If you read all the comments on this salacious Techcrunch post about a girl who supposedly conned the industry, you’d have two takeaways. The first is that it was out of character for Techcrunch (some even called Techcrunch a bully), something I would agree with. However more important were the comments from people saying “oh my gosh, how dare this girl!” Seriously?
The entire startup ecosystem seems to cater to those who lie in one form or another. It’s why so many people do it in the first place. Here are just a few of the common lies being spread by founders, investors, and other participants in the ecosystem.
While not a flat out lie, vanity metrics are a great tool for misleading people as to how successful your company is. One example would be a contact management solution discussing how many contacts they have indexed. “We’ve indexed millions of contacts”. However given that each person has thousands of email contacts, it’s not actually a huge number, and more importantly is no indicator of how well the company is performing. It’s the same as saying “our product works as expected and thus we have large amounts of data in the system”.
What you really want to know is whether or not people are coming back regularly to a company’s product. Are existing users/customers referring the product to other people? How fast is revenue growing? These are the types of questions that would give you a real indicator of how a company is doing. Vanity metrics are used to create a picture of a situation which may or may not be true. That’s why I would consider this lying.
Our Huge Acquisition
Acquisitions are not always a good thing. Acquihires are one example of this. Despite failure, entrepreneurs will boast to technology publications about their company acquisition. The reality is that investors lost their money, but nobody is talking about it. In other words, the story being told is that it was a great success even though it wasn’t. That’s why this is a lie as well. ## We’re killing it!
Walk around any conference that startup founders are attending and you are bound to hear countless stories of how well things are going. If you were to believe these founders, you’d think that running a business is easy. They’ll tell you that “things are great”, right after they had to fire one of their executives for unprofessional behavior. The company’s developer may have stopped all progress on development and now they are furiously looking for someone to replace them, however “things are going great!” It’s false, and it’s a lie. ## Our portfolio company is doing great
Investors are equally guilty. The last thing they want to tell you is that one of their portfolio companies is a complete train wreck. Yes, some of them might complain in private if you are really close to them, but most are hyping up all their companies, as they should. The only problem is that some of their companies are failing miserably, but they are claiming that they are doing great. The investors are well aware of the challenges facing their portfolio companies, but they always tend to say that the companies are crushing it. It’s not true. ## CEO’s Leave of absence
I always love when a CEO is replaced but they are promoting it as though it was a good thing. Yes, there are instances where moving on makes sense and is even desired by the founding-CEO. However there are plenty of instances where the CEO didn’t want to leave but they have some statement that comes out about how they helped the company grow their employee base, revenue base, or something else. It’s a way of helping them find another job despite the fact that they were essentially just fired. ## X investors are committed
A CEO’s job is to raise funding for their company. So when they are out pitching investors, and the investors ask “how many people are committed?” or “how much is committed?”, the CEO has to say something that sounds promising. “We’re 80 percent committed.” “We are 100 percent committed but we’d love to have you participate.” Often times the story is true, but let’s be honest, more often than not the story is embellished. ## We’re operating at X run rate
This is my favorite. Startups will claim they have a run rate (projected annual revenue) of X million dollars. It’s all based on last month’s transactions which could go up or down the following month. Granted, once you have any month that reaches a multi-million dollar run rate, it’s a good sign. However this is really just another vanity metrics as it gives one no understanding of the performance of the underlying business. How much did that revenue cost (e.g. Groupon)? ## I’m friends with X
Somebody tells you that they are close friends with [insert popular person’s name here] because they randomly bumped into that person in a bar and chatted for a moment. We all know what that really means: they aren’t friends and the person they met couldn’t tell you anything about the person who’s telling you this story. ## Conclusion: There Are Tons Of Liars
Ultimately all these lies are essentially forms of embellishment. People stretch the truth. Yes, some people cross the line of flat out lying, like the girl Techcrunch pointed out, but it’s not exactly a surprising act to see given the culture of half-truths, name dropping, and hyping. Ultimately most people who stretch the truth frequently end up being caught. Just as often, they get away with their embellishing. One thing I’m certain of however is that catching this form of behavior doesn’t require a watch dog publication (i.e. Techcrunch) to “reveal” these malevolent actors.
That’s because too many people are guilty of such behavior. I’d argue it’s simply a byproduct of this aggressive culture.
Not to be overly promotional here but my friend sent me a response he wrote about how the product his company has built can be used to tackle this problem. Feel free to check it out here.