To put it politely – the startup world is messed up. Big time. And we need to fix it.
In my last startup, when we were fundraising, we met a particularly aggressive (‘sharky’) investor. During our discussions, they constantly told us to follow the model of an investee company of theirs, which was their poster child.
And they were right. Over the next few years, this investee company skyrocketed, raised a ton of capital, and would have become a unicorn.
But then came the funding winter. And the truth came tumbling out. We now hear that there was fraud. And it is unclear if the company will survive.
In my opinion, this is not a coincidence. It is the side effect of a deeper rot that has set in. And as VCs and entrepreneurs, we better face it.
Startups aim to do the impossible. They try to do in 5 years what used to once take 30. For such rapid growth, you need capital. To get that much capital, you have to promise the moon. And once you promise the moon, you have to deliver it (or face angry investors).
So what is the solution we have found? It is called ‘fake it till you make it.’
But fake what? It started with faking your confidence but soon that spirit of fakery permeates everything, and one starts faking the story, and ultimately even the numbers.
Ambition per se is not the problem. The problem is the normalization of lying, exaggeration, and overhyping. In fact, if you are an entrepreneur, you are expected to overhype everything while investors apply a haircut on whatever you say.
I became an entrepreneur to solve business problems, not to play liar’s poker. As entrepreneurs or VCs, this is not the game we signed up for.
Stop this fakery. It is helping nobody.
Here is the truth – most startups struggle. Most hockey sticks are inflated (e.g., ‘buying’ customers through discounts).
And most startups that are making huge losses, are doing so not because they are ‘investing in growth’ but because they want to keep investors salivating by somehow showing skyrocketing revenues.
We can’t hide from this truth.
Here is my unsolicited advice: Be patient. Be persistent. Do the right thing. And if we fail, let us fail honestly, after doing our very best.
– Rajan