Mistakes and learnings

I was recently working on the investor presentation of one of our startups together with the startup’s founder. The company is currently back on its growth track but experienced a few turbulent months earlier in the year when revenue fell short of our expectations. We correctly identified the problems behind the months of lower performance and have applied or are currently in the process of applying remedies to each problem.

During our conversation, our founder asked whether we should explicitly highlight the months of lower performance in the presentation. The founder was concerned that highlighting these turbulent months would draw attention to the mistakes we made, and that these mistakes could scare off investors.

There are two problems with this line of thinking.

The first is that investors are very good at uncovering problems. We’ve read thousands of investor presentations and had discussions with hundreds of entrepreneurs. As a result, we know that what’s not said in a presentation or discussion carries at least as much signal as what is said. We don’t always find out but we often do. And having an investor unearth a problem is much more damaging to an entrepreneur’s chances of getting funded than having the entrepreneur preempt this damage by sharing the problem themselves.

The second problem with an entrepreneur not drawing attention to the mistakes they made is that it means they miss out on the opportunity to highlight their learnings from these mistakes. We all make mistakes. So if an entrepreneur states that they haven’t made any, they’re either deluding themselves or hiding something. Both are dangerous. But if an entrepreneur shares the mistakes that they made and shows how they’ve taken actions to address these mistakes, this signals that they’re both self-reflective and open to learning. And entrepreneurs with these traits eventually win.

For these two reasons, I recommend that entrepreneurs not only share the mistakes they made with investors, but also use them as an opportunity to highlight how they’ve learned from these mistakes to build a stronger business.

Also published on Medium.