Welcome to the Dreamit Dose. In about the next five minutes,
we'll talk about when you're not getting interest from investors,
it might be because you're stretching the truth a bit.
What's the old adage? Don't bullshit a bullshitter.
You may be doing this by accident and shooting yourself in the foot.
It's not hard to fix. So let's dive in.
So what do I mean by B.S. and losing credibility?
There's some classic mistakes that we see people make all the time.
First thing, they misstate the problem's severity.
They talk about how huge the problem is. It's massive.
But they have no evidence to back it up. Complete B.S.
One of the great ones we see again and again, they show us a logo wall in their deck
and you'd think when you look at it that these are all paying customers.
It turns out, one or two are customers but the rest are just people that are under trial,
or they're doing a proof of concept, or they're just people they're talking to
and they're misstating what that traction really looks like on their logo wall.
But you wouldn't know it until you ask a couple of questions,
and that's not the way it's presented to you.
Don't try to show an impressive logo wall if they're not actually your customers.
Another thing is it's all about traction.
So it turns out a lot of the traction is purchased under false pretenses.
I mean, they have traction but it turns out
they've really been goosing the traction over the last couple of months
doing unusual things to increase traction to make things look better.
But then a good investor is going to see through that, and you're going to lose credibility.
Maybe they're going to talk about their total addressable market and how huge their TAM is.
Turns out they've just been taking a percentage of a top down estimate,
or they've done it totally incorrectly. It's a great way to lose credibility.
By the way, that one is really easy to fix.
Make sure to check out our Dreamit Dose on how to calculate TAM correctly.
Another classic way, there's lots of graphs and lots of data
that are sitting inside a pitch deck. Many of them we find are misleading.
They're manipulating the information to really help the startup show the best possible story,
but they're not telling the real story.
One of the most classic ways we see where the story is not really true,
is a startup talks about rare one-off examples of how a user is doing something,
or customers are doing something.
I saw this last week. There was a startup pitching me
and they said well for every customer that we get we usually get 30 or 40 referrals.
And I said wait a second. That doesn't sound right.
Is that really true all the time? Is that a rare one off example,
or is that what most users see?
And they admittedly said, well actually it was just a one off instance.
The other thousands of users typically refer about four customers.
You just sit there and go, oh my goodness,
they're bullshitting me and they start losing credibility because that's what they put on their slide.
And unless you ask that question or two, you really don't get into it.
Another thing is they start showing you the revenue projections.
The revenue projections aren't supported by the pipeline.
So you're just like, well the revenue projection is B.S.
Then the last thing we see pretty frequently for Pre Series A companies
is they show a team slide. And the way you would think the team slide shows,
you would think these are all full time team members.
It turns out one or two are full time, the other four are part time, two or three people are advisors,
but that's not indicated on the slide.
It just says Team Slide with lots of smiling faces
and lots of interesting places where they went to school.
You'd think everybody is full time, but you're being misled.
So what happens? Investors realize that you're bullshitting.
You lose credibility. And you know what, once you start to lose credibility,
it's a slippery slope and you're not getting it back.
And what they start to think about, if they're kind of lying about this,
if they're stretching the truth, what's next?
What are board meetings in years on looking like?
I don't even want to get started on this.
So they start to think, what else are they hiding now or what would they be hiding later?
And who needs this? Let's go look at the next startup.
So how do you fix it?
Comb through your pitch deck and look for where your bullshitting.
Look for where you know you're always really kind of stretching it.
Let's go section by section. Your problem statement.
Make sure you're not blowing it out of proportion.
When you're looking at different types of graphs and data, disclose critical data points.
Put things in the footnotes if things seem like they might be a little shady or misunderstood.
Don't let them be misunderstood. Footnote it.
Clearly label your logo wall. So if you have a logo wall and you're trying to show traction,
if they're not all customers, list who's the customer, list who's in the pipeline, and list who's in a trial.
But be clear about it. Don't hide it.
For your TAM. Calculate it correctly.
It's not hard to do. Watch our Dreamit Dose on it. It's really straight forward.
I'd say 80 percent of startups get it wrong.
You'll lose a lot of credibility if you don't even understand how big your actual market is.
Your Team Slide. Clearly indicate who's full time, who's part time, and who's an advisor.
Don't just list everybody there because you know everybody's assuming their full time.
But that's a dangerous assumption. So be clear about it.
Your traction. Make sure it's not artificially inflated.
If you suddenly goosed it over the last couple of months or couple of quarters
and started doing an artificially high marketing spend, disclose it or don't do it at all.
But don't try to fake traction. It's a really dangerous thing.
And then the last thing I talk about, is your sales processes.
Do your sales processes and does your sales pipeline support the revenue targets you're stating?
If they haven't, either fix your processes or change your revenue,
but make sure they're well aligned. Don't stretch it, don't bullshit it,
because it's usually pretty easy with even a light level of due diligence to say
this startup is never going to deliver this revenue based off their sales processes and pipeline.
That's your Dreamit Dose in about five minutes.
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And I'm really looking forward to answering your questions in the comments section.
See you next time.