One of the best books that could have considerable influence on how to start a business is written by author, evanglist, venture capitalist and serial entrepreneur Guy Kawasaki. So what does the guy that founded Truemors (sold) and AllTop.com know about starting a business? Quite a bit and he’s sharing it all with you in his latest book Reality Check: The Irreverent Guide to Outsmarting, Outmanaging and Outmarketing Your Competition.
In his book, Kawasaki highlights the realities that both entrepreneurs and investors face in this world of starting a business. Perhaps most notable are his chapters that focus on the top lies each party tells. Here’s the top lies of entrepreneurs that you might want to try and avoid making or saying:
- “Our projections are conservative.” According to Kawasaki, an entrepreneur’s projects are never conservative. He makes it a point that when pitched, that he’ll usually add one year to the delivery time and multiply it by 10 percent. Entrepreneurs apparently are prone to thinking that there’s a risk aversion if your numbers are too high or even too low. It’s hard to judge what is that right number to share.
- “(Big name company) is going to sign our purchase order next week.” Instead of saying that you’re going to get the purchase order next week, Kawasaki says that if you’re going to “play this card”, you might want to do it after the purchase order is signed. Don’t get burned by this because nothing is guaranteed in life…especially purchase orders.
- “Key employees are set to join us as soon as we get funded.” Kawasaki believes that there could be some controversy about simply saying this line. It’s more prudent and supports your claim if you have those key employees testify to the venture capitalists, investors, stakeholders, etc as soon as you’re finished with that meeting. Time to show them you’re serious.
- “No one is doing what we’re doing.” Called a bummer of a lie because it’ll lead to two logical conclusions: no market for the product and no sense of understanding technology and a search engine. Kawasaki’s rule of thumb is that if you have a good idea, at least five companies are doing it. If it’s great, expect at least 15 companies.
- “No one else can do what we’re doing.” Too arrogant can be a big turn-off. Once you’ve launched, expect more companies to pop up that will do exactly what you’re doing.
- “Hurry, because several other venture capital firms are interested.” Probably not true. Kawasaki says that unless you’re at the top of your game and the “cream of the crop”, you’re going to be able to really claim this, but for most of the startups out there, you’re not going to be able to sell this very well.
- “Oracle is too big/dumb/slow to be a threat.” Sure, this is probably more applicable for those in the technology sector, but it might also hold true if you swap out Oracle for your market’s biggest player. Some (or maybe all) investors may think that you’re being arrogant and maybe even “stupid” for thinking that big companies wouldn’t be able to innovate and do what you’re doing.
- “We have a proven management team.” This definition of a proven management team can be deceiving, according to Kawasaki. He says that “truly proven” in a venture capitalist’s eyes is being a founder of company who has returned billions to its investors. If you’re proven, then you wouldn’t need money and by saying you’re proven is pretty repetitive – just something you don’t need to say.
- “Patents make our product defensible.” Kawasaki says that you shouldn’t rely on patents when talking to venture capitalists. Only use the word “patent” once in your presentation unless you want the investors to think you care only about patents.
- “All we have to do is get 1 percent of the $X billion market.” According to Kawasaki, venture capitalists want more than 1 percent of the market. In fact, they want enough of the market to face the antitrust division of the Department of Justice. Also, it seems that unrealistic to say that you want 1 percent of the market – it’s just not that easy.
These are the most common lies that Kawasaki claims entrepreneurs make. as a result, investors may make it a sticking point when rendering their decision. But don’t be mistaken that only entrepreneurs tell such lies…venture capitalists also tell similar lies. The part to note here is whether or not you get caught.
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