Many hills and valleys are growing your company as a founder. When product and financial performance fall short of expectations, it's equally important to be transparent.
I have run into less-than-honest behavior as an angel investor who funds promising startups. The point at which ego and reality collide is where faking ittranslates into stating untruths to investors, customers and oneself is.
The founder of Theranos, ElizabethHolmes, was convicted of defrauding investors about the diagnostic device company she founded. The CEO of a cyber fraud prevention company is accused of raising $123 million from investors using financial statements that showed millions of dollars of revenues and assets that didn't exist.
These and other equally egregious cases are cautionary tales for entrepreneurs and investors.
The founder of the company I invested in kept two sets of books, one with correct historical financials and the other with inflated numbers. Product performance had fallen short. The inflated financials were presented to investors.
The founder of a company I invested in secretly kept two sets of books: one with correct historical financials, and another with numbers inflated more than 10x actuals.
But investors are always looking for something that isn't right. We found the second set of books after digging into the data. The founder was in legal trouble because he couldn't get more investment in his company.
Positive news is important, but presenting challenges is even more important. If you don't communicate challenges can snowball into bigger issues. Don't allow the pressure from investors to make you exaggerate or sugarcoat the truth.
It was never about playing with the truth as a philosophy. It says to adopt a mindset that you will succeed even when you aren't confident.
Product development and financials will be in the future. It's important to present reality when reporting on the current state of product development, actual customers and financial performance.
One trait that enables founders to take huge risks to create and run with their vision, namely outsized confidence and ego, is the very trait that can cause a few of them to lose the sense of what is right and wrong. They deceive to get ahead with their moral compass adrift.
The creators of an ego-driven high are addicted to deception. They think of themselves as the CEO of a company. They have a stream of untruths. The people are trapped in a fantasy world. The founder of Theranos was caught in the lie as the deception snowballed out of control.
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