How to Lose Credibility in 5 Easy Steps
Meeting an investor for the first time is a lot like going on a first date. Both founder and investor are trying to get to know each other and see if they are compatible.
As a VC, one of the characteristics I’m most focused on during that first meeting is trustworthiness. In order to invest in you, I have to believe that you’ll be honest and truthful with me. That means I’m paying a lot of attention to how you present yourself, your business and your backstory. I fully expect that you’ll position everything in the best possible light — you’re selling, after all — but there’s a line you must be careful not to cross.
Here are 5 ways founders can lose credibility with potential investors the first time they meet:
1. Misrepresent Revenue
Too many founders misrepresent key metrics like revenue in their initial pitch.
And I say misrepresent because it is always intentional (I was a first-time founder once – I knew exactly what each number in my deck meant). Examples include:
Showing GMV instead of revenue (but implying that it’s company revenue)
Showing registrations (signups) instead of actual users
Using non-standard time periods (e.g. quarterly recurring revenue instead of monthly recurring revenue)
In all my years, I have never seen a founder do any of these as an “honest mistake.” It is always a case of someone trying to make the numbers look better than they actually are — and it’s blatantly obvious to any experienced investor.
2. Claim Credit for Something You Didn’t Do
When talking about your past experience, don’t claim credit for something you didn’t do.
“I led project X” vs. “I was part of the team on project X”
“I sold a $500,000 contract to Y” vs. “I was the sales engineer on key deals, including a $500,000 contract with Y"
…and so on.
“…and then Steve asked me to personally oversee the “iPhone” project.”
Investors – particularly Pre-Seed and Seed VCs – are betting on the team. So you can be guaranteed we’re going to fact-check. And we are very good at finding back-channel references. When I call your ex-boss or ex-coworker, will they corroborate what you told me?
3. Namedrop Someone You Barely Know
This is annoying in any situation.
“I was hanging out with X the other day and they loooove what we’re doing."
“So, I was talking to Elon the other day…”
Guess what? That person you name-dropped? There’s a good chance I actually know them (or know someone who does).
And the minute we get done our first call, I’m texting them to find out what they really think of you.
There’s zero reason to ever do this with an investor. It’s certainly not going to impress us or help you close the raise. Instead, it’s a unnecessary reason for us to potentially say no.
4. Claim Someone is Investing When they Haven’t Committed
This one usually isn’t intentional, but it can be just as damaging.
Far too many founders name drop angel investors or VCs that haven’t actually committed to the round.
In the best case, you will come across as naïve and inexperienced (which still isn’t great), but you can also come across as a liar.
Again, it’s very easy for potential investors to fact-check this. And we will.
5. List Logos of Companies that aren’t Customers
This is another case where “rounding up” can hurt your credibility.
I’ve seen too many slides with logos of companies “we’re talking to” that are presented as if they’re customers. Or companies with free users presented as though they’re paying.
Guess what? I made this mistake once. And I got called out on it.
Every. Single. Time.
At the time we were fundraising, our revenue numbers weren’t great (we were still trying to figure out our business model) — but we had an amazing list of companies on our free product. Instead of owning the fact that we had a strong top-of-funnel, we tried to round up. It cost us credibility with a number of investors we met (you can read more about the mistakes we made in that fundraising deck here).
Meeting an investor for the first time can come with a lot of pressure. You want to put your best foot forward, but you must be cautious not to trip over the line between enthusiasm and embellishment. Just like on a first date, investors are watching for potential red flags.
If I think you’re exaggerating, misrepresenting yourself or lying, chances are we’re not going on a second date.