19
Jun

Bulls*%t, Next Slide…

We had an entertaining speaker at last night’s meeting of Anges Quebec. Andy Nulman

of Airborne Mobile and Just for Laughs fame, spoke about his experiences as an entrepreneur and his thoughts on Angel investing. I don’t know Andy but he’s absolutely hilarious.

One funny anecdote he mentioned was pitching some VCs during the early days of Airborne and being told that their financial projections were not nearly sophisticated enough. They dutifully hired a bunch of experts to create what he described as the most beautiful set of financial projections ever created. At their next pitch to a big strategic investor, they went through their powerpoint and got to the financial projections. As soon as the investor saw the projections he said “Bullsh!t, next slide.

Under “Lies Angels and Entrepreneurs Tell Themselves” #1 has to be that financial projections mean something. Projections are a good way to work out aspirations but they’re not good for predicting the future (in a startup). We’re investing in People right? Entrepreneurs are just as bad. When their pitch isn’t convincing they roll out excruciatingly complex financials to boost their case.

Angels and entrepreneurs should stop lying to each other. Entrepreneurs should be honest about what they don’t know (which would be refreshingly impressive) and Angels should realize that at the earliest stages they’re placing a big fat hairy bet on an individual. People who aren’t comfortable doing this probably shouldn’t be investing in startups.

Andy’s version was funnier…

Comments ( 8 )
  • » Weekend Reading | StartupNorth says:

    […] New post: Bullsh!t, Next Slide or the big lie of startup projections http://www.flowventures.com/blog/index.php/2009/06/19/bullst-next-slide/ […]

  • Mark MacLeod says:

    As someone who prepares a lot of financial projections I can say that they *do* have value but not as a predictor of the future. The value comes from:

    – Knowing how you will goto market and what resources it will take to get there

    – Showing how far you can think forward as an entrepreneur + how big you think

    – Demontrating the levers of growth or inflection points in your business + how you will hit them

    But no one should ever think the actual end numbers represent the future.

  • raymond says:

    Hey Mark. I agree with you in the sense that projections help entrepreneurs really think through their strategy while helping outsiders (like investors) see how the entrepreneur thinks. Unfortunately, this is usually not what both sides have in mind when doing projections. Particularly with Angel-level investing, where there’s not much of a business to look at, I think people need to dial back their expectations about how meaningful projections are supposed to be. I’m sure investors would get more useful information out of entrepreneurs if they just treated the whole thing as a creative exercise rather than some implied promise that the numbers represent the future.

  • Dave says:

    The best value in the projections – if you goose all the input variables and still get a stinky revenue/profit forecast then you’ve figured out this might not work. You’d be surprised how many times I’ve done that and said, “Hey, wait a minute guys …”

    Cheers from the west coast …

  • raymond says:

    Hey Dave, your ex-VC tricks are exposed for all to see! Maybe the idea here is to ban projections on paper and have investors and entrepreneurs huddle around an Excel sheet. That way the exercise would be to see how creative the entrepreneur is with different models. Entrepreneurs could also validate the VC’s basic math skills. 🙂

  • Andy Nulman says:

    Ray–

    Here’s the story in its (kind of) entirety. I’m not entirely against projections and/or biz plans…I just want to put them into perspective. I think the following does so: http://tinyurl.com/npor4j

    –Andy

  • raymond says:

    Thanks Andy,

    I also wrote a post recently about Business Plans vs Business Planning (http://bit.ly/kIM5f

    ). I think the point is that good planning/analysis (including projections) can help entrepreneurs, especially if they focus on how it helps their startup vs. just impressing investors.

    Raymond

  • links for 2009-07-04 « National Angel Capital Organization says:

    […] Bulls*%t, Next Slide… | FLOW Ventures We had an entertaining speaker at last night’s meeting of Anges Quebec. Andy Nulman of Airborne Mobile and Just for Laughs fame, spoke about his experiences as an entrepreneur and his thoughts on Angel investing. I don’t know Andy but he’s absolutely hilarious. (tags: angelgroup pitching angesquebec) […]

The comments are now closed.