Lying by Omission
Every entrepreneur does it. A lot of people just call it optimism…seeing the bright side of things. You have to do it to have a chance at being successful. You know, like when you were recruiting your VP of Sales. She didn’t ask you about your product’s stability and you’re not about to volunteer that every customer you’ve installed has had problems with reliability. Heck, the Army even has a policy called "Don’t ask / don’t tell" so if the government can do it, it’s okay right?
Sometimes yes, sometimes no.
It makes no sense to talk about your crappy credit score on your first date, but you darn well better talk about it before you get married. The same goes for entrepreneurs pitching VCs for money. Too often, entrepreneurs think of raising venture capital as "the end" instead of appropriately thinking of it as the beginning of a relationship. It doesn’t make sense to lead with all the challenges in your business in a first meeting, but full disclosure is imperative with your prospective investor *before* you close on the round.
At my previous company, we had a saying for this process. We called it "8-miling." For those who haven’t seen the movie 8 Mile, the climactic scene in the movie has Eminem in a rap-duel where his opponent has a bunch of juicy inside dirt on him. Instead of waiting to get lambasted, Eminem launches into a spirited rap about everything bad the other guy could say. The bottom line is that he showed confidence and mettle by acknowledging his shortcoming and finishes with "I’m still here."
I think every entrepreneur should 8-mile their business with their prospective investors before taking their money. VCs are in the business of making bets, they just don’t like making bets without knowing it. Entrepreneurs who get that, will find their investors to be true partners.