Product investing by its very nature is risky; it requires investors to financially support a product that has not yet been created in an effort to bring it to fruition. While any decent investor will do the requisite due diligence to minimize their risk, it’s still ultimately a judgment call. Investors have to put their dollars on the line knowing they could potentially be lost. Fledgling companies and their C-suite executives must walk the fine line of selling their vision—what they plan to achieve—with communicating what’s currently possible, all with the aim of raising necessary funding.
This has created what’s notoriously come to be known as Silicon Valley’s “fake it till you make it” philosophy. We see companies and their CEOs live and die, fly to the moon or crash and burn by this philosophy. But for all the times it bore a tech titan, there are many more where it created a monster.
Elizabeth Holmes infamously found herself on the wrong side of this line—her epic rise, and perhaps even more legendary fall, ended with her being found guilty of four charges of defrauding investors. Although most who subscribe to Silicon Valley’s philosophy would prefer to call her an outlier who took it too far, as someone who has over 40 years of experience in the field of crisis communications, I feel duty-bound to highlight the inherent problems with “faking it till you make it.”
Integrity, honesty, and authenticity are all essential for building a lasting, successful brand and business. There’s no substitute for real—and however you shake it, “faking it” just isn’t real. Conversely, if what you’re selling is real, you don’t need to fake it. It’s actually entirely possible to sell your vision for a not-yet-realized future, while being honest about what’s actually possible in the here and now.
Managing Investor Expectations
There’s no better way to ensure healthy business relationships than to manage expectations. Whether this is for clients, investors, or partners, it’s essential to be upfront and honest about what’s possible and when. Overpromising might initially win some people over, but in the long run, when you can’t deliver, you’ll find yourself wishing you hadn’t made promises you knew you couldn’t keep. Not only is this dishonest, but it’s also a surefire way to ruin both your reputation and your professional relationships.
As company leadership, it is vital to manage investor and potential investor’s expectations by being open and transparent about what’s possible. And this doesn’t stop after they have made their investment; you must keep investors informed about both progress and setbacks throughout the entire life of your business. Having regular, open, and proactive communication is essential for building, developing, and maintaining strong business relationships. Most of the time, delays and setbacks can be navigated and understood, if they are honestly communicated about and handled with integrity—meaning you do what you say you will do. Have conversations about junctures in the process where there could be potential delays ahead of time—the more upfront and honest you can be from the very beginning, and the more transparent you continue to be, the stronger your relationships with investors and other stakeholders will ultimately be as well.
The fundamental problem with Silicon Valley’s “fake it till you make it” philosophy is that “faking it” inherently implies dishonesty. There should never be any “faking it” in your business or professional relationships. I’ll say it until I’m blue in the face, but anything built without integrity and honesty is inevitably going to collapse. That’s certainly not to say don’t be confident, optimistic, or forward thinking, but your vision has to be rooted in reality. It’s ok to have your head in the clouds if your feet are still planted firmly on the ground.
If you build your business on a lie, sooner or later, the foundation will crumble. The good news is that there are effective communication strategies that can help you be honest, while still attracting investors.
The Power of Positivity
Being honest does not mean being pessimistic. We often see this overcorrection in the media with what we call the bad-news bias—where healthy skepticism devolves into knee-jerk cynicism. Effective communication is about finding the right balance so that your stakeholders are accurately informed, up to speed, and engaged.
Every company is going to hit roadblocks and have setbacks. If there’s one thing we should all be acutely aware of—given the past two years—it’s that nothing is ever certain. No one can see everything coming. The good news is that healthy investor relationships aren’t about perfectly predicting the future and clairvoyantly avoiding every hurdle; what matters is how you handle setbacks when you face them (because you will have setbacks). If you proactively communicate about the issue (as soon as you see it developing, not after it’s already beyond the point of no return), immediately get to work creating a feasible plan of attack, provide an honest timeline, and continue to be transparent throughout the process (with regular communication), then those roadblocks won’t derail the whole train. You can work to move past them all while creating a healthier business and stronger relationships with investors, employees, and other stakeholders.
Do your best to frame problems in a positive light; with the right approach, problems can become opportunities. Highlight how you’re using the setback to ultimately build and deliver a better product. We always have a choice about whether we focus on the positives or the negatives of a situation. When communicating about a problem, be open, honest, and transparent, but remain focused on the positives that can ultimately come out of it, along with your action plan for overcoming it. All relationships, including (and especially) those with investors, must be built on mutual trust and respect—building this requires that you’re transparent and honest about the process. While it can feel nerve-racking to deliver less than ideal news, if done correctly, then it doesn’t have to erode relationships and can actually help make them stronger.
At the risk of repeating myself, this is again the inherent problem with “faking it till you make it.” It’s an approach that builds up walls instead of relationships. It’s isolating and undermining. There’s no trust or mutual respect that can ever come from a relationship based on deceit. And no business can succeed alone. You need allies, partners, and advocates who believe in what you’re doing. That’s how great businesses weather the inevitable storms they face. That’s how you survive setbacks and thrive beyond them.
The Lesson Learned.
Succeed or fail, at the end of the day, you have to be able to sleep at night. We can talk all day about right and wrong, about optimism versus delusion, about what makes someone a visionary and another a fraud, but deep down, the answer is always simple. Call it what you want—your conscience, your gut, your instincts—we each have an internal alarm that tells us when we’re crossing the line. Lies will always catch up with you. If you want your business to succeed, if you want to really leave a lasting legacy, you have to build it on integrity. If you want your work and your reputation to stand the test of time, you have to cultivate and nurture real, genuine relationships built on mutual trust and respect.
Remember that setbacks are an inescapable part of life, but they are also opportunities that can make your business and your professional relationships stronger. Each and every decision you make about how you communicate in your relationships ultimately decides this.
Do your best to manage expectations by being transparent and honest from the beginning. Be realistic, but don’t get stuck on the negatives of any situation—figure out a way to move forward and focus on the positives when you communicate. The right partners will respect the person who chooses to tell the truth, even, and especially, when it’s the harder path. While it might be uncomfortable, it will ultimately help you to build better relationships with investors that can withstand everything life is bound to send your way.
You can fake it all you want, but it won’t do you any good if you don’t actually know how to make it.
Written by Eric Yaverbaum.
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