How to Convince Investors
paulgraham.com
paulgraham.com
This advice applies to many things in life -- getting a job, proposing marriage, networking in general.
For instance, I've occasionally met people who obsess about crafting the perfect CV. For many of those people (not all) if they'd brought the same level of intensity to doing good work in the past, they'd be fighting off would-be employers, without any need to sprinkle pixie dust on their CV. Ditto people who try to find some magical method for networking. Do awesome work, and networking becomes mostly a matter of showing up and saying plainly and understandably what you've done.
Agree.
Even omitting the right word from you web page if you are a freelancer will cost you business. Outsourcer looks at qualifications and if, say, they are looking for php and the page doesn't list php the freelancer might not get a call for the particular project even if it seems reasonable that they do know php.
Similarly if you are looking for a plumber and you need a water heater put in having "we install water heaters" is much better than "we do all sorts of plumbing". People key into specifics and hot buttons.
Thing is, past the first N years of your career, your CV / resume doesn't (or shouldn't) matter much. Ideally, you are connected to important people in your industry, who know what your work (or portfolio) is, and what you are best suited to do.
In such a situation, a person who wants to hire you would make the decision in advance, coach you to put in the right keywords so that your resume passes all the necessary and appropriate HR tests, and make the hire happen.
It's all about networking, who you know. What you know is obviously important, but if nobody knows in advance that you can do it, it's harder to prove such a thing in an interview? (Of course, this is less true for new grads or newer professionals, who haven't had time to build up a professional track record.)
That's why being suckered into backend positions with little or no contact with customers or other parts of a company is often not a good idea, even if the pay is good and the tech interesting.
Doing postgraduate studies, participating in events, speaking, all of those are very important, yet, at least in my case, I only learned about those relatively recently.
I know some good people that don't do this, and they get outsmarted in the career ladder by the more gregarious types (which, in some cases, did worse work, or even worse, some sociopathic/liar types). That's also a reason not to work in big companies :) unless you're a good hand at self promotion and office politics yourself (and there are some toxic companies where not even that can save you. Usually monopolies or oligopolies).
EDIT: And after that happened you may just realize that all you can show is some experience in office politics. By trying to sell that in the next interview you just turn into the next CV optimizer. Kind of a vicious cycle.
I completely agree with this.
I remember one of the most shocking things one of my professors said was "If you're sending out a resume past the age of 30, you've done something wrong."
This might seem a bit arrogant but I think his point that at some point your achievements and network should be sufficient to stand alone.
My man on the inside said that it wasn't so much that this one thing killed the prospects, but that it caused enough uncertainty that the decision was delayed... during which time they decided to go another way.
When we were raising our first round of capital, we didn't know what we were doing. We weren't good at analyzing markets, managing product, or managing people/dev process. So to raise money we were forced to lift with our back and do it on the strength of the pitch/story telling, rather than the strength of the company.
Working through the pitch and raising capital helped us get good at all the aspects of building a company. Now that the company can stand on its own two feet, it's much easier to just tell our story and simply explain what we're doing without worrying about the pitch too much. It wouldn't have been possible if we didn't do the first round on the strength of the pitch (since we wouldn't have raised money, wouldn't have gotten good, and wouldn't have built a company that speaks for itself).
I guess the moral here is that it takes a while to build enough confidence to spread your wings. It's an iterative process. You fake confidence while you have to, which in turn gets you the resources to get better at what you do. The next time you don't have to fake as much. The time after that you have to fake even less. Until eventually you're knowledgable enough and confident enough that you can just tell your story and not worry about the pitch at all.
In the post, I wrote: I firmly believe no outside problem (running out of money; struggling to pay bills) can’t be fixed by looking inside yourself and becoming a better, stronger person.
That may sound sort of cheesy and "self-help-y", but for me it was transformative. I had to have internal confidence before I could project confidence externally. In order to have that internal confidence, for me, it involved rethinking absolutely everything about our startup, from our name to our customer demographic to our value proposition. (I go into detail on what happened and how we re-thought our startup in my blog post.)
Once I rethought everything, I found a deep well of internal confidence, and we went from "teetering on the brink" to raising another $175,000 from outside seed investors quickly (some of whom had been sitting on the fence for months), and then applying to and getting into Techstars' first Austin class as well.
External problems like lack of money or investors saying "no" are often reflections of your own internal doubts or lack of confidence. As PG said, it's not fixed by bravado, but by going deep inside yourself and rethinking your assumptions. Why are you doing this? Of all the things you could be doing, is this the #1 thing that drives you every single day of your life?
Once you fix your internal issues, the external issues resolve themselves. However, this lesson may be something you have to experience to believe (as I did.)
This is one of the best advice for both fund-raising or anything else in life and it's basically the same strategy Arnold Schwarzenegger used to become the "number one star" in hollywood [1] as explained by Steve Chandler:
* ...Then I asked just how he planned to become Hollywood's top star. Mind you, this was not the slim, aerobic Arnold we know today. This man was pumped up and huge. And so for my own physical sense of well-being, I tried to appear to find his goal reasonable.
"Easy, It's the same process I used in bodybuilding," he explained. "What you do is create a vision of who you want to be, and then live into that picture as if it were already true." *
edit: attribution added - 1: http://biznik.com/articles/being-like-arnold-schwarzenegger
http://en.wikipedia.org/wiki/Method_acting
I use this in negotiation as well. You convince yourself that you are playing a role and do what is consistent with the role you are playing. You are an actor. Takes quite a bit of practice.
> And by convince yourself, I don't mean play mind games
> with yourself to boost your confidence. I mean truly
> evaluate whether your startup is worth investing in.
As a personal example, I started dancing, and after watching the movie Step Up 3, I decided that this guy (http://youtu.be/EKIgbR_V8fs?t=1m2s) danced really well. So I set out to dance just like him. At the beginning, it was me akwardly dancing in front of my bathroom mirror at 3 in the morning. Now I can do what he does, and more.
So yeah, fake it till you make it, and then go get some investors.
It's more like, if you can't truly convince yourself that your startup is worthwhile (or becoming the character via method acting), then your startup/character/acting method should be changed because other people won't believe it either.
Hollywood is filled with people trying to act like they are a great star. Almost none of them are, nor will they ever be one.
You're skipping over important nuance: Assuming star = bundle of confident, recognized talent that brings values to any endeavour he/she is involved in, radiates this (vs "shouting") in person.
In contrast, Hollywood is filled with many people not acting like they're great stars, but projecting the peripheral benefits of being a great star (ie high visibility, rich lifestyle, entourages, etc) but they do not feel/act like stars at their cores.
I would really love some more color on this. What about a product that addresses a genuinely new market? For example our market is a subset of the analytics market targeted at a new set of data, similar to Mixpanel or KissMetrics. I honestly have no idea how to talk about the market because there is no analogue at this point. How can I apply this advice?
"But every company that gets really big is "lucky" in the sense that their growth is due mostly to some external wave they're riding, so to make a convincing case for becoming huge, you have to identify some specific trend you'll benefit from."
Is this the answer to my question? It doesn't give me an $xy, but it does give me the "wave" I'm riding. Is that a solid foundation for talking to investors?
"It's slightly dickish of investors to care more about who else is investing than any other aspect of your startup"
You have a silver tongue, PG :)
It looks like you have a bunch of stuff going on all at once which is hard for investors to analyze and understand. It is important to break each invention/IP/idea in to separate concepts and analyze the market size of a niche market of each.
For your "cognitive data visualization and comprehension" IP you are working on, the key would be understanding a business type it could be sold to, then figuring out how much you would get.
Lets say you looked at the xBox One and Connect along with the PS4. Is there a way to license your technology to those two companies or maybe even game developers? If so, what do you think the licensing would get you per Xbox, PS4 or game?
You need to estimate two numbers: (# of units) and ($ per unit). Where the unit could be consoles or titles etc.
Anyway, hope that helps a little. Feel free to email me, same name at gmail.
This is why lack of competition is often scary to potential investors -- paradoxically -- they ask themselves, how attractive can this supposed new market be if there are no other companies going after it?
The advanced way to do market analysis -- which only the most experienced entrepreneurs ever actually do, but which works really well, at least with us -- is to spend very little time on market theory or top-down market estimates (handwaving), and instead put a lot of effort into building a solid, well-though-through BOTTOM-UP market analysis.
What I mean by bottom-up is, literally, start at the bottom -- with an individual customer -- what is their problem, and how much are they plausibly going to pay for the solution, and then how much is it going to cost to acquire that customer. Then sum up how many customers like that exist at various sizes and in various market segments.
E.g. "I estimate that in the US alone there are 50,000 small companies that need this solution and will pay $10,000 each, and I think I can acquire them for $3,000 of sales and market expense each. And then there are another 5,000 midsize companies that will pay $50,000 each..." and so on and so forth. You can slice and dice it however makes sense for the specifics of what you are doing.
This kind of analysis answers several questions at once for the investor:
(a) Is there a big market? (b) Does the entrepreneur actually understand the dynamics of the market she's going after? (c) Does the entrepreneur understand the sales and marketing requirements and costs of her business? (d) Is this an entrepreneur who takes every aspect of her business seriously and rigorously?
Interestingly enough, that totally jibes with the Customer Development methodology from @sgblank, where he talks about developing and validating your "Problem Hypothesis", "Market Hypothesis", "Channel Hypothesis", etc.
E.g. "I estimate that in the US alone there are 50,000 small companies that need this solution and will pay $10,000 each, and I think I can acquire them for $3,000 of sales and market expense each. And then there are another 5,000 midsize companies that will pay $50,000 each..." and so on and so forth. You can slice and dice it however makes sense for the specifics of what you are doing.
This is the approach we're taking at Fogbeam. We've identified a beachhead market we're going to pursue to try and get initial traction, done some simulations based on the number of such customers, potential price points, etc., and come up with some potential revenue numbers and what-not. NOW, the next step is to get out and prove that our numbers actually make sense and hold up in the real world. Of course, they won't really, at least not according to our most optimistic projections. But the hope is that they do hold up well enough to get this thing off the ground...
Identify value to the customer first.
It seems insane, but investors are blinded by traction.
If you are a startup that has low scalability, but you have traction, you will get funding
If you are insanely scalable, a great idea, but you don't have traction, you just won't get funding. It doesn't matter how awesome your team is. Investors just can't see good ideas through the traction curtains anymore.
Why is this? Because investors have no clue, but you can't blame them, they are mostly 40-50 year olds whose minds are just not built anymore to foresee the future and most of them haven't even build a startup from ground to IPO. How are they supposed to even remotely know what will be the next startup that turns the whole silicon valley upside down.
This applies to 99% of investors, but there is a tiny folk of 1% who are so in the mindset, almost all of them previous founders. They can foresee the future and they are only waiting for the startups to have built the product they have been thinking of for years, but haven't built it due to simply not having the time.
Source: Pitched my no-traction/very scalable startup to hundreds of investors over 4 months until I stopped 2 months ago to get traction, never got a second meeting except for one time. Always thought, do the investors not see how super scalable this all is? Said no-traction startup now has strong traction.
To be fair, I think most people tend to underestimate the scalability (as well as the Total Addressable Market) of successful startups at the early stage. As PG puts it, the big winners often look like bad ideas in their earliest stages.
Take Rap Genius, for example. I'll freely admit that, when I first heard about the site and all the funding it received, I had no freaking clue why it was getting so much attention. I thought that this time, finally, unquestionably, the VC community had gone truly bonkers. Later on, when someone explained the potential to me -- that the underlying technology and platform could become X, Y, Z -- I was floored by the possibilities. And I felt like an idiot for not seeing it earlier.
I know a lot of people who had very similar reactions to airbnb, and to this day, a lot of people still have that reaction to Uber ("An app just for calling cabs??? Seems pretty narrow!"). Same thing with Tesla ("It'll never work at scale; you need to whole infrastructure of power stations on the street corners!").
Scalability is very hard for the average observer to gauge. It's even hard for the average tech enthusiast to gauge, and probably hard for the average VC to gauge.
Investors should exclusive pursue the outliers and for that reason MUST look for the startups that don't match any elements of the "pattern". (except for a team that executes)
But they dont get that.
Very true, but why is this insane? Investors see tons of people with great big ideas who talk about passion. Since you have to winnow the field, why not do it on something that matters (traction) versus something that doesn't (the alma mater of the founder, or how they dressed).
Instead, if you had spotted the startup's potential pre-traction, maybe just 1 or 2 months before it gained traction, you could have invested half the amount at a $2M val.
And this ability,ladies and gentlemen, to spot a startup 1-2 months pre-traction, makes the difference between a 25x and a 100x.
Just being the devil's advocate. (Not that I intend to compare VCs to devils!)
It might be worth it for the VC to wait and see, then overpay, because 1 or 2 months could be a significant percentage of a young companies' total life. They are overpaying for the extra data points and insight, in effect.
By finding founders whose startups are just about to take off, even better with the founders not knowing it yet. :)
Not insane at all.
You're only saying that because you've never tried raising funding for a company with traction. But except for very rare exceptions, even when you have traction there are a whole new set of questions about the nature of the traction.
The point I wanted to make was that there are just so many startups that got funding because of traction, but that have such a low scalability. I always think to myself when I see read these stories: "Dude, this can be worth $50M/a 10x return max. Blinded by traction again."
the Pattern is helpful because it is the differences that make companies succeed or fail; bad investors automatically think that differences from the Pattern are automatically bad.
that said, traction is one fact that makes all other hesitancies and issues disappear. that is why so many investors have their minds changed by it. "I don't love this idea but the graph goes up and to the right, so I'd better talk to them."
Yet, the reality is that even in these companies there's a notion of traction, and it's absolutely critical. It's not measured in terms of users, but instead manifest in scientific milestones. Every time you demonstrate the scientific validity of a piece of your tech, you are de-risked in the eyes of investors. That mirrors traction, even if it's less direct.
Another way that biotech companies can achieve notions of traction comparable to tech companies is through intermediate business models, such as operating as a contract research organization or reference laboratory.
Despite those parallels, I'd say that biotech traction is still difficult to achieve because most science lacks determinism in the rate of progress.
Biomed startups have mostly technology risks, the problems are well-known and there is a very defined (and heavily regulated) goto market process. As the comment above mentions, the thing that gets investors excited in biomed startups is mitigation of the technology risk.
As an example, Bessemer Venture Partners passed on investing in Apple, Google, Intel, eBay, FedEx, and many other big companies. Their "anti-portfolio" makes amazing reading, and vividly demonstrates how hard it is to pick winners:
Our reasons for passing on these investments varied. In some cases, we were making a conscious act of generosity to another, younger venture firm, down on their luck, who we felt could really use a billion dollars in gains. In other cases, our partners had already run out of spaces on the year's Schedule D and feared that another entry would require them to attach a separate sheet.
had me laughing aloud as it completely took me by surprise. Thanks for the link!
https://news.ycombinator.com/item?id=6175417 (paulgraham.com, i.e. this one)
https://news.ycombinator.com/item?id=6178042 (www.paulgraham.com)
The solution is simple: Establish an HTTP redirect from "www.paulgraham.com" to "paulgraham.com" or vice versa.
"The best investors rarely care who else is investing, but mediocre investors almost all do. So you can use this question as a test of investor quality."
I think the part about mediocre investors is true, but I'm not sure if I agree with the part about the best investors. There is actual value in knowing who else is investing. First, knowing the caliber of other investors is a signal. It's not the only signal, and it's not the best signal, but it is a signal. Second, my partners and I have a network of trusted coinvestors. If we hear that one of them is investing in a company, we can share due diligence, which is great for founders because it avoids duplicated meetings, and great for us because it saves us some time/helps us focus on questions that haven't already been asked and answered. We have never made a decision to invest in something "because X is investing", but we've certainly used our relationships with various X's to inform our due diligence process.
I have about a decade worth of sales experience. Sometimes not very successful, some very successful. I've also succeeded with convincing investors. The two were very similar for me. I've also worked with many other people in sales roles; of the ones that were successful only a small handful sold in the way Paul writes about.
Moving forward I won't be working with, or hiring anyone who doesn't. It's better for everyone.
Thanks for the essay, Paul.
Every decision made starts with an emotional trigger, and ends with a defensible position.
The reason it isn't insane for VCs to invest money into ambiguous situations even knowing that we are doing this is because the enterpreneur who can't get the a VC to be emotionally positive isn't going to be able to get anyone to be emotionally positive about what they are doing (recruits, customers, press, etc.). Conversely, the best entrepreneurs often marry great product skills with great sales skills.
Incidentally, your second point echoes one of the more persuasive arguments I've heard for cofounding teams -- if you can't convince a co-founder to join, will you really be able to build a team and acquire customers?
- Trying to reconcile this with the earlier citation that truth telling is critical. This flies in the face of it and rationalizes this behavior by claiming it's dickish to ask? I don't think that's true and when did two dicks make a right? By the way the much better tactic to solve this problem is pick one or two investors and work with them to get them to commit and then have an honest answer for the others who'll fill out your round.
I enjoy these essays overall but don't enjoy this common thread I see that confuses hustle and sleight of hand as being interchangeable.
Of course that is an assumption that because they ask a question they care. While I'm sure they probably do care (because it's a well known fact and human nature) asking doesn't prove that the answer matters to them.
That said in business bluffing and telling lies in certain circumstances about certain things (especially negotiation with an adversary) is a given. There is a line that is walked and it is walked differently by different people according to what they feel comfortable with.
After all if you were at a car dealer and asked them "are you selling me this car cheaper than to any other customer" how do you think they would answer? And if they asked you "tell me the price the other dealer quoted you" how would you answer?
One thing I do know is that if you don't know how to be devious in business you will have problems. This is not to say you should be a thief lying all the time and ripping people off. But you need to have some common sense about what is done in a business transactions and what is generally considered acceptable. And how in some cases you could even be viewed negatively for being "to honest".
That closing line is the equivalent of a gymnast sticking a landing.
I hope that no one comes out of the "tube" of school and college without wings - but if that's true why do so few seem to fly?
What is it about those who fly that they learnt that others did not? Formidable-ness seems to simply be a tell for a good investor - not an explanation.
Please keep pushing them off cliffs - maybe we can work it out soon.
Do you know for whom you do not need a pitch? Investors. I am not talking about potential investors, who may one day remember you and consider the investment as the entrepreneurs I said earlier. I am speaking of that meeting with the investor, face to face, where you're to present your startup and they will decide whether to invest in you or not. A meeting is a conversation, not a pitch. It is the time that you will present what you know, not what you memorized. We must listen to the investor, to understand his doubts, it takes a lot of empathy. When going to a meeting for such a conversation you should prepare your knowledge, not your speech. You must have a deep understanding of the strengths and weaknesses of your startup, you have to create a presentation only to show some specific numbers that you have no reason to decorate. Those data that are calculated in a serious, rigorous method and not "estimated" or "expected".
In summary, I think two things are essential: i) to have a carefully prepared pitch, ready to go out without thinking, the standard answer about your startup - something that is clear and visionary at the same time, to show the idea and attract person's interest and ii) not to have anything memorized if this short answer turn into a conversation, but you have to be completely updated to all relevante knowledge about your business - and this will tell not only the investors, but yourself, if you are prepared to run this business.
Been waiting for someone to articulate this for a while now. Pitch people an idea a few thousand times and you get pretty good at reading if people buy it. Getting close to the "convince" threshold for investors and when we do reach it, watch out!
It makes perfect sense to me why investors would want to know who else is investing, for a number of reasons. For one, standing on the sidelines knowing that most startups will fail is not a reasonable strategy. This is because some startups, no matter how unlikely, will succeed, and some VC will, despite our better judgment, have invested in them. If other VC deliver higher value for their clients than we do for ours because we cautiously and prudently stand on the sidelines, then we stand to lose the confidence of our clients.
But I do not understand why anyone would rely on the statements of founders to determine who else may or may not be on board as investors.
Each round has investors commit and before they close, some investors may ask who else is investing. Most closed rounds on really early stage companies are hard/impossible to find, but all pre-closed rounds are impossible to find since there is no record of something that hasn't happened yet.
Is the information disclosed in Form D's severely limited or useless for determining who is being funded and who is funding them? If yes, then what is the purpose of this website?
Team - not your first rodeo, know how to win, subject matter experts. Focus - clearly stated value proposition. Dream - big market, big value. Plan of Attack - clear path to capture market share. Validation/ Traction - customers! Tech - solid, non-obvious, not easily replicable. (i.e. if your successful, someone else can't just hop into the market and eat your lunch). Use of proceeds - not just pay my salary, but grow this business. Next big milestone: profitability? another fund raise?
If you hit on these, then investors will want to put money in their favorite types of companies: the one's that don't look like they need it. ;)
Evidence of success often makes the first two way less relevant. Up to the point where tables are turned and investors will be trying to convince founders to take their money.
But these days, would-be "seed stage" investors are acting more like VCs looking at an A round. Everybody seems to have become incredibly risk averse, and acts like they've forgotten the "high risk" part of the expression "high risk, high reward".
Now to be fair, I'm speaking from an East Coast perspective, and I understand the investors here tend to be more risk averse than their West Coast counterparts. But from the sounds of this, this mindset may be spreading.
Oh well, at least, in our case, we aren't trying to raise money (yet) anyway. Our goal is to self-fund as far as possible and only raise outside money if we absolutely have to.
Trying to "beat the system" is like trying to beat investors at what they would on average be the best at doing and potentially sending inadvertent false positive signals caused by the nervousness of being new to fundraising.
If you focus on what PG recommends, you eliminate a lot of that friction since you eliminate the nervousness.
My tl;dr: In the fundraising lottery, it's easier to sell investors a ticket than trying to convince them you have the winning combination.
[1] (as with Drew Houston and the east coast))
Is YC in this camp or do you guys and gals try to stay in the huge success side of speculation?
One concrete consequence is that Y Combinator funding lets you sell early, if you want to. It can sometimes make sense to sell yourself when you're small for a few million, rather than take more funding and roll the dice again. Google likes to do early-stage acquisitions, and we expect them to become increasingly common as other companies learn what Google has.
If you take a large amount of money from an investor, you usually give up this option. But we realize (having been there) that an early offer from an acquirer can be very tempting for a group of young hackers. So if you want to sell early, that's ok. We'd make more if you went for an IPO, but we're not going to force anyone to do anything they don't want to.
I think YC prefers big successes but doesn't try to pressure everyone to be the next Dropbox or AirBnB
This line hit home with me. Applies perfectly to job interviews.
That's not necessarily bad, but the whole point of the essay is that you should first come up with a strategy for a market that you really think has a shot of being that big.
My biggest takeaway from your essay: the truth prevails. As cliche as it sounds, its apt advice for those aspiring to be the biggest startups of our generation. Its easy to get carried away with our dreams and visions.
It's got more to do with a weak back, actually. Folk with strong backs can lift very heavy weights safely.
In terms of the analogy, I dunno what I'm saying. Just fulfilling my HN nitpick quota.
Though the back musculature is sufficiently complex that a mis-firing can make for a bad week even if you're just picking up a bar of soap.
Yeah, I cringe when I see obvious-but-sadly-erronious out-of-scope analogies being made. Particularly if I happen to have some idea of the subject area in which the analogy is being drawn. Sort of detracts from the whole message.
If the issue is sufficiently allegorical, I'm reasonably OK with letting it slide, but increasingly this is a sign that there are much deeper flaws in a piece, and it's time to shift my limited attention elsewhere.
E.g., "weight loss" stories in the popular press (in my case most often on NPR or The New York Times) which fail to distinguish adipose tissue from skeletal muscle, or address the role of strength training in both body recomposition and fitness. Both Gina Kolada and Gretchen Reynolds have particularly caught my attention in this regard.
Or this stunning display of cavalier disregard for facts from The Economist: http://www.economist.com/news/leaders/21582516-worlds-thirst...
Notice in particular: dismissal of the opposing argument is limited to unnamed "several theorists, who have since gone strangely quiet". ORLY?
Not that The Economist hasn't (editorially at least) been notoriously and conspicuously cornucopian.
Otherwise, it's just faking it.
I think first time entrepreneurs are prone to thinking that raising money is a win. Second time entrepreneurs almost never think that, they view it as an obligation.
A lot of young, first time entrepreneurs, if you told them: you can with certainty raise a $5M Series A, but with certainty the business will not work in the end, which you will figure out in 3 years -- they would still raise the money. They have a burning desire to to be a CEO, to build something, and they'll worry about the rest later.
In my view, raising money when you either have no idea if it's a good opportunity, or believe on early data that it's actually not (but you'll figure it out or pivot later), -- this is what I see in "fake it til you make it", "hustler" thinking -- is that when you're successful, you've now signed up to use some of the most productive years of your life chasing an opportunity that is likely not to be any good, when you could have held out for something better.
Happiness research indicates that people are consistently wrong about what's going to make them happy (or sad) -- the shiny new car will lift their spirits every time they get behind the wheel, but within a few weeks, it's just another car. I think this applies to fundraising as well: raising money for an idea you're not 100% convinced on has proven to tempt many founders, but in my experience, they later come to regret it.
I admire the clarity of your thoughts.
This is a really fine and insightful article. Thank you for sharing this.
The people who are really good at acting formidable often solve this problem by giving investors the impression that while no investors have committed yet, several are about to. This is arguably a permissible tactic.
By engaging in this tactic, you are working to make foolish behavior on the part of the investor successful, which then leads to the very climate that makes the dishonesty so tempting in the first place. It's a vicious cycle.
Why not stick to the "always be 100% honest" approach? This will reform the investor climate over the long-term if the best startups consistently use it, and after all, these best startups are the target of your essay.
I recognize you didn't recommend this approach. But I think you should go one step further and not claim it is arguably acceptable.
Seems that the target of PG's advice is a particular individual and what benefits them. Not what benefits all startups. If he were writing to investors he might write differently.
In the difficult environments, everyone has their wallets stashed in their pockets and it's hard for even good startups to raise money. In that environment I think engaging in "permissible levels of salesmanship" is probably rational.
But in an average to strong market, I agree, why compromise even at the margin? If it's a good idea you'll get funded.