Guy Kawasaki's “Top Ten Lies of Entrepreneurs”

Via Signal vs. Noise I found Guy Kawasaki's latest piece, “The Top Ten Lies of Entrepreneurs.” This is a great list:

  1. Our projections are conservative.
  2. Gartner says our market will be $50 billion in 2010.
  3. Boeing is going to sign our purchase order next week.
  4. Key employees are set to join us as soon as we get funded.
  5. No one is doing what we're doing.
  6. No one can do what we're doing.
  7. Hurry because several other venture capital firms are interested.
  8. Oracle is too big/dumb/slow to be a threat.
  9. We have a proven management team.
  10. Patents make our product defensible.
  11. All we have to do is get 1% of the market.

I've encountered thoughts like these reading through business plans in my own preparations for finishing school, and there have certainly been plenty of similar lists I've seen on the various VC blogs and in the book The Monk and the Riddle by Randy Komisar with Kent Lineback. Perhaps these are obvious but they deserve restating for people that think they're immune to this.

What's more important about this latest top ten list is the commentary by Guy and Jason Fried's “Guy Gets It Right” post at Signal vs. Noise. Guy collects what his response would be if he was the VC listening to the pitch and gives some good advice. Jason's advice is similar.

I've not had a plan torn apart by a VC, yet, but I've watched others tear apart presentations. I'm not sure I could offer any advice over and above the list of don'ts above. Perhaps I should mention a list of dos:

  1. Do make projections with solid supporting evidence. The market itself, and perhaps your target segment, could be relatively easy to define and show. People prefer to invest in growing markets and growing companies so you need to show growth is likely.
  2. Do acknowledge what the experts are saying. Gartner is making numbers up with projections, but they tend to know what they are doing when they do current market research and analysis. There are plenty of other experts to consider too.
  3. Do indicate what customers you have lined up, that you understand their unmet needs and that they are going to benefit by your proposed solution. If you present a plan that doesn't focus on customer pain you aren't going to be taken seriously.
  4. Do indicate what skills and strengths you have and what gaps remain to be filled. If you are asking for money to grow a sales team, make sure you have someone on board that knows how to hire sales people and has experience doing so. Nothing scares me more than a plan that says a team of five people is hiring a hundred people in the next year and that team has product development milestones in the first quarter.
  5. While it's true that anyone can do what you're doing if they made the same choice, indicate what you are doing to sustain a competitive advantage. Indicate why others would have a difficult time decided to do what you're doing.
  6. Similar to the previous item, talk about what barriers lay in the way of others that want to do what you're doing. For example, a competing drug would have have to go through FDA approval, or people in this kind market are extremely loyal so because we are first to solve their problem and sign them on, it will be hard to steal them away from us.
  7. Do indicate where your money has come from and what investors are already at the table with a piece of the pie. Some angel investors are amazingly good for your credibility. The dedication of the founders in mortgaging their lives to the gills is important for gauging their passion.
  8. Instead of insulting the big players in your market, indicate how it would hurt for them to make the same choices you've made. Southwest Airlines made a series of strategic decisions (no connecting flights, no first class, all planes are 737s, no checked luggage) that resulted in a way to attack a market with prices lower than others, and when Continental tried to copy them with Continental Light, it hurt their other business that relied on the high margins offered by other choices. Beating the big boys relies on strategy, not arrogance.
  9. Do indicate that your management team can do what it takes and is dedicated to making it work. History is good, but passion is important. (I'm echoing Guy and Jason here)
  10. Yet again, it is more important to indicate how you will sustain your competitive advantage rather than relying on IP to save your bacon. The IP wars are miserable and expensive, so rely on something else to protect your hard work. Part of the cautionary tale here is that all it takes is a big idea. It takes a good idea that makes someone's life better (besides your own) and the skills and willingness to make it work.
  11. Guy nails this one. Indicate how you will dominate a niche of the market and expand that. Read Geoffrey Moore.

There you have it. I'm not sure I added anything that was not also obvious, but maybe it's good to say it all again. links:

Josh Poulson

Posted Monday, Jan 9 2006 08:25 AM

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