New Guy Kawasaki Blog - The Top Ten Lies of Entrepreneurs and VCs

Outspoken venture capitalist and author (The Art of the Start, Rules for Revolutionaries) has started blogging at blog.guykawasaki.com. He's already succeeded in sparking some controversy among both VCs and entrepreneurs, with The Top Ten Lies of Venture Capitalists and The Top Ten Lies of Entrepreneurs, which I'll briefly list here, but you should go read his commentary:

1. “Our projections are conservative.”
2. “(Big name research firm) says our market will be $50 billion in 2010.”
3. “(Big name company) is going to sign our purchase order next week.”
4. “Key employees are set to join us as soon as we get funded.”
5. “No one is doing what we're doing.”
6. “No one can do what we're doing.”
7. “Hurry because several other venture capital firms are interested.”
8. “Oracle is too big/dumb/slow to be a threat.”
9. “We have a proven management team.”
10. “All we have to do is get 1% of the market.”

There is some great discussion in the comments on his site as well as a commentary and more discussion at 37 Signals.

For the most part, I agree with Guy's comments, but I'm going to take issue with a couple of them.

RE: #2 and big name research firms... I agree that it's only a guess, and I also agree with Jason Fried's comment that by the time an analyst identifies it as a trend, the early movers are already well in motion. But as one commenter said:

As a small company, there is limited bottom up research we can perform. We have to rely on external resources like Gartner and IDC to make certain projections. Don’t VCs or any other rational set of people need numbers to quantify the potential return? I may be extremely passionate, but if the market size of my product is limited, why would any one care?

The analysts do provide an independent validation of the marketplace, and by all means, a startup should know what the analysts are saying about their market. Don't make a big deal of it, but don't ignore it either.

RE: #5 - There are all kinds of people out there doing things that no one else is doing. Sure, it's the norm to have many people have the same idea at around the same time because a certain combination of societal and technological changes has created an opportunity. But it's also not all that "exceedingly rare" for someone to come up with something really radical - "disruptive". I think entrepreneurs have to be honest about it - don't make superlative statements ("no one"), but rather, "We've done our homework extensively, and we don't know of anyone doing this." However, his point #6 is well-taken. Even if you're first, don't count on holding that first-mover advantage very long.

One final tip re: #3 -- if that big company really is going to sign a purchase order next week, do anything you can to get it signed sooner or reschedule your pitch so you can show up with that signed purchase order in hand. Tell your customer exactly what's going on and offer them some incentive. For that matter, they want to see you get funded because that makes it more likely that you'll be around to deliver and support what you sell them. And no, letters of intent don't count. I've worked for startups and seen three letters of intent from big-name customers end up never amounting to anything. Get the signed contract.

Anyway, glad to see Guy blogging. I'm adding him to my regular reading list and encourage you to as well.

Related: Guy Kawasaki's Top Ten Tips for Anyone Starting Anything
Related: Why Business Plans Don't Get Funded