Editor’s note: This article was first published in July 2013. Its view that blogs, social media, free hosting and open-source tools make starting a business almost free reflects 2013, and the ‘crisis’ it mentions refers to the post-2008 downturn.
Guy Kawasaki borrows a line from Benjamin Disraeli, who said that “there are three kinds of lies: lies, damned lies, and statistics.” Drawing on his long career in business, Kawasaki shares on OpenForum the 10 lies he has heard entrepreneurs tell most often when they’re looking for funding, and the 6 lies investors tend to tell, so that we know what not to say and what not to believe.
The 10 lies entrepreneurs tell
- Our projections are conservative.
- Our market will be worth 10 billion in 10 years.
- Several Fortune 500 companies are ready to do business with us.
- Nobody else can do what we’re doing.
- Hurry, because we’re in advanced talks with other investors and will close the deal soon.
- Our business will be profitable from day one.
- Big companies can’t get into our market. They’re too slow to compete with us.
- Our management team has a proven track record.
- We’ve filed our patents and our intellectual property is protected.
- All we have to do is get 1% of the market.
Kawasaki’s advice: if you’re going to lie to investors about your business idea, at least come up with new lies, because these ones are worn out in the investment world.
The 6 lies investors tell
Now for the most common lies investors tell entrepreneurs who pitch them a business project. If you hear these phrases, switch on the warning light.
- I liked your company, but my partners didn’t, and we all have to agree before we invest.
- We’re patient investors who want to help build a great company.
- We found no companies in our portfolio that conflict with what you’re doing.
- Show us a bit more of the business and we’ll invest a lot of money.
- We love co-investing with other firms.
- We’ll get other companies in our portfolio to work with your company.
The difference between entrepreneurs’ lies and investors’ lies is that the investors are the ones with the money your business needs.
Starting a business has never been cheaper
Even so, Kawasaki thinks we shouldn’t worry too much about this. It’s not all bad news: he’s convinced that today, almost everything an entrepreneur needs to launch a business idea is free or cheaper than it used to be.
To promote your products or services you now have blogs and social media. In other words, marketing for a business that’s just starting out is free or takes very little money.
You don’t need to invest in an office to get started, because you can start the business from home.
Most of the tools and software that only big companies used to have are now within anyone’s reach. They’re open source, so they cost the entrepreneur nothing.
When it comes to building a website, you don’t need your own server at first. There are hundreds of platforms where you can host your site for free, and you can get your own server later on.
Kawasaki also sees many advantages to starting a business in times of crisis: everything is cheaper, from rental space to labor, and employees are fully committed.
Not to mention that today you can download all kinds of software, documents and templates: business plans, quote templates, accounting programs and so on.
For Kawasaki, this is one of the best times ever to be an entrepreneur, and people shouldn’t be afraid to try. What’s the worst that can happen? That you fail and end up unemployed again?
Further reading
- 15 questions to evaluate your business idea
- Seven steps to define your market once you have a business idea
- How to turn your idea into a business in 11 steps, by Stephen Key
Featured image: JD Lasica from Pleasanton, CA, US, CC BY 2.0, via Wikimedia Commons.
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