Angel Insights Blog
Monday, November 10, 2014
Your Pitch is Just the Beginning: Walking the Line on Little White Lies
By: Elizabeth Usovicz, General Manager of Transaction Commons, as part of a series she writes for ACA aimed at entrepreneurs, “Your Pitch is Just the Beginning.”
Call it high optimism. Every entrepreneur puts a positive spin on his or her situation occasionally. Maybe you’ve done it yourself: your deal with a big customer is only days away from closing; the next version of your product will be released in less than a month. Marketing is, after all, presenting a product, service or brand in the best possible light, and there’s nothing wrong with that. It’s crossing the line from positive spin into wishful thinking that leads to trouble.
When startups cross the line, it’s often in an effort to get to “yes” prematurely with an investor or business partner. Unfortunately, the results can be far-reaching.
Here are two reality checks for startups tempted to stray a little too far from the truth.
Software Platform
The founder had 10 years of global experience in his industry and had developed an enterprise workflow application. With charisma and determination, he landed a presentation with an angel investor group. He had described his application as a beta version, which was one of the angel group’s threshold requirements for presenting. Pressed about the specifics of his platform during the presentation, the founder admitted that his beta version was actually a prototype, built on an Access database, with no security, backup or web interface. His omission about the platform’s investment-readiness may have gotten him a presentation, but it damaged his credibility and his chances for an investment – not only with this investor group, but potentially with other groups as well.
Product Claims
The innovative startup founder had developed and patented a new product in his industry. With patience and persistence, he and his team built a loyal community of customers and a distribution network. When the startup had the opportunity to become a strategic supplier for one of the industry’s largest manufacturers and distributors, an investment or eventual acquisition looked like a very real possibility.
The large company required suppliers to use domestic ingredients in their products. As part of its supplier review, the large company conducted an analysis of the startup’s product, taken from different production runs, and questioned the source of one of the ingredients. The founder acknowledged that he was not always able to source the ingredient domestically and sometimes used an imported alternative. The large company began to question the product’s fit for their business, and the supplier deal gradually fell apart.
Up-front disclosure may not have secured the investor meeting or sealed the supplier deal. But it would not have compromised the founders’ credibility and may have planted the seeds for potentially beneficial future relationships.
There’s nothing wrong and everything right with presenting your startup in the best possible light, but…
You cross a line when you compromise integrity – your own, as well as that of your product or service – by side-stepping clarifications or ignoring inaccuracies. When you walk the line on little white lies, be sure you think through the consequences of crossing that line.
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