For all aspiring entrepreneurs, first time founders, please think about the below! In no way is this compilation a derogatory statement and I hope all readers will find value.
A non exhaustive review of the best lines I continue to hear as a VC:
– “We have built a sophisticated algorithm.” With emphasis on the word sophisticated. As if some intend to not built sophisticated algorithms. The words sophisticated, innovative, complex, advanced, cutting edge get to be over used in every presentation I read and pitch I attend.
– “Because of …. we actually do not have any cost of customer acquisition.” I love this one. Usually heard when a b2b2c business model is being pitched.
– “We have built an API”, “We have an API.”, “We are building an API.” Insert any words and build a sentence with API and you have the flavor of the moment. Very enjoyable, especially when I start asking what an API, what it does and what it means for the company’s strategy. Unless one of the founders is a techie, the answers tend to be very humorous or ill informed.
– “We have achieved viral growth by using social media with no marketing or sales spend.” I paraphrase here, but you get the gist. As if early growth via social media, friends and family with zero cost means something and can be extrapolated with solid results.
- “The life time value, LTV, of a customer is $x. It is too early to give you the cost of customer acquisition.” I am puzzled by this one. If it is too early to figure out CAC, then your LTV is meaningless.
– “We will be cash positive in xx months and will not need to raise more capital.” I usually get quoted 12 to 18 months when the statement is uttered. I tend to sigh and long for my first cocktail of the day once the statement is uttered.
– “No one is doing what we do.”, “We have no competitors.” Of course they aren’t any and I have a bridge to sell you in Brooklyn.
– “The large incumbents are clueless and cannot deal with technology change.” I am fine with pointing incumbents’ weaknesses. If you do that you need to point to the strengths too. Strengths are conveniently eluded most times (cash flow, cash in bank, customers, market share…)
– “We do not need a head of sales.”, “We do not need a CFO.”, “We do not need a CTO.”, “We do not need another high level team member.” It never ceases to amaze me how little self knowledge some teams have, to the point where they do not recognize their own weaknesses.
– “We have achieved zero …” Insert churn rate, default rate. Statement implies, sometimes explicitly, that achievement, even if over a very short period of time will hold going forward. Credulity knows no bounds sometimes.
– “Current regulation does not apply to us.” or its equally interesting cousin statement “We are a software company so regulation/laws do not apply.” Typically heard from west coast startups who, and this is sometimes a huge benefit, do not get encumbered by current frameworks be they legal, regulatory or business related. Still makes me chuckle when I hear these words.
– “We will reach $1m/$5m/$10m by month 18.” I categorize these types of statements in the “i have no clue about growth rates and the friction of traction” category. I am an optimist by nature, but still, presenting me ungrounded revenue growth numbers is automatically met with strong skepticism.
- “There is no barrier to entry.”, “The barriers to entry are very high.” used in a positive way. Yet the startup has not entered its market yet.
– “Our upside case is conservative.”, “our revenue forecasts are conservative.”, “Our assumptions are conservative.” I don’t need to comment these, do I?
– “We are worth $xx in pre money valuation because…” Usually the reasons are weak or the wrong ones, i.e. another company raised at that level.
– “Our product/service is free.”, “Our customers decide how much to pay us.” If I am asked to suspend disbelief I need something to compensate for self induced brain anorexia. I will accept intelligently laid out monetization plans around data.
Rather than go on an on, I will switch to some “fun” categories I have observed along the years:
1) The “unique business model” syndrome: Where in fact the startup is another me too.
2) The “selective memory” syndrome: Telling me something one day over a phone call and showing me something completely different in our next meeting, without any explanation or recollection of what was said prior.
3) The “fact challenged” syndrome: When someone mixes his/her own beliefs which they are entitled to, with the facts which are unmovable and objective.
4) The “numbers challenged” syndrome: When changes in forecasts, budgets, assumptions are explained away without enough rigor, or not even explained at all. Happens way too many times sadly.
5) The “sky is the limit” syndrome: One gets pitched that the market is huge, it is not addressed, it is up for grabs, it is new. Gosh, I wish it were true every time.
To be fair, I need to write a similar post about investors: “VC kids say the darndest things.” Equally zany. Maybe next time.