Earlier this week I watched as an entrepreneur lied to a venture capitalist about an acquisition only to be proven a liar an hour later. I thought it was worth a post. Lets say you are in talks with a huge ecommerce company to buy your startup. Those talks go well and you close the deal, but you have to keep it secret for a while (i.e. because they are public). What do you do if a VC that you have been talking to emails you and asks, ‘Hey I heard you were acquired by xyz, love to get some of the details.” If you are inexperienced you might be tempted to lie and suggest they must be wrong. The problem with the lie is that you will be found out as a liar in mere moments. VCs have very long memories and they talk to a LOT of folks everyday. No doubt that VC has spent some time working with you and as a result talked to other VCs about you and your company. Those other VCs will hear about the acquisition and call the VC you lied to and ask him about the deal. He will either tell them that he has no information or he will tell them the story about your lie. So what is the right thing to do? Forward the email to your acquirer and sit back and wait – you don’t need to respond to the email. The right answer is the least amount of work and protects your reputation.
Trust is a commodity. But for so many entrepreneur’s working with VCs there is a layer of worry and desperation that can make it easy to forget. You don’t want to lie but feel trapped because you also don’t want to take a risk of upsetting potential funding partners.
All the more reason why it’s important to surround yourself with entrepreneurs who not only value integrity but also who know what the trenches are like.