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I agree with Sam's message, but I sympathize with founders who make mistakes here. Founders are told to hustle, to aggressively push themselves and their visio
by tkiley 11y ago
I agree with Sam's message, but I sympathize with founders who make mistakes here.
Founders are told to hustle, to aggressively push themselves and their visions in order to build momentum for their businesses. Founders are encouraged to bend - if not break - the rules in order to get things done.
First-time founders are thrown into the world of finance with a good deal of ignorance about the meanings and conventions of specific financial terms, combined with a culturally ingrained bias towards spinning things as positively as possible. Broadly speaking, this seems like a recipe for disaster.
- someear 11y agoSell and outsell your vision, dreams, and potential, not the facts.
- cbhl 11y agoThis requires founders to be mindful and realistic with what the facts are. See also: http://www.npr.org/sections/money/2015/07/03/419543470/episode-363-why-people-do-bad-things http://www.npr.org/sections/money/2015/07/03/419543470/episo...
- rokhayakebe 11y agomistakes Color me stupid, but I am sure the vast majority of founders know exactly what they are doing when they give GVM in place of revenue. For example no one would buy a home for $200M, sell it for $201M and say I made $201M last year.
- tempestn 11y agoNot necessarily; many would consider $201M the revenue and $1M the "profit" or "earnings" in that case.
- dkural 11y agobut they'd know they didn't make 201M - and conceptually that them buying and selling that house doesn't value them like a 201M revenue publicly traded company with billions in market cap. Founders know exactly what they're overselling. They do it for spin.
- asmithmd1 11y agoUsing your example for a business more people understand - A real estate agency can honestly say "We sold $20M of real estate last year" and everyone knows they probably took in about $1M in revenue. With new businesses where revenue models are changing it is possible to make honest statements that mislead an investor.