Friday, September 2, 2011

Lesson #86: Perception Often Outshines Reality


Sometimes, there can be a lot of "smoke and mirrors" around a startup.  You may have one startup with a great idea and very competent team, get overlooked by a another startup with a lesser idea and no track record.  Why is that?  The answer is simple:  perception can often outshine reality.  Below are a few examples of what I am talking about.

Investors and partner/customer prospects tend to put a lot of weight around the "intangibles" in assessing a business: (i) is the company the next Facebook (sexy) or a widget manufacturer (not sexy); (ii) did the CEO graduate Harvard (huge pedigree globally) or Wayne State (unknown outside of Detroit); (iii) did the head of marketing used to work at Google (a boom) or  Pets.com (a bust); (iv) are the company's investors Kleiner Perkins (respected VC) or friends and family (unknown angels); (v) does the company have customers like McDonald's (known Fortune 500 brand) or Susie's Diner (unknown small business); (vi) does the company have a strategic partnership with Discovery Channel or nobody you have heard of before; (vii) does the founder have an outgoing A-type personality (that jazzes you up) or a demure B-type personality (that puts you to sleep); or (viii) is the company based in my home town (easy to meet) or half way across the country (hard to meet).

And, these initial perceptions are not always justified.  As example: (i) that widget manufacturer may be able to capture 33% market share in a $1BN market with very little competition, compared to trying to knock-off industry leading Facebook; (ii) Wayne State is one of the best medical schools in the country, and is a perfect school for a medical-related startup; (iii) the Pets.com marketer led grow from zero to 5MM visitors and left the company a year before it collapsed; (iv) the friends and family investor also happens to be the former Chairman of Expedia, perfect for a travel startup; (v) it's a lot easier/faster to close sales for a lot of Susie's Diners than try to bag slow-moving Fortune 500 elephants; and (vi) that B-type personality may also be a 150 I.Q. genius with a game-changer idea, compared to that A-type personality selling you on unproven assumptions.

It is not fair that this happens, but the reality is, these "intangibles" can often rule the day.  And, lack of these "intangibles" can make it an uphill battle for your startup to get off the ground.  So, do your best to make sure you have all your T's crossed and all your I's dotted, from a perception basis, as well as a business basis, before approaching prospective investors or partners/customers.  And, if you can't fix perceptions, for whatever reason, figure out how to turn your perceived weaknesses into communicated strengths, tackling them head on.

And, worth mentioing, perception can sometimes help you get through a really rough jam.  Let's say your business is running out of cash and is going through tough internal pressures.  It is important those pressures stay limited to insiders of the company.  It should never seep out into your public facing persona.  Your partner/customer prospects don't need to know that is happening.  As an example, when iExplore was going through its very difficult time driving travel revenues after 9/11/01 (which almost put the company out of business), we always put on a "business as usual/growth story" into our public-facing messaging with prospective customers/partners.  Why? Because perception can outshine reality.  Had news of iExplore's weak financial position ever leaked to our customers/partners, they would have stopped buying from us or working with us, further exacerbating the problem, putting the company into a death spiral.

Everyone initially wants to dance with the prettiest girl at the ball, even though she may have an I.Q. of 75.   But, people can't assess I.Q. based on a first glance from across the dance hall.  So, make sure you put on your best evening gown and ruby slippers, so you too can get that first dance, and wow them from there.

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