Do Startups Exaggerate Their Achievements?

This is a follow up to the story, “Decoding Press Releases: An Industry Insider’s View”

The PR agency perspective

Suhasini Ahluwalia Mehta is director of Stellant Communications which handles PR for the likes of Locus, Quantum Mutual Fund and Nexus Venture Partners. This is her take:

“I believe PR agencies resonate and highlight the interesting journey of a company.

I don’t think it’s even possible for agencies to encourage companies to make exaggerated statements. I say this because [what business developments are shared is] first, the decision of the company founders. Secondly they are also questioned by their board and investors; thirdly – they eventually must live up to those claims otherwise they will run into bad publicity and will let down all stakeholders.

Ethics are set collectively by all stakeholders in the ecosystem – investors, founders, advisors, PR consultants and the media. Many a time certain points in ‘news’ also get exaggerated due to the line of questioning of media and the eventual story that comes out may be completely different.

We at Stellant Communications believe our job is to not just emphasize the company’s strengths but be a partner in their journey. In the rare case of an over enthusiastic client we play the role of devil's advocate and in the long run it's always appreciated by them.”

The investor perspective

Sunil Kalra, angel investor says:

“I do prescribe to the fact that there is many a startup that will overstate targets achieved to the press. This mostly happens with the early stage startups – these guys are new and have no clue on how to go about media interactions, the other instance is with the startups who have raised external funding and are trying to cover up when they don’t achieve their stipulated milestones.

It’s hard to say if all investors know the inside story of a startup, some may be influenced by the news they hear. Even among investors there are three kinds you see.

1. The passive investors who align themselves to active investors

2. The investors of early stage startups who are not discouraged by ill performing startups or turn complacent by portolio startups doing great because it takes around 10-15 years to build a solid company

3. And the institutional investors who encourage startups to spend the funds to earn the set targets. Often even institutional investors have junior professionals who are just learning the ropes of the industry; their decisions may be influenced by the various startup news they hear.”

The startup founder perspective

Neerav Jain is founder and CEO of CityFurnish.com, a startup founded in September 2015 and describes itself as ‘India’s biggest furniture rental market place.’

According to Neerav, there might be a reason why startups feel they need to exaggerate their numbers. The media only reports large numbers. CityFurnish had raised funding and when they wanted this news to be shared on media, it became a problem.

“From my 3 to 4 interactions with media and startups in this segment, we encountered a unique filter with some media agencies, where they have a criteria of reporting a release of funding in excess of 1 million dollars only,” Neerav said.

Often a reason you will see lines in the news like, “x company raised an undisclosed amount in funding.”

From an early stage startup founder’s perspective it begs the questions, “Must I go raise more funding than I need just to get the media to notice me? Or should I exaggerate what I have raised to get publicity?

Vishesh Khurana is cofounder of BigFoot Retail Solutions, the parent company of KartRocket, ShipRocket and Kraftly. Kraftly founded in August 2015 describes itself as, “India's first C2C mobile marketplace for unique and hand crafted products.”

This is his take on exaggerated business news.

“Yes, unfortunately, startups do exaggerate their achievements. You see this often, especially with very new startups. There will be potential investors reading this news and the tendency to bloat your numbers to get their attention is very high.

But it becomes very awkward when companies can’t back these numbers. An interested investor could immediately be put off when the publicly available numbers aren’t the same as the ones on their financial records. You lose trust.

This is why I don’t condone exaggerating your achievements in the media. At Kraftly, we have been lucky to have investors and mentors who have stayed with us from the get-go, so we never had to go through making exaggerated news.

Even now Kraftly does not put out numbers we can’t justify. Do a news search and compare them with the numbers on our website.

For example, take this exposé by a Quora user: About 3 months back a company had a press release which said they had a million dollars in revenue, and about 60,000 paying customers. However, this Quora user had done some simple math using numbers from the company’s website and found out that the revenue should be about 1/10th of what their press release said.”

According to Vishesh, it was quite the scandal on Quora, drawing in over a hundred comments.

“The excuses to this discrepancy ranged from “it’s the journalist’s fault to it’s a printing mistake,” says Vishesh.

“But at the end of the day, once things are printed you can’t take them back,” Vishesh reasoned.

For startups it’s definitely being caught between a rock and a hard place.

Neerav of CityFurnish maintains, “Checks and balances should be maintained so that the news reaching out is accurate and factual. But I think the startup itself should not exaggerate facts to get more views.”

He believes the PR agencies, journalists and startups should be ethical in reporting developments.

“Verifying and re-checking the facts with the concerned parties involved and maintaining a non-biased approach is important,” he said.