Lies , Lies , Lies

[WISE GUY] ^ ^ g

BY GUV KAWA5AKI

LIES, LIES,

^ ^ r

LIES!

IN THE QUEST FOR CAPITAL, MANY ENTREPRENEURS STRETCH THE TRUTH. ONE VENTURE CAPITALIST CALLS THEM OUT. AS A VENTURE Capitalist, I get pitched

2."[BIG-NAME RESEARCH FIRM) SAYS

6 . " N O ONE ELSE CAN DO WHAT WE'RE

dozens of times every year, and every pitch contains at least three or four of the ties below. Are you guilty? l.''OUR PROJECTIONS ARE CONSERVATIVE." An entrepreneur's projections are never conservative. If they were, they would he $o. I have never seen an entreprenexir achieve even their most conservative projections. As a rule of thumb, when I see a projection, I add one year to delivery time and multiply by 0.1.

OUR MARKET WILL BE $ 5 0 BILLION IN

DOING." The only thing worse than cluelessness and the lack of a market is arrogance.

$$$

2010." Even if the product is bar mitzvah planning 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 WEEK "

Only play this card after the purchase order is signed, because no investor will fall for this one.

reading this article means you're not

AS SOON AS WE GET f UNOEO." W h e n a

one of them.

Projections

c/a

WOW!! 34

ENTREPRENEUR

MARCH 200?

FIRMSARE INTERESTED.'*

There are maybe 100 entrepreneurs in the world who can make this claim. The fact that you're

4 . "KEY EMPLOYEES ARE SET TO JOIN US

Forecast!

=

?."HURRY, BECAUSE SEVERAL OTHER VC

venture capitalist calls these key employees, he usually gets the following response: "I recall meeting him, but I certainly didn't say I would leave my $25O,ooo-a-year job to join his company." If key employees are ready to rock 'n' roll, have them call the venture capitalist and confirm it.

6.''0RACLEISTD0BIG/ DUMB/SLOW TO BE A

The only thing worse than cluelessness and the lOCk Of

a market is arrogance.

THREATTO US." T h e r e ' s

a reason Larry Ellison is where he is, and it's not that he's big, dumb and slow. Entrepreneurs who utter this lie look naive at best, stupid at worst. g.''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 wliatever it takes to succeed, you'll surround yourself with proven advisors and you'll step aside whenever it becomes necessary.

5."NO ONE ELSE IS

1 0 . "ALL WE HAVE TO 0 0 IS GET 1 PER-

DOING WHAT WE'RE

CENT OFTHE MARKET." First, n o venture

DOING." Weil, either there's no market for it, or you're so clueless that you can't use Google to figure out you have competition. Neither a lack of a market nor cluelessness is conducive to securing an investment.

capitalist is interested in a company that wants just l 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 ofthe difficulty of building a successful company. tiri"/s GUY KAWASAKI'S mantra. He isjbtmer chief evangelist far Apple Inc.. co-founder of VC prm Garage Technology Ventures and author of eight books—rnost recent/n The Art of the Start Wsjf te btoj of htfp// q uykawasaki. corn.