Comments on: Should your startup release financial data? http://www.texasstartupblog.com/2008/05/28/should-your-startup-release-financial-data/ Spurring innovation and entrepreneurship. Fri, 19 Mar 2010 10:02:01 +0000 http://wordpress.org/?v=2.7 hourly 1 By: Truman Neuman http://www.texasstartupblog.com/2008/05/28/should-your-startup-release-financial-data/#comment-346273 Truman Neuman Thu, 29 May 2008 15:47:16 +0000 http://www.texasstartupblog.com/?p=1694#comment-346273 The Truth Works; Always has. Time and Tide waits for neither man nor the exposure of his deceptions’. Thanks for another great advisory snippet, exactly. The Truth Works; Always has.
Time and Tide waits for neither man nor the exposure of his deceptions’. Thanks for another great advisory snippet, exactly.

]]> By: Scott Whigham http://www.texasstartupblog.com/2008/05/28/should-your-startup-release-financial-data/#comment-346264 Scott Whigham Thu, 29 May 2008 11:08:52 +0000 http://www.texasstartupblog.com/?p=1694#comment-346264 While I agree with your example in the last comment, it begs the question: "Are all investors 'savvy investors'?" No. If the aforementioned 17 yo kid with the great idea (to compete with me by copying me) has a rich uncle, is that rich uncle going to pick up the phone and call me? No chance. Rich Uncle Alex is going to my posted numbers as proof that his 17yo nephew has a legitimate shot at making the big-time (and therefore will fund his nephew increasing my competition). I think that, in the software/web world, it might only take your competition raising as little as $50,000 to potentially cause real problems for you. In the biomedical field or manufacturing world it might take $500,000 + to make an impact but not in my field; angel investments can make a big difference. In the web world, a "hacker dude" can pair up with a "business dude" and they can have a business plan+demo in just two weeks. Rich Uncle Alex won't be able to write the check fast enough when they show him their, "If we can just capture 1% of this billion-dollar market..." presentation. I understand where you're coming from but I still have to disagree that it is wise for all types of companies that meet your criteria to post their numbers. I love transparency but there is a limit for me. While I agree with your example in the last comment, it begs the question: “Are all investors ’savvy investors’?” No. If the aforementioned 17 yo kid with the great idea (to compete with me by copying me) has a rich uncle, is that rich uncle going to pick up the phone and call me? No chance. Rich Uncle Alex is going to my posted numbers as proof that his 17yo nephew has a legitimate shot at making the big-time (and therefore will fund his nephew increasing my competition).

I think that, in the software/web world, it might only take your competition raising as little as $50,000 to potentially cause real problems for you. In the biomedical field or manufacturing world it might take $500,000 + to make an impact but not in my field; angel investments can make a big difference. In the web world, a “hacker dude” can pair up with a “business dude” and they can have a business plan+demo in just two weeks. Rich Uncle Alex won’t be able to write the check fast enough when they show him their, “If we can just capture 1% of this billion-dollar market…” presentation.

I understand where you’re coming from but I still have to disagree that it is wise for all types of companies that meet your criteria to post their numbers. I love transparency but there is a limit for me.

]]> By: Alexander Muse http://www.texasstartupblog.com/2008/05/28/should-your-startup-release-financial-data/#comment-346260 Alexander Muse Thu, 29 May 2008 00:17:40 +0000 http://www.texasstartupblog.com/?p=1694#comment-346260 Scott - perhaps there is some risk of a competitor raising money based on your numbers, but I would suspect a savvy investor would take the 'competitor's' business plan and give you a call. Why fund a copycat when you can approach the small guy, likely at a better price, and fund him. Of course, you may be right, but I would be willing to take the risk... Scott - perhaps there is some risk of a competitor raising money based on your numbers, but I would suspect a savvy investor would take the ‘competitor’s’ business plan and give you a call. Why fund a copycat when you can approach the small guy, likely at a better price, and fund him. Of course, you may be right, but I would be willing to take the risk…

]]> By: Scott Whigham http://www.texasstartupblog.com/2008/05/28/should-your-startup-release-financial-data/#comment-346257 Scott Whigham Wed, 28 May 2008 22:18:56 +0000 http://www.texasstartupblog.com/?p=1694#comment-346257 Interesting take and while we all would prefer investors coming to us, there are other things to take into account when deciding whether to publish your numbers. Imagine a chart with three points, all curving upward: * Revenue * # of Employees * Quality of product On this chart, your revenue and Quality of Product are high but your # of Employees is low. This means your ability to react to competition would be lower, right? Having few employees means high margins and low costs but it isn't the greatest thing. So should this company publish their numbers? I say, "No". Publishing successful numbers invites potential competition from better-funded companies. It's the idea of, "If they can do $x with just five people, we could do $x*100 with a team of 50!" If I publish successful numbers, one of my competitors can use those published numbers to raise money ("Look, Mr. VC - this small, self-funded company is doing $x with only one employee! You should fund us and we can wipe him out!"). You say, "Once your deal is shopped EVERYONE who cares will find out anyway." but I disagree: only those in the right circles who care will find out. My competition is possibly some 17yo kid in Singapore who isn't in those circles. Microsoft isn't in that circle. I just think that posting numbers *prematurely* invites competition that can potentially be devastating. For that reason, until all three of your lines on your chart are on the same curve, I think that you shouldn't do it. After you've gotten all of your ducks in a row (revenue growth, # of employees, and quality product), go for it! Interesting take and while we all would prefer investors coming to us, there are other things to take into account when deciding whether to publish your numbers. Imagine a chart with three points, all curving upward:
* Revenue
* # of Employees
* Quality of product

On this chart, your revenue and Quality of Product are high but your # of Employees is low. This means your ability to react to competition would be lower, right? Having few employees means high margins and low costs but it isn’t the greatest thing. So should this company publish their numbers? I say, “No”.

Publishing successful numbers invites potential competition from better-funded companies. It’s the idea of, “If they can do $x with just five people, we could do $x*100 with a team of 50!”

If I publish successful numbers, one of my competitors can use those published numbers to raise money (”Look, Mr. VC - this small, self-funded company is doing $x with only one employee! You should fund us and we can wipe him out!”).

You say, “Once your deal is shopped EVERYONE who cares will find out anyway.” but I disagree: only those in the right circles who care will find out. My competition is possibly some 17yo kid in Singapore who isn’t in those circles. Microsoft isn’t in that circle.

I just think that posting numbers *prematurely* invites competition that can potentially be devastating. For that reason, until all three of your lines on your chart are on the same curve, I think that you shouldn’t do it. After you’ve gotten all of your ducks in a row (revenue growth, # of employees, and quality product), go for it!

]]> By: sean scogin http://www.texasstartupblog.com/2008/05/28/should-your-startup-release-financial-data/#comment-346256 sean scogin Wed, 28 May 2008 21:49:17 +0000 http://www.texasstartupblog.com/?p=1694#comment-346256 fantastic post! I can understand the feeling of wanting to tell people that you're doing well, but integrity in business is so much more important. Btw, now a devoted reader, found you via twitter (for your records) fantastic post! I can understand the feeling of wanting to tell people that you’re doing well, but integrity in business is so much more important. Btw, now a devoted reader, found you via twitter (for your records)

]]> By: Curvezilla http://www.texasstartupblog.com/2008/05/28/should-your-startup-release-financial-data/#comment-346254 Curvezilla Wed, 28 May 2008 20:03:14 +0000 http://www.texasstartupblog.com/?p=1694#comment-346254 As I look out my corner office window from the 72nd floor of the Bank of America building I can't fathom why someone would lie about their business. I mean I would never fudge the numbers and tell you my consultancy made $200MM last year when we only made $198MM. The audacity of some people. *super fast commercial speaking voice* This comment was all meant tongue in cheek and is by no way true by any stretch of the imagination. ;-) As I look out my corner office window from the 72nd floor of the Bank of America building I can’t fathom why someone would lie about their business. I mean I would never fudge the numbers and tell you my consultancy made $200MM last year when we only made $198MM. The audacity of some people.

*super fast commercial speaking voice* This comment was all meant tongue in cheek and is by no way true by any stretch of the imagination. ;-)

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