What? Entrepreneurs stretching the truth when talking to investors? Neil Patel has done 15 investments in 30 months, and he says:
I can’t even count the times I have run into entrepreneurs who embellish. And it isn’t just bad entrepreneurs who embellish; good ones have a tendency to do the same thing as well. The worst is when they tell you everything is great and how the company is doing really well, but a week later they mention how they’ll be out of cash within the next 30 days.
Oh dear: That’s after 30 months as an angel investor. It doesn’t bode well for the future.
I got this from Neil’s very interesting “What I Learned About Entrepreneurship Through 15 Angel Investments,” which he published yesteday on his QuickSprout blog. I was intrigued by the title, browsed the blog a bit, and I’m impressed. I love this quote, from his About page:
I am dumber than I look — Dumb? That’s right, I am not the smartest person out there. I have made a ton of entrepreneurial mistakes that have lost me a lot of money. By reading about my mistakes and learning from them, you’ll increase your odds of success.
That’s well done. It definitely makes me want to read more.
So, turning back to what Neil’s learned, he’s got some really practical advice here. Like, for example, his “Don’t account for revenue before it hits your bank account:”
Why would you tell your investors that you are going to make $60,000 this month when the month just started? Wait till the end of the month to count your money. Plus if you start accounting for revenue that hasn’t come in yet, you can get yourself into a really messy situation. especially if you start spending that money before it comes in.
And there’s this one, his “business ideas are a dime a dozen, great entrepreneurs aren’t.”
I’ve learned the hard way that business ideas are a dime a dozen. Every time I invested in a cool idea and not the entrepreneur, it ended up losing me money. I don’t think that investing in great entrepreneur guarantees that you’ll make money, but it will at least give you a better shot.
That makes sense to me too. Nice post.