Guy Kawasaki put up another informative post, “The Top Ten Lies of Entrepreneurs” and has done a pretty good job of digging up “red flags” in a given pitch. Here they are:
“Our projections are conservative.”
“(Big name research firm) says our market will be $50 billion in 2010.”
“(Big name company) is going to sign our purchase order next week.”
“Key employees are set to join us as soon as we get funded.”
“No one is doing what we’re doing.”
“No one can do what we’re doing.”
“Hurry because several other venture capital firms are interested.”
“Oracle is too big/dumb/slow to be a threat.”
“We have a proven management team.”
“Patents make our product defensible.”
“All we have to do is get 1%% of the market.”
Just about every pitch will use several of these “lies”. (heck, my last company used all but the Oracle lie) That’s not necessarily a bad thing. But what IS a bad thing is when these statements made again and again, in great fanfare, in an effort to close a deal.
That’s a red flag.
My personal opinion is that when you do make one of these claims, first, make sure it’s 100% true. Second, don’t make a big deal about it. Why?
When you make a big deal out of any of these points, you’re making it an important component of your company’s success. If any of these points fail or fall through, you will lose credibility in proportion to the fanfare you made of it.
When you do make a statement like “big company X is talking to us about an acquisition”, it helps to add in something like, “but of course that’s a long shot and right now we’re in very preliminary talks with nothing in writing”. Stuff like this lets you speak the truth, yet also communicate that you’re realistic about it.