness and the lack of a market is arrogance.
7. “Hurry, because several other vc firms are interested.” There are maybe 100 entrepreneurs in the world who can make this claim. The fact that you’re reading this article means you’re not one of them.
8. “Bharti Airtel/ Infosys/ Reliance/Vodafone/Facebook is too big/dumb/slow to be a threat to us.” There’s a reason Sunil Mittals and Mark Zuckerbergs are where they are, and it’s not that they’r big, dumb and slow. Entrepreneurs who utter this lie look naive at best, stupid at worst.
9. “We have a proven management team.” If you were that proven, you wouldn’t be asking for money. A better strategy: State that you have relevant experience, you’ll do whatever it takes to succeed, you’ll surround yourself with proven advisors and you’ll step aside whenever it becomes necessary.
10. “All we have to do is get 1 percent of the market.” First, no venture capitalist is interested in a company that wants just 1 percent of a market. Second, it’s not easy to get even 1 percent, so you look silly pretending it is. Instead, show an appreciation of the difficulty of building a successful company.
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