Overly Optimistic Things Entrepreneurs Say
It takes a special kind of person to be an entrepreneur. An entrepreneur exudes confidence and is by nature highly motivated. The results can be inspiring, producing some of the greatest inventions and innovations that improve our lives every day. But sometimes, the unique qualities that drive greatness can lead to some interesting behaviors — one of the most common (and endearing) being the extreme optimism with which they approach the world. (Believe me, I know — I was once in their shoes.)
This comes through in spades in many of the pitches we hear. In fact, there are six phrases we hear repeatedly from entrepreneurs — our sweet spot is Enterprise IT — that automatically set off alarms. This is intended in a sincerely light-hearted manner, but perhaps also as a heads up. They are:
- “These projections are conservative.” Ninety-nine percent of the time those same financial projections turn out to have been overly aggressive. In reality, we don’t obsess about the exact numbers that are presented to us; we care much more about the thinking that went into producing the projections.
- “The market is enormous for this.” It’s easy enough to create a spreadsheet showing huge market estimates. But often there is no market — yet. Or there is no proof that there will be one. A huge task for any start-up is cultivating the market so that the potential is fulfilled.
- “Look at these great customers who have expressed interest in buying our product.” These can be very impressive lists, but unfortunately they are often dominated by early discussions rather than companies lining up to write a check. It’s usually a long, painful road to close those early lighthouse customers.
- “We have no competition.” Hmm. Maybe there is a reason why. You might think this is a good thing, but usually it’s not.
- “No one else can recreate this technology.” When it comes to competition, former Intel chief Andy Grove’s quote comes to mind: “Only the paranoid survive.” It’s important never to underestimate the other market players.
- “Google [or Microsoft, etc.] will play nice with us.” Please re-read Mr. Grove’s words of wisdom from above.
As investors, it’s essential for us to believe in and support the entrepreneurs we back. And while an entrepreneur’s blind optimism might lead to a slightly altered view of reality, I realize how important it is for entrepreneurs to believe 100 percent in what they are doing. So all joking aside, I actually find it a little concerning if an entrepreneur doesn’t have some aspects of this blind optimism. How can you successfully achieve the near impossible if you don’t believe you are destined to succeed?
Luke Burns is a Partner at Ascent Venture Partners, where he works with innovative early stage companies with a focus on mobility, data analytics and security. Earlier in his career, Luke was co-founder and CEO of e-commerce software provider Emercis Corporation, and he also has held consulting roles with Bain & Co. Luke holds an AB in chemistry and physics from Harvard University, and an MBA from MIT’s Sloan School of Management.