Guy Kawasaki:
1. Our projections are conservative. An entrepreneur’s projections are never conservative. If they were, they would be $0. I have never seen an entrepreneur achieve even her most conservative projections. Generally, an entrepreneur has no idea what sales will be, so she guesses: ‘Too little will make my deal uninteresting; too big, and I’ll look hallucinogenic.’ The result is that everyone’s projections are $50 million in year four. As a rule of thumb, when I see a projection, I add one year to delivery time and multiply by .1.

2. (Big name research firm) says our market will be $50 billion in 2010. Every entrepreneur has a few slides about how the market potential for his segment is tens of billions. It doesn’t matter if the product is bar mitzah planning software or 802.11 chip sets. Venture capitalists don’t believe this type of forecast because it’s the fifth one of this magnitude that they’ve heard that day. Entrepreneurs would do themselves a favor by simply removing any reference to market size estimates from consulting firms.

3. (Big name company) is going to sign our purchase order next week. This is the ‘I heard I have to show traction at a conference’ lie of entrepreneurs. The funny thing is that next week, the purchase order still isn’t signed. Nor the week after. The decision maker gets laid off, the CEO gets fired, there’s a natural disaster, whatever. The only way to play this card if AFTER the purchase order is signed because no investor whose money you’d want will fall for this one.

4. Key employees are set to join us as soon as we get funded. More often than not when a venture capitalist calls these key employees who are VPs are Microsoft, Oracle, and Sun, he gets the following response, ‘Who said that? I recall meeting him at a Churchill Club meeting, but I certainly didn’t say I would leave my cush $250,000/year job at Adobe to join his startup.’ If it’s true that key employees are ready to rock and roll, have them call the venture capitalist after the meeting and testify to this effect.

5. No one is doing what we’re doing. This is a bummer of a lie because there are only two logical conclusions. First, no one else is doing this because there is no market for it. Second, the entrepreneur is so clueless that he can’t even use Google to figure out he has competition. Suffice it to say that the lack of a market and cluelessness is not conducive to securing an investment. As a rule of thumb, if you have a good idea, five companies are going the same thing. If you have a great idea, fifteen companies are doing the same thing.

More 5 lies here.

By MrMoney on February 26th, 2008
In: Entrepreneurial Lifestyle / Empreendedor, Posts In English  | 

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