March 12, 2012
I met an entrepreneur the other day and as he walked me through his pitch he showed a slide that detailed his team and his advisors. On the Advisory Board he listed a friend of mine. I said, “Oh, Eric is involved? That’s awesome – he’s terrific.” The entrepreneur said “yeah, we really like him.”
After the meeting, which had gone pretty well, I called Eric. “I just met AcmeCo. Cool company. I didn’t realize you were on their Advisory Board. How’d you meet them?”
Eric replied, “I’m not on their Advisory Board. I told them I thought what they’re doing is interesting, and that I’d be happy to be helpful, but I didn’t want to formalize any relationship at this point.”
AcmeCo’s chances of getting an investment from High Peaks were over. And their relationship with Eric might be, too. Life is too short to deal with people who aren’t straight about this stuff. It was really disappointing.
What’s got me completely perplexed is that this was the fifth time this has happened to me in the last six months. I’m not kidding. Five times in six months I’ve had someone blatantly over-represent the involvement of a notable person who, when I reached out to them, told me they were just informal friends of the company in question. And that’s only counting the situations where I actually knew someone well enough to go check up on it. How many times was I lied to but didn’t know enough to catch it?
Do none of these people remember George O’Leary’s 5 day tenure as football coach at Notre Dame (fired when it surfaced he had lied on his resume)? Or Yale coach Tom Williams, driven out last year after lying about being a Rhodes Scholar finalist? Or Jeff Papows, former CEO of Lotus, who pulled off the resume-fudging trifecta, lying about his military record (exaggerated his rank), education (phony PhD), and even his parental status (falsely claimed to be an orphan).
I can understand where there might occasionally be a miscommunication between a company and a would-be advisor, but five times in six months – and that’s just the validated ones – feels like an epidemic of misrepresentation. And that’s just Advisory Boards.
Equally, if not more common is the company who is stretching the truth when they say “we’re in active partnership talks with Company X,” or, “Company Y is likely to become one of our beta customers.” We hear these statements, and then we do our diligence, going and talking to Company X and Company Y.
You’d be amazed at how often the feedback from X and Y is something along the lines of “Well sure, we’ve had a conversation or two, but it’s a long way from being anything real.”
I know where this all comes from – good entrepreneurs are by their nature wildly optimistic. They’re terrific at willing things to happen. See a customer you want; believe you’re going to get them; will it into being. If you put an obstacle in front of them, they just plow right through it. These are admirable traits, and critical to entrepreneurial success.
But they can be dangerous traits, too. When you tell me Company X is your partner, and they’re not, then one of two things is going on – either you’re stretching the truth and being unethical, or you’re drunk on optimism and are misreading the situation.
Even if it seems like just an innocuous little truth-stretching, I’ve got to take it seriously. I definitely don’t want to do business with unethical people. I also don’t want to do business with people who are prone to reckless optimism – believing that Eric is an Advisor when he actually hasn’t signed on yet, or that your partnership with Company X is imminent. I’ve been to that movie before, and it ends badly after wasting time and money chasing windmills.
If you’re pitching your business to prospective investors, please be careful with what you represent about your relationships. As professional investors, it’s our job to take advantage of our networks to learn as much as we can about you and your business. Most good investors have pretty deep networks, and will be able to chase down any important relationship that you have. If what you’ve represented turns out to be untrue, you’re toast.
Optimism is indeed admirable. But lying is lying.