Paul

Great post. It's good to see that you agree with honesty. Some people nowadays might think that dishonesty might get them somewhere, but in the long run, it will always hurt you. I'm reminded of the quote from Napoleon Hill:

"I fully realize that no wealth or position can long endure unless built upon truth and Justice. Therefor, I will will engage in no transaction which does not benefit all those whom it involves…"

I've memorized this quote.

Thanks for the great info on your site. I'll be recommending it to my Master of Engineering Management Class later on this when I go and talk to them about Entrepreneurship.

All the best!

Gideon Shalwick

Thank you for linking over to my post and extending the discussion on financials and venture capital.

But I'm confused - where in my post did I say "don't present accurate financials"?

I did say that most VCs will assume your financials aren't accurate, because it's unlikely you have the experience to do them properly. Plus, there are so many unknowns with early stage companies: the general assumption from everyone is that the financials will be wrong.

But I very clearly give advice on how to TRY and provide accurate financials, about going through detailed exercises on producing those financials, and being very clear on the assumptions you've used to get there.

I never said, "don't present accurate financials." If anything, I suggested the opposite - with the caveat that most VCs know your financials are likely wrong. Not because you're lying, but because you don't know any better.

Hi

I think its good to tell the truth to VC, however the truth is that almost no one that is pitching for Venture Capital has a true/accurate idea of what revenue they will generate, more so in the online space.

So if you want to tell the truth, tell them you really don't know what it will generate. But you have a few assumptions and it may work out approximately like this.

The one thing you can tell them is what it will cost to bring the project to a position where you might get an idea of what revenue it could generate. You should be able to do this pretty accurately. ie 5 developers for 6 months and a bunch of on costs.

The typical entrepreneur pitching for VC will have projections that they have spent days, weeks on. They have managed to convince themselves that it will turn out as per the spreadsheet, but the truth is no one has a clue until the assumptions are tested.

The VC will know this better than anyone. Recently I told two different VC that I had no way of accurately predicting what revenue we would generate for an idea we had been working on. I could tell them what it would cost to get there, we could have put a bunch of dartboard revenue forecasts in, they actually liked the fact that we didn't and simply demonstrated that the idea if correctly executed would be very valuable.

So, truth is fine if you know what it is, but most potential investee companies wouldn't know a realistic revenue forecast it if hit them in the head.