Entrepreneurship · Fundraising

I noticed that few entrepreneurs lie about number of customers, and other key metrics. Why?

Sunil Kumar

September 28th, 2015

I noticed that few startups post incorrect number of customers, and other metrics on their websites. I am not sure how common this is in US and other parts of the world. Is this a common practice across the world ? If yes, how do you standout if you do not plan to lie ? 
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Michael Brill Technology startup exec focused on AI-driven products

September 28th, 2015

Sunil, unfortunately humanity is in a race between exaggeration and cynicism.

If you think prospects are swayed by your customer list and metrics, then play the game. Did somebody with a 'chase.com' domain download a beta? Put their logo on your site... "Find out what the largest bank in the US uses for <whatever you do>." Do you have 2000 users, 1100 of which are your friends and family? That's "Discover what thousands and thousands of people rely on for <whatever you do>."

People are overwhelmed and need to rely on social proof before they invest time. You've got a few seconds to get their attention while they're on your site so you need to kick, claw, bite and exaggerate to get them interested. *Nobody* cares about your 12% multiplex demodulation advantage over your competition. They want logos and numbers that imply credibility and low risk.

Give it to them.

Stone Atwine Experienced in building technology-based financial service businesses in emerging markets

September 29th, 2015

I find that people lie a lot when they are raising money. Needless to say, they get caught soon after the pitch. I think lies create doubts in people's minds about your credibility if/when you get caught. 

Sam McAfee Building Popup Incubators for Corporate Innovation Programs

September 29th, 2015

Yeah, I don't think it's usually intentional lying, more like embellished (potentially unrealistic) prediction, or exaggerating the involvement of one stakeholder to get buy-in of another. The article last year in Wired, No Exit, does a good job of illustrating the phenomena:

"At this point, they were forced to play a shell game with everyone they met. Without investors, they couldn’t afford to hire the engineers they required to sell a robust product to paying customers. Without customers, they had no market-traction data to show investors. They needed investors to get customers and engineers; they needed customers to get investors and engineers; they needed engineers to get customers and investors. If they didn’t act as though it were all in place, there was no chance it would ever fall into place."

There is a lot of juggling expectations of different people to hang in there long enough to make it to the next "thing" whatever that is. Being creative with the metrics can be part of this.

Anonymous

September 28th, 2015

I don't understand "Few startups post incorrect number(s)"
Do you mean many do?  Or few post correct numbers?  It seems you mean many lie.  Do they?  I haven't noticed that...  I often notice that they post incomplete numbers, like a high percentage like them, but they don't say how many so there are probably few, or they say they have a lot of downloads, but they don't say how many liked it or bought it...

Greg Armshaw

September 28th, 2015

Stats are one thing.  Client case studies are a step up.  If you can get some real life case studies on your site then folks are re-assured.

Chris Kitze CEO at Safe Cash Payment Technologies, Inc.

September 28th, 2015

You should always tell the truth, don't worry that others are lying, that's on them.  There are probably many things you can tell your prospects that they will find compelling, it could be a single testimonial and you could have one customer.  It could be more impressive than 1,000 fake customers.  Look from your customer's point of view, it's not always about massive numbers of users.  They want to know what's in it for them.

Akram Benmbarek Building & Growing innovative businesses

September 29th, 2015

Not sure how often you noticed that, but if entrepreneurs provide inaccurate information it will come back to bite them with people that matter. Let's say if you inflate the number of customers you have, investors will find that out eventually during the due diligence process, and not only they will not want to invest in the company but also they wouldn't want to hear from you again. What I can say is that in the U.S, we are a marketing society where there's an abundance of products and where aggressive sales practices are dominating. Many companies will stretch the truth to get the attention...

Michael Kleeman Senior Fellow - UCSD

September 29th, 2015

It is sad that many if not most early stage businesses will overstate their customer base and sometimes more things. If you want to capitalize on your being truly honest then make a statement about the transparency of your numbers and invite investors under NDA to see your actual data and even if you can get permission have them contact customers. If the data are financial then having more than a summary on a slide page but a copy of your financials early on might add to your credibility. But be careful not to undersell yourself…promotion is not the same as exaggeration.

Anonymous

September 29th, 2015

A few? That's pretty funny. Many startups lie wildly. Twitter, Zynga, Google, etc. have all done very bad things.

Why? To attract investors. How? There are tools and services for this. You need two million new accounts by the end of the month? Just have a valid credit card. 

Sunil, it's immoral, it's fraud, but this happens when there are hundreds of millions, if not billions of dollars at stake.






Sunil Kumar

September 30th, 2015

Thank you everyone for sharing your thoughts. I prefer to tell truth in business, as I am a bad liar, and I hate lying. We will put the correct stats which make us relevant.