Fibbing Founders: Top Ten Lies Startups Tell Investors

In an effort to break into the venture capital world, I recently started an amazing apprenticeship through Venture University as a Venture Capital Investor. After an intense and extremely informative VC Masterclass, I am now tasked with going out and sourcing some new deals worthy of our capital. Many of the responses I was getting from founders during our initial conversations seemed a little suspicious. Digging a little deeper, I began to realize that I had been getting hit with some serious sales tactics by some fibbing founders.

Realizing this, I thought it might be useful to provide new or future startup investors with a list of the Top 10 Lies Entrepreneurs Tell Investors to help them sift through the bull! So, here’s what I got:

1.)   We don’t have any competition!

This is one of my favorites. The likelihood of a company having zero competitors is almost unheard of. In fact, if they don’t have competitors, then they more than likely have a terrible business because every good business has either direct or indirect competition.

2.)   These are VERY conservative projections!

The BS meter has just exploded! Why is it that you are showing conservative numbers when what I want to see are entrepreneurs who think and achieve big? As an alternative, it may be best for entrepreneurs to show a sizeable but achievable upside, which is realistic, that they are going to do everything to achieve.

3.)   We have first-mover advantage!

If this is the case, then the product or service might be too early to the market. Many first-movers make costly mistakes and can benefit more from being a smart follower, letting someone else make the mistakes, pivoting, and passing them by.

4.)   We have a proven management team that has created and sold several successful companies!

Proven team, maybe. But if they have sold so many companies, then why do they need my money? Success is good, but I want to see some skin in the game. I have seen too many good deals go bad when unhungry entrepreneurs raise money and have no fire in the belly to succeed! No hobbies on my dime.

5.)   We have a few huge contracts being signed next week!

Awesome! That makes me excited to fund you in two weeks when the contract is inked, or when the cash for the contract has been received! Many entrepreneurs talk a big game, but usually when the bluff is called, a different scenario unfolds.

6.)   We just started raising capital, get in early, we have investors already interested!

Apparently, grandma the unaccredited investor is coming on strong! The reality behind this curtain is that in most cases the entrepreneur has been trying to raise for several months, struggled, stopped, and is back at it again because money is fading fast.

7.)   We have a patent; we own this space!

So how big is this space? Be wary of these comments because the entrepreneur probably has a provisional patent in a very small and specific space. More than likely, all the genius stuff is already taken.

8.)   All we have to do is get 1% of the market and we are golden!

If you are focusing on only 1%, who is going to grab the other 99% and likely crush you? Founders with a monopolist mindset might have a chance getting that 1%, but make sure they are focusing on the right market size, not trying to skew you from their targets and capabilities.

9.)   I’ve tested this market, and people love my idea. This is going to be huge!

I love entrepreneurs with big ambitions who believe in their product. Just make sure that the market they are referring to is not just their family and closest friends, but it has actually been tested on a target market who is willing to pay.

10.) This is surely our last round of capital we’ll need. Then we’ll sell for billions!

Let’s be honest: The billionaire club is not that easy to get into. Best if you bring your founder back to reality and make sure they don’t really mean that this is the last round needed, say, before the next round? Capital needed is surely underestimated in the startup world, so make sure they fully understand that.

Well, there you have it! If you are new to the venture capital world and are looking to be groomed by the industry’s most respected and to get some real-world portfolio experience, I suggest you check out Venture University.

Make sure to send this list out to the companies trying to pitch you to make sure they don’t waste your time, and so they know you can see past the lies.