Don't "Market" Your Startup to VCs

Whether it is called “marketing” or “stretching the truth”, lying to VCs is very common among founders. Most of the time it is not outright false, but usually deception to cover up an ugly part of the business. We have seen examples stretching from testimonials about products that have not been created yet, to “users” being defined as website clicks. The problem is that lying to a VC can cost both your chance and raising money from that VC, but also raising money from ANY VC.

While it is fine to highlight the best parts of your startup, here are some pointers for less impressive areas and why you should not lie:

1. It is Illegal. Lying to investors can lead to several different charges on both the state and federal levels. It can also prevent you from raising future capital and can cause previous investors to demand their investment back at any point. You must ask a lawyer about how you portray information if you are unsure.
2. Every Startup has Obstacles. There is no such thing as a startup where everything is perfect. VCs are expecting those parts and want to see how you plan on working with them. Having a marketing or customer acquisition problem is okay as long as the business looks promising. However, if a startup describes themselves as having zero problems, then VCs know they are lying or hiding something.
3. Investors are Lie Detectors. Investors listen to hundreds of pitches per year and build a strong internal lie detector. If you have an idea of how to fudge the numbers, odds are they have seen that trick 50 times already. It’s not impossible to trick a VC, but it is very difficult if the investor is seasoned. 
4. Numbers Don’t Lie. Every VC will have a due diligence process where they will take a closer look into your numbers – and covering a lie is very hard. Telling a VC you have 100 paying customers might be impressive, but if those are all friends who did you a small one-time favor, it will be clear very quickly when they start investigating who your clients are.
5. Competition also has Problems. When a startup claims they are running the same business model as a competitor, but doesn’t have the same problems, it either means they have developed a brilliant solution or are lying. This happens very often and is one of the easiest ways of uncovering false narratives in startup pitches. If a competitor is having a difficult time creating recurring revenue, then your startup should also have the same problem unless you can show what you have done differently.
6. VC world is very small. What many founders forget about is that the VC world is relatively small and many investors know each other and discuss their deals together. On more than one occasion we have seen VCs back out of deals because a friend at another VC did not like their interaction with the founder. Investors talk to each other much more than founders realize. If you break the trust of one VC, it can cost your chance at many others.

Fundraising Demystified Episode #19 is Live!

This week on the #FundraisingDemystified podcast, we feature Nick Desai, the seasoned serial entrepreneur, and CEO of Together by Renee, a cutting-edge generative AI-driven healthcare app. Nick has raised an impressive $250 million in his career, and he's here to share his invaluable insights on fundraising in the digital age.

Here are 3 key takeaways from this episode that you won't want to miss:

1. Finding the Right Investor: Nick emphasizes that it's not just about valuation; it's about aligning with the right investor who can provide expertise, networks, and more. Discover how the right partnership can be a game-changer for your startup.
2. Valuation Realism: Learn why setting realistic valuations, especially in early rounds, is crucial for long-term growth and success. Nick shares cautionary tales about the risks of aiming too high.
3. CEO's Role in Fundraising: Nick highlights the pivotal role of the CEO in fundraising and why being able to raise money is a hallmark of a great startup CEO. Gain insights into the multifaceted skills required for success. Listen Here

Jason has already roasted 20+ decks during this weekly event. We have received incredible feedback from founders who had their decks roasted or just came to watch.
Click the link below to submit your deck to receive feedback on how a VC would look at it. This is a RARE opportunity, so don't miss your chance! RSVP Here

What the Experts Have to Say

Trust But Verify: Words Of Warning For Early-Stage Investors

Stories from an early-stage investor about lies he has seen founders tell and what he does when he discovers a lying founder. Read More

Six Reasons You Should Never Lie To An Investor

Lying is a bad idea. Here is a list of a few more reasons why founders should avoid lying to investors.  Read More

Startups And The Big Lie

Lying culture amongst founders is a problem for VCs. This article describes why truthfulness needs to return to the VC industry. Read More

If you're ready to raise capital, accelerate your fundraising process by upgrading to Premium. All premium clients receive a complementary consulting session with Jason Kirby, Managing Partner at Thunder. Upgrade Now

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Written by Jason Kirby - https://www.linkedin.com/in/jasonrkirby
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