Things Entrepreneurs Never Confess To Their VCs

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Things Entrepreneurs Never Confess To Their VCs

 

Note: This is intended be a light-hearted piece that hits just close enough on some counts to (hopefully) be funny. Please don't take it too seriously.  (Oh, and for the record, I've actually said more than one of these things myself).

interrogation

Things Entrepreneurs Never Confess To Their Investors

1. You know that candidate you introduced me to? Well, he was kind of a schmuck.

2. We had our management team meeting yesterday and we've concluded that we're kind of screwed.

3. I know I should know this, but I have no idea what participating preferred means — and who should prefer it.

4. We've got a big launch of our mobile app scheduled for April 1st, we've lined up some great PR and everything is ready to go. Just one minor detail: We have no idea when Apple's going to approve the app for the AppStore. We wisely refrained from putting an early version through the process, because we're in “stealth mode”.

5. It finally hit me that revenue and cash are not the same thing. Customers provide “revenue”, employees want to be paid in cash.

6. I'm wondering if I should worry that the 10 year Oracle sales executive we hired for VP of Sales hasn't really sold anything yet. Oh, and I think he wants my job.

7. My co-founder had a major life event come up (the event was that he decided he wanted one). He'll be leaving us but is happy to continue to contribute as a strategic member of the board of directors. I didn't know he had a lawyer, but the lawyer assured me that my co-founder would “Vest In Peace”, which sounds like an amicable parting.

8. Learned from tech guy yesterday that our entire back-end runs on a single “virtual” Amazon EC2 instance. Also learned that “virtual” means that it can virtually disappear whenever it wants. That's why the engineering team has been working for months on this horizontally scalable, self-replicating, auto-healing architecture so that when we start getting some paid customers, we'll be ready.

9. Had to execute some “executive leadership” yesterday. At the last management meeting, our VP Marketing was telling me we were getting crushed in the market because of two big missing features. I told her that on the startup battlefield, wars are not won by features. Besides, we're investing in our future, not our present. That's why the entire engineering team is working on building a scalable, self-replicating, auto-healing architecture.

10. We have 11 months of cash left in the bank. Adjusted for inflation. But, not adjusted for the fact that we have no idea if any of our large, enterprise deals that our VP of Sales sold is ever going to pay us in a form that can be used to pay bills and payroll. Our landlord is clueless and doesn't understand the importance of the strategic deals we're doing and the raw brand-value of the logos we're collecting for our website.

11. Our VP of Sales keeps saying “land and expand, baby, land and expand”. I don't know what that means exactly, but we've been doing a lot of landing and not a lot of expanding.

12. I'm super-excited! We had our first acquisition offer yesterday. Well, it wasn't really an offer. And no, they didn't really use the word acquisition, or M&A or “buy”. But there was some high-level, strategic talk about how we could work together. And, he paid for lunch, so there must be some interest.

13. We're planning on throwing a big, bad, holiday party. It's not one of those crazy launch parties. We want to treat it as a “recruiting” event. Yes, yes, I know that there's no additional head-count in the budget, but we to be proactively filling the candidate funnel. Startups are “all about the people”.

14. Back in college, when you “audit” a course, it meant you just tried it out and see if you liked it. Why does “auditing financials” have to be so intense?

15. We've found new office space. To be consistent with the 5 year pro-forma we showed you at the last board meeting, we'll be signing a 5 year lease that matches the space needs based on those projected numbers. It's nice when things just work out, isn't it?

16. I woke up this morning with this really big idea. It'll make the idea you invested in pale in comparison. The good news is that we can reuse the work the engineering team has been doing. Not only have they been building something that's horizontally scalable, self-replicating and auto-healing, they had the foresight to build something infinitely flexible too. Now I know the importance of hiring great people — ones that have the vision to see your vision and can adjust their vision based on your new vision. This is going to BIG!

What do you think?  

Posted by Dharmesh Shah on Wed, Feb 22, 2012

COMMENTS

"Yes, we know that no clients have converted to the paid version, but we don't think an acquirer will be focusing on those kind of metrics. We're preparing to file some patents, and that should get Google's interest."

posted on Wednesday, February 22, 2012 at 1:50 PM by Ty Danco


Love this, what a hoot! Land and Expand turns to Crash and Burn.... super "fun" article with a twist of lime/reality :-)

posted on Wednesday, February 22, 2012 at 1:59 PM by Bill Murphy


Ex-boss to potential customer, of course we support that feature while demoing a website that was all static code, no code-behind pages, no logic etc while im standing there signing no, no, NO, NO!!!!!!!

posted on Wednesday, February 22, 2012 at 2:00 PM by Woody


Laughed out loud at #9. Thanks!

posted on Wednesday, February 22, 2012 at 2:05 PM by Murat C


I am an entrepreneur but do not have vc's. Even so, I enjoyed the post and reading various experiences. When I read (speed-read) the beginning of this post I saw the beginning of item 4 as "bag lunch' instead of "big launch' and just wanted to share that.

posted on Wednesday, February 22, 2012 at 2:08 PM by barbara jacobs


They won't tell the VC that they feel a deal is closed, when the prospect says "yes", even if they haven't received a dime of money from them -- since they can still draw on the VC's money. Yet the VC wants the money in the bank, not a promisory note....which often never is 'made good on'.

posted on Wednesday, February 22, 2012 at 2:08 PM by Matt Andrews


Thanks! I needed a good laugh today!

posted on Wednesday, February 22, 2012 at 2:08 PM by Janet Corniel


Very funny, and so so true - especially #5.

posted on Wednesday, February 22, 2012 at 2:09 PM by Judy Schramm


Last one is the ultimate !!

posted on Wednesday, February 22, 2012 at 2:09 PM by Tushar


Now I know why they have a quiet period before an IPO! Bet yours is way out there! Ha!

posted on Wednesday, February 22, 2012 at 2:09 PM by Jack Nargundkar


Fun read! I enjoyed that one. 'LAND AND EXPAND BABY!' 
 
Thanks Dharmesh.

posted on Wednesday, February 22, 2012 at 2:10 PM by BJ Patel


Excellent! Now if only board meetings could non-scalable, non-replicating and yet auto-healing :)

posted on Wednesday, February 22, 2012 at 2:11 PM by Patrick


"...but we've been doing a lot of landing and not a lot of expanding" Hillarious!!!!! I think I am actually going to use it on our next board meeting :)

posted on Wednesday, February 22, 2012 at 2:11 PM by Roman Peskin


Not funny in the least.

posted on Wednesday, February 22, 2012 at 2:15 PM by Guest


This is excellent and perfect timing! Every day is like drinking from a fire hydrant...so it is nice to laugh once in a while. Thanks Darmesh - I look forward to your posts.

posted on Wednesday, February 22, 2012 at 2:17 PM by Mindy


Thanks for the laughts today! I needed this does of reality!

posted on Wednesday, February 22, 2012 at 2:18 PM by Karen


Been there done that...reminds of my early days when it was fun and exciting living through a start-up. Nice blog. 
Thanks

posted on Wednesday, February 22, 2012 at 2:20 PM by Norm C


This Entrepreneur needed your LOL article today. Just perfect. Thanks!!

posted on Wednesday, February 22, 2012 at 2:20 PM by


Sadly, some of us have seen founders/ceos really 'spinning' the facts to the investors...and sadly, some investors do believe the 'spin' and never ask the tough questions...

posted on Wednesday, February 22, 2012 at 2:22 PM by Suresh


Love the horizontally scalable, self-replicating and auto-healing solution. Can I get one of those on mobile.

posted on Wednesday, February 22, 2012 at 2:26 PM by Johndaus


I can get anything to look like it works using PowerPoint animation.

posted on Wednesday, February 22, 2012 at 2:27 PM by tCharter


No, that's not popcorn you hear in the background, it's just one of our suppliers that is a little irate about not having been paid yet ...

posted on Wednesday, February 22, 2012 at 2:29 PM by Paul W. Homer


I would love to see a follow up: "Things VCs never confess to Entrepreneurs".

posted on Wednesday, February 22, 2012 at 2:31 PM by Anthony Richardson


"We think we have found a better VC or investor." The speed of light will appear to be in slow motion compared to how fast that gets around the VC/Investor community.  
 
I loved the post.

posted on Wednesday, February 22, 2012 at 2:33 PM by Gail Wallace


It would be funny if it wasn't so true and so sad. Too many entrepreneurs think techie talk will get them through when fundamentals are all that really matter.

posted on Wednesday, February 22, 2012 at 2:35 PM by Donovan


Amusing, all except for the negative reference to EC-2.  
you know that horizontally scalable, self-replicating, auto-healing architecture that Net Flick moved to when they couldn't keep up with their expansion. 
http://www.informationweek.com/news/cloud-computing/infrastructure/229300547

posted on Wednesday, February 22, 2012 at 2:36 PM by Murray Oles


Great list. Need to start a list of things management teams say, but should not: 1) These financials are conservative. 2) We're not going to make money on this one, it's the next one that we're after 3) We are about to close a BIG DEAL (6 times)....

posted on Wednesday, February 22, 2012 at 2:47 PM by Tony Pompliano


Reminds me of a time when my daughter was young and did something that I did not approve. I lectured her for about five minutes and she sat there and dutifully listened to me. When I was finished, she looked at me and said: "What's the point dad"?

posted on Wednesday, February 22, 2012 at 2:49 PM by George V


Loved your list! #14 is funny but true!

posted on Wednesday, February 22, 2012 at 2:58 PM by Doreen Munoz


At first board meeting: "So, what do you guys want to talk about?"

posted on Wednesday, February 22, 2012 at 3:00 PM by JBE


Dharmesh, 
 
Another great post. Laughed at them all (painful recognition!). We have worked with lots of startups as a PR/social media firm and often been asked about payment in equity. One potential client referenced "Deluded Equity." I told him that all equity investment in startups is deluded. I don't think he got the joke. I also don't think he knew how to spell diluted.

posted on Wednesday, February 22, 2012 at 3:07 PM by Paul Furiga


"I just figured out that I'm really good at raising money but I suck at creating and selling a product."

posted on Wednesday, February 22, 2012 at 3:08 PM by Dror


All true, but I am embarrassed to admit that #3, ("participating preferred"), really struck home. 8).

posted on Wednesday, February 22, 2012 at 3:09 PM by Mark Watkins


Terrific!

posted on Wednesday, February 22, 2012 at 3:19 PM by Ray Schmitz


And..."Those 5 patents we said we had? Well they are really only applications and...um...only cover a portion of our product."

posted on Wednesday, February 22, 2012 at 3:27 PM by Jim Shelnut


My favorite one: 8. Learned from tech guy yesterday that our entire back-end runs on a single “virtual” Amazon EC2 instance. Also learned that “virtual” means that it can virtually disappear whenever it wants. That's why the engineering team has been working for months on this horizontally scalable, self-replicating, auto-healing architecture so that when we start getting some paid customers, we'll be ready. 
 
Very well said Dharmesh!

posted on Wednesday, February 22, 2012 at 3:43 PM by Gautam


Great post.  
"You know those numbers we presented showing 30% EBIDTA at year 5?; We meant 3%"

posted on Wednesday, February 22, 2012 at 4:36 PM by David Robbins


Did the Oracle Sales Excutive actually sell something during those 10 years? or just "trained" the sales team all that time?  
 
Huge difference!

posted on Wednesday, February 22, 2012 at 4:50 PM by Sebastian


#17 
"Wait, you thought that year 1 begin immediately after funding. Hahaha. No, we actually had an extra 6-month ramp-up built it, so year 1 numbers actually don't kick-in until month 18. Sorry for the confusion. " 
 
18. "Now, can you use your connections to help us get into SXSW? We think it'd be a great place to relaunch..."

posted on Wednesday, February 22, 2012 at 4:57 PM by Jeb Ory


Thanks for a laugh today! Love #8...

posted on Wednesday, February 22, 2012 at 5:39 PM by Andrea Fuentes


Funny post. 
 
 
 
19. Wait, you really believed those financial projections we showed in our funding deck?

posted on Wednesday, February 22, 2012 at 7:04 PM by Karl Treier


This is amazingly well done. Next, please do the VC >> LP dialogue.

posted on Wednesday, February 22, 2012 at 7:13 PM by Milt Capps


Very enjoyable article ... I became a subscriber becasue of it!

posted on Wednesday, February 22, 2012 at 7:24 PM by Bob


Great article. I had to take a break from my busy day to read this and it was well worth it.

posted on Wednesday, February 22, 2012 at 8:05 PM by Kareema Jones


Thanks for the kind words, everyone. Glad you enjoyed the article -- it was fun to write. 
 
And, for the record, I'm a big fan of Amazon's EC2 service. No disparagement intended.

posted on Wednesday, February 22, 2012 at 9:31 PM by Dharmesh Shah


Very nicely put facts:) especially things like..."first acquisition offer" & "horizontally scalable, self-replicating, auto-healing architecture.....is awesome. 
 
Thanks a big dose of laugh this morning. 
 
Janaki

posted on Wednesday, February 22, 2012 at 9:45 PM by Janaki Pendyala


Nice to read, good sense of humor, but give some practical guidelines?

posted on Wednesday, February 22, 2012 at 10:57 PM by Krishan


I really enjoyed most the points throughly.

posted on Wednesday, February 22, 2012 at 11:04 PM by bhoopendra


A good one from onstartups, after a very loooong time....

posted on Wednesday, February 22, 2012 at 11:39 PM by srimano


Good one Dharmesh , nice combination of learning with fun.

posted on Wednesday, February 22, 2012 at 11:52 PM by Aman


It's a great read and lauged on a number of them. May I add #20: Competition? I have been in a few but mostly downhill mogul races.

posted on Thursday, February 23, 2012 at 12:04 AM by Reuben Katz


Excellent, convinced me that I need to keep calling meetings until I get to the bottom of why things are not getting done

posted on Thursday, February 23, 2012 at 2:01 AM by Inder Panesar


This should be nailed in every , not only startup company's wall, but also in big corp's hq's walls. Period.

posted on Thursday, February 23, 2012 at 2:35 AM by Paul Ristoja


This is hilarious!

posted on Thursday, February 23, 2012 at 3:51 AM by Madhuri Satheesh


Thanks Dharmesh, a big deal coming in - someone wants to buy our domain name:) 
 
 
 
Thanks, but you did let a few things on to the other side! Investors will ask have more questions now.

posted on Thursday, February 23, 2012 at 5:38 AM by Raj Mohan


Beyond excellent! Which in itself could be considered a disguise for a "never confess". This is truly funny and on the mark many times over.

posted on Thursday, February 23, 2012 at 6:01 AM by Roger Ellman


Good read! Thanks for taking the time to write.

posted on Thursday, February 23, 2012 at 7:43 AM by Jan Cunningham


Good one, I have heard a fair share of these. Once upon a time, I probably said a few of these too :) ha

posted on Thursday, February 23, 2012 at 8:32 AM by D


Were you at my last board meeting?

posted on Thursday, February 23, 2012 at 10:54 AM by Igor Strontz


"What's a runway?"

posted on Thursday, February 23, 2012 at 3:12 PM by Jim Shook


Very funny Dharmesh - I laughed out loud at pretty much everyone and although there are the crazy ups & downs of a startup - would any of us really trade the excitement and the satisfaction of building & starting a company for the regular corporate world? I've worked for some very large organizations and wouldn't trade the startup tech world for anything (well....maybe just maybe I'd trade it for that giant buyout offer)

posted on Thursday, February 23, 2012 at 5:34 PM by Megan McGraw


We are 15 years in. Finally hit Year 3 EBITDA forecast. We are very happy to finally hit a target.

posted on Friday, February 24, 2012 at 12:48 AM by Bill Bavin


"2. We had our management team meeting yesterday and we've concluded that we're kind of screwed." 
 
you lost me with this tripe. Post something meritworthy, instead of suckage like this, eh.

posted on Friday, February 24, 2012 at 1:05 PM by yeah


My favorite was #10, I worked for him.

posted on Friday, February 24, 2012 at 1:16 PM by Marge


It's so curious that there are is so much more said with the things that are NOT said out loud. Honesty goes a long way people.

posted on Saturday, February 25, 2012 at 4:44 PM by Sang


Over the past 12 years as a start-up consultant, I have learned to listen for what isn't being told to me is often more important then what they tell me. Enjoyed this post.  

posted on Monday, February 27, 2012 at 11:02 AM by Sharon Evans


I just sent this to a VC I know. Wonder if he's laughing as hard as I did. What a hoot!!

posted on Monday, February 27, 2012 at 11:23 AM by Wally Gross


Way too big for my small startups. Maybe that is why I never got too far off the ground. 

posted on Tuesday, February 28, 2012 at 10:08 AM by Mary Mintle


Don't forget the "hardened, secure, server farm" is really two servers in a poorly ventilated closet back at HQ (incubator space) with a single point of failure low-bandwidth (e.g. cheap) internet connection.

posted on Wednesday, February 29, 2012 at 2:00 PM by Eric


3/1/12 
 
Thank you for the funny post!!! It made my day.  
 
Cordially, 
 
V Tyree

posted on Thursday, March 01, 2012 at 2:34 PM by V Tyree


Really good list!

posted on Friday, March 02, 2012 at 8:48 AM by Интересный блог


The 2nd one is one of the most hilarious ones. Great stuff.

posted on Saturday, March 03, 2012 at 4:53 AM by Mark


OK, so I had my first outloud laugh of the day with this list. I can add a subset from being a tech writer in the engineering dept, documenting the bleeding edge (snort!)

posted on Saturday, March 03, 2012 at 2:35 PM by Janet E Wallace


Good post, I remember working for a startup once where some VC's were visiting and considering investing. They liked the number of orders we could show, but even though management knew 82% of purchases were returned, I don't think this info was shared with the potential investors.

posted on Sunday, March 04, 2012 at 11:36 PM by Cheyenne Jones


yeah it nice and also make you to rethink  
thanks 
nice 

posted on Friday, March 16, 2012 at 12:40 PM by niranjan


I love how you can nail the 'statement' (that could kill us) with a lilt of humour. Class yet again Dharmesh!

posted on Saturday, March 17, 2012 at 1:59 AM by Victoria


Crazily funny and it's completely real 'gas' that can kill you by laughter !  
<Customers provide revenue, employees want cash>, <11 months of cash left>,  
<No M&A talk but wants to work together, paid for lunch :-)>,  
<the really big idea that makes your investment rationale pale !>  
 
My entrepreneur genes just got a new lease of life after reading this !

posted on Thursday, March 29, 2012 at 1:28 AM by Sandeep Todi


Don't forget to sprinkle liberally with: 24/7, mission critical and best in breed for best results. Great article

posted on Thursday, March 29, 2012 at 7:49 AM by Will Dangerfield


Ah, yes - nothing like the old days when fuckedcompany.com was considered "free press"

posted on Monday, April 02, 2012 at 8:40 AM by Joe


Nice article, humorous, precise, like a lemonade. I actually took time off to read it. It is a good piece to read. All the best.  
 
Regards, 
Nilesh

posted on Tuesday, April 10, 2012 at 5:09 AM by Nilesh C Ganeshani


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