4 ms·

I don't agree with the premise that some amount of deception is necessary to pitch a company. Founders should say both what they plan to do, and what they actua

by tlb 9y ago

I don't agree with the premise that some amount of deception is necessary to pitch a company. Founders should say both what they plan to do, and what they actually have working today. I think it's a partly a dysfunction of some investors, that they get excited by the plan and forget to drill into what actually works. Investors who consistently drill into the current situation aren't surprised when things are a little broken, because that's true of every startup.

maerF0x0 9y ago
Especially in the pitch, the value of a lie there is quite low and the long term costs of a mismatch are great.
capkutay 9y ago
and investors simultaneously kill competition by honest companies...'you have a 10 year roadmap to do X? not interesting. i'll invest $100m in this company that says they can do 10X in one year!'
- twinkletwinkle 9y ago
  The market should correct that though. Those companies will (should) quickly run out of money to invest. While those who pick the ones with the right 10 year plan will (should) have the returns to continue investing.
  - mi100hael 9y ago
    What really happens is the company that over-sold their capabilities gets the $100M and then ends up not meeting their stated timeline but investors are already 9-figures deep so they just accept there were "unforeseen setbacks" and continue supporting the company rather than admit they were hoodwinked. Meanwhile, the realistic company that was passed over runs out of money and folds.
    - AndrewKemendo 9y ago
      This is exactly right and there are numerous examples of that.
    - RyanZAG 9y ago
      I think most startups understand this implicitly, and therefore most pitches are lies. Most of the rest of the comments are about "it doesn't have to be this way!", but it's almost an inescapable local max. The previous big breaks in technology were nearly always the 10X in 1 year types, but it's extremely hard to tell who is actually a 10X in 1 year because they are so extremely rare. Probably impossible, since more likely than not, the 10X is pure luck on the part of a competent 1X than any kind of real difference. So the sensible 10 years for 1X that will make you profit but not overwhelming profit don't get funded, so the 10 years for 1X have no choice but to lie and get the funding they need, and investors get stringed along with all their sunk costs because most of the time that 1X payout is still a lot more than their sunk costs.
  - capkutay 9y ago
    companies with lots of funding have a way about choking their more frugal competitors. they poach the top talent, they take up all the hype in the space, grab the top customers/partners first...
  - Certhas 9y ago
    > The market should correct that though. That's a hypothesis not well supported by data or theory. (e.g.: https://en.wikipedia.org/wiki/Market_failure https://en.wikipedia.org/wiki/Market_failure )
    - heavenlyblue 9y ago
      By the time an efficient market corrects for these errors we will all die due to the heat death of the universe.
jonmc12 9y ago
Here's the dynamic I've observed as an entrepreneur. On average, investors don't make scientific decisions. Pitches are the input data to these decisions; on average, entrepreneurs who raise capital efficiently optimize for the fitness functions that close deals. Good pitch advice comes in the form: "play the game", "don't be so literal", etc. On the other hand, average investor feedback does not create a learning opportunity for entrepreneurs who are pitching. Smile f-ing, and backdoor calls to other investors is the language of pitch feedback. It creates a dichotomy where many entrepreneurs feel everyone else is embellishing and investors can't give feedback with candor in any case. Therefor, an internal narrative comes to life that its rational, and even in shareholder's best interest, ie, a duty of a CEO, to stretch the truth in a way that gets the company the resources it needs.

by tlb 9y ago

maerF0x0 9y ago

Especially in the pitch, the value of a lie there is quite low and the long term costs of a mismatch are great.

capkutay 9y ago

and investors simultaneously kill competition by honest companies...'you have a 10 year roadmap to do X? not interesting. i'll invest $100m in this company that says they can do 10X in one year!'

twinkletwinkle 9y ago
The market should correct that though. Those companies will (should) quickly run out of money to invest. While those who pick the ones with the right 10 year plan will (should) have the returns to continue investing.
- mi100hael 9y ago
  What really happens is the company that over-sold their capabilities gets the $100M and then ends up not meeting their stated timeline but investors are already 9-figures deep so they just accept there were "unforeseen setbacks" and continue supporting the company rather than admit they were hoodwinked. Meanwhile, the realistic company that was passed over runs out of money and folds.
  - AndrewKemendo 9y ago
    This is exactly right and there are numerous examples of that.
  - RyanZAG 9y ago
    I think most startups understand this implicitly, and therefore most pitches are lies. Most of the rest of the comments are about "it doesn't have to be this way!", but it's almost an inescapable local max. The previous big breaks in technology were nearly always the 10X in 1 year types, but it's extremely hard to tell who is actually a 10X in 1 year because they are so extremely rare. Probably impossible, since more likely than not, the 10X is pure luck on the part of a competent 1X than any kind of real difference. So the sensible 10 years for 1X that will make you profit but not overwhelming profit don't get funded, so the 10 years for 1X have no choice but to lie and get the funding they need, and investors get stringed along with all their sunk costs because most of the time that 1X payout is still a lot more than their sunk costs.
- capkutay 9y ago
  companies with lots of funding have a way about choking their more frugal competitors. they poach the top talent, they take up all the hype in the space, grab the top customers/partners first...
- Certhas 9y ago
  > The market should correct that though. That's a hypothesis not well supported by data or theory. (e.g.: https://en.wikipedia.org/wiki/Market_failure https://en.wikipedia.org/wiki/Market_failure )
  - heavenlyblue 9y ago
    By the time an efficient market corrects for these errors we will all die due to the heat death of the universe.

jonmc12 9y ago

Here's the dynamic I've observed as an entrepreneur. On average, investors don't make scientific decisions. Pitches are the input data to these decisions; on average, entrepreneurs who raise capital efficiently optimize for the fitness functions that close deals. Good pitch advice comes in the form: "play the game", "don't be so literal", etc. On the other hand, average investor feedback does not create a learning opportunity for entrepreneurs who are pitching. Smile f-ing, and backdoor calls to other investors is the language of pitch feedback. It creates a dichotomy where many entrepreneurs feel everyone else is embellishing and investors can't give feedback with candor in any case. Therefor, an internal narrative comes to life that its rational, and even in shareholder's best interest, ie, a duty of a CEO, to stretch the truth in a way that gets the company the resources it needs.