When all that glitters is not gold - the problem with faking it until you make it in VC
When All That Glitters Is Not Gold
"Fake it until you make it" may be a common mantra in the start-up world, but it's becoming increasingly clear that this approach can lead to serious problems in venture capital (VC). Recent charges, convictions, and sentences have demonstrated that fraudulent behaviour is no longer being overlooked by investors, who are scrutinizing start-up claims more closely, and the tech downturn is revealing who has been taking the industry's "fake it till you make it" ethos too far.
The problem with this approach is that it can lead to founders exaggerating their claims and falsifying data in order to secure funding. This can lead to overvalued companies, disappointed investors, and ultimately, the collapse of the firm. Moreover, this culture of fakery can also lead to a lack of diversity in the industry, as women and minority founders may be less likely to engage in this type of behaviour and therefore less likely to secure funding.
The proverbial phrase "all that glitters is not gold" originated from William Shakespeare's famous play, The Merchant of Venice. In the play, the Prince of Morocco is led by the exterior glitter of gold and chooses the gold casket, only to lose the lottery of caskets. The phrase has since become a widely recognized proverb, serving as a warning that appearances can be deceiving. In today's world, this phrase is particularly relevant, as it reminds us of the dangers of relying solely on outward appearances and the importance of looking beyond the surface to uncover the truth.
In order to combat these issues, VC investors must prioritize transparency and ethical behaviour when evaluating start-ups. This means conducting thorough due diligence and holding founders accountable for their claims. It also means recognizing that women and minority founders may face additional barriers to securing funding and taking steps to address these inequalities.
The Problem with "Fake It Till You Make It" in VC
One of the main issues with the "fake it till you make it" mentality in VC is that it often leads to unethical behaviour, such as misrepresenting company data or making false claims to investors. This can ultimately harm the industry as a whole and erode trust in the startup ecosystem.
Furthermore, the pressure to present a successful image can cause founders to prioritize short-term gains over long-term sustainability, leading to a lack of focus on important issues like diversity, sustainability, and ethical practices. This can lead to a homogenous and unsustainable industry that prioritizes profits over people and the planet.
In addition, the "fake it till you make it" mentality can create a culture of fear and pressure, where founders feel like they need to constantly prove their worth and meet unrealistic expectations. This can lead to burnout and mental health issues, and can also discourage women and underrepresented minorities from entering the industry.
It's important for VC investors to shift away from this mentality and prioritize honesty, transparency, and ethical behaviour. By doing so, they can help build a more sustainable and inclusive startup ecosystem that prioritizes the well-being of its founders, employees, and the world around them. This shift can start with holding founders accountable for their actions and rewarding those who prioritize ethical practices and long-term sustainability over short-term gains.
Prioritizing Transparency and Ethical Behaviour in VC
Unfortunately, VCs are not immune to the "fake it till you make it" mentality either. In fact, some VCs have been known to overhype their success and experience to attract more investors and gain a competitive edge. This can lead to a cycle of deception and inflated expectations that ultimately harm both the VC and the startups they invest in.
Moreover, when VCs prioritize short-term gains over long-term sustainability, they can create a toxic culture that harms the industry as a whole. For example, VCs may pressure their portfolio companies to prioritize growth at all costs, even if it means sacrificing ethical practices or sustainability. This can ultimately harm the company's reputation and erode trust in the startup ecosystem.
To address these issues, VCs must prioritize transparency and ethical behaviour in all aspects of their work. This means being honest about their experience and expertise, being clear about their investment goals and strategies, and holding themselves accountable for their actions. It also means prioritizing long-term sustainability over short-term gains and valuing diversity, equity, and inclusion in their investments.
By doing so, VCs can help build a more sustainable and inclusive startup ecosystem that benefits everyone involved. They can also help restore trust in the industry and pave the way for a new generation of ethical and sustainable startups.
Looking in the Mirror in VC
In addition to the pressure on founders to "fake it till you make it," there is also a similar culture among venture capitalists. VC firms are under immense pressure to identify the next big thing and to deliver returns to their investors. This pressure can lead to a tendency to oversell themselves and their capabilities to potential investees.
Furthermore, many VCs have come under scrutiny for their lack of diversity and inclusion. Research has shown that less than 10% of venture capital funding goes to female founders, and even less to founders from underrepresented backgrounds. This lack of diversity can contribute to a culture of homogeneity in the industry, where certain traits and behaviours are rewarded, and others are not.
To combat this, VC firms must prioritize diversity and inclusion in their hiring practices and in their investment decisions. This will lead to a more inclusive and innovative industry, where a variety of perspectives and experiences are valued and celebrated.
领英推荐
Transparency, Diversity, Ethics in the VC ecosystem must also include LPs, fund of funds, endowments etc. By continuing to invest in funds that are NOT transparent, diverse, ethical etc they indirectly perpetuate the context where “fake it till you make it” transgressions thrive and spread. Garnet S. Heraman GP Aperture VC.
It's all about an inclusive and sustainable startup ecosystem
Building an inclusive and sustainable startup ecosystem is crucial for the long-term success of the industry. Here are three key points to consider:
Ultimately, a more inclusive and sustainable startup ecosystem benefits everyone involved, from the startups themselves to the VC investors and the wider society.
Take Back to Work
Ultimately, the "fake it till you make it" culture in Silicon Valley and in the VC industry is a symptom of a larger problem.
The pressure to succeed and to deliver returns to investors can lead to unethical behaviour and a lack of accountability. It's up to all stakeholders in the industry, from founders to VCs to regulators, to prioritize transparency and ethical behaviour, and to work towards a more equitable and sustainable future.
There is a rapid need for transparency and ethical behaviour in the venture capital (VC) industry.
The "fake it till you make it" mentality can lead to fraudulent behaviour, a lack of diversity in the industry, and a focus on short-term gains over long-term sustainability. To combat these issues, VC investors, LPs, and firms must prioritize honesty, transparency, and ethical behaviour.
This includes conducting thorough due diligence, holding founders accountable for their actions, and valuing diversity and inclusion in hiring practices and investment decisions.
Don't be fooled by the shortcut "fake it until you make it" approach in the VC industry. It's a risky gamble that can cause you serious problems. Instead, prioritize transparency and ethical behaviour to build a sustainable and diverse ecosystem that benefits everyone involved.
It's the collective responsibility of us all - Founders, Regulators, VCs, GPs and LPs - to create an inclusive and sustainable startup ecosystem for all.
About the Author
Leesa Soulodre?is the General Partner of R3i Capital,?a global sustainable development venture capital fund?investing in climate change adaptation and the transition to value-based healthcare. Reach out if you would like to learn more about our mission in the?R3i Future Fund.
What’s in our name?
R3i stands for returns, resilience and reliability — three characteristics that are often used to describe or evaluate investments, businesses, or other assets.
Together, these three characteristics can be important factors to consider when evaluating the potential risks and rewards of an investment or asset.
3 i’s — “Intelligence, Innovation, and Insight” are the three characteristics that are often used to describe a venture firm’s edge. R3i synthesises these into its collective and inclusive “impact”.
?? Reverse A1C back under 5.6% in 16 weeks ?? Using the 5.6% system ?? My latest A1C 4.9% ????DM "REVERSE" to start
2 周Fake it till you make it is quite wrong because all this time there's a part of you that knows you don't have the competency. And competency is where confidence comes from. Now that puts us in a tough spot because how are we supposed to be resourceful or confident, and act in spite of low competency? The secret is to act upon your values and your beliefs about yourself. That's why if you seek confidence, you should have total clarity on who you believe you are, and understand what you value. As soon as you have that clarity, confidence shows up. As you take action and gain competency, confidence exponentially increases.
LinkedIn Top Higher Education Voice, publisher of International Employability Insight (IEI) & founder of Asia Careers Group SDN BHD
1 年Should #colleges & #universities own #entrepreneurial #education? The J.P. Morgan lawsuit against Charlie J.Founder of Frank, demonisation of Elizabeth Holmes founder of #theranos & her imprisonment threaten to overshadow many of the lessons to learn. Is it reasonable to say that Charlie J. & Holmes were demons, but were their investors as angelic as they might seem? It would be disastrous if these cases are used as an excuse to exacerbate the extreme bias against #womenentrepreneurs, with just 1.9% of #vc investment going to female founders! Much has been made of Holmes dropping out, but when we look at successful #entrepreneurs, particularly those in the #tech space, this is not an unusual: Steve Jobs - Apple Mark Zuckerberg - Facebook Bill Gates - Microsoft Jack Dorsey - Twitter & Daniel Ek - Spotify all dropped out of #college, Dorsey twice. They are all men, reinforcing the need to redouble efforts to support young women #entrepreneurs. The more pressing problem is whether universities are doing enough to keep young entrepreneurs engaged & ensuring they have the tools to navigate the “#dragonsden” they are about to enter with their fledgling #startup. Asia Careers Group SDN BHD - Investing in International Futures
Here is a report I found some time ago, but continue to share: https://www.startups.com/library/expert-advice/why-do-startups-fail I research technology and related markets to be able to improve the odds of survival of good people trying to serve good people. You must start with a mission statement. What do you do, who do you serve, and how do they benefit? Next shop it around and see if there is a real need. How much money did the target customer spend last year buying a solution? No budget means no market. 42% of those who failed on this issue.
Partner, FoundersX Ventures (Venture Capital Firm)
1 年Great article Leesa!