Opinions expressed by Entrepreneur contributors are their own.
The recent imprisonment of Elizabeth Holmes got me thinking more deeply about the old Silicon Valley adage, “Fake it ’til you make it.” This saying has long been the mantra of startups not only in Silicon Valley but throughout the country. I’ve been involved in the startup community for the better part of 8 years now. I worked at a startup that believed faking it was a legitimate business strategy. Its founders are now staring at substantial prison time tied to a multitude of fraud convictions. I’ve also worked at two startups (my current one included) where the focus was grit, effort and hard work always backstopped by integrity. You don’t tell people you can do something you can’t do simply to benefit your own self-interest.
The fact is ratifying “fake it ’til you make it” is nothing more than creating an excuse about your own personal or professional failures. Does that mean you can’t push limits? Or test the abilities of your team? Does it mean you can’t seek to achieve goals that seem unattainable? Or to publicly aspire to accomplish those goals? Absolutely not. Startups are typically only successful when they are backed by seemingly impossible dreams. But there are ethical ways to get there. Let me explain.
Let’s say your startup idea is to create a two-sided marketplace for art. On one side, you have buyers who are interested in art from particular artists, and on the other side, you have sellers who have access to legitimate pieces of art from those artists. Your goal is to programmatically match buyers and sellers and to use technology to validate and authenticate the art. In your mind, this will all eventually be done without human intervention, but it will take months (or maybe years) to make that happen technologically. So, now let’s break this down into two models: (a) a model based on “fake it ’til you make it”; and (b) a model based on grit, hard work and creative but ethical solutions.
Related: Here’s Why You Should Not “Fake It Till You Make It”
“Fake it ’til you make it” model
Let’s start with the “fake it ’til you make it model.” You put out a pitch deck and marketing materials that tout proprietary matching algorithms that will connect the right buyers to the right sellers and an AI-based software that will detect fraudulent or forged works of art. Without question, these are how you envision the future state of your business. Moreover, your website states that you’ve completed thousands of successfully matched art transactions. What does it matter if it’s not true? It’s not hurting anyone.
Now the truth is it’s still your dream to create proprietary matching algorithms and AI-based fraud detection, but what you currently have is a simple database of sellers and buyers of art with a basic taxonomy that allows you to classify the works. You also employ a few art experts who can review the listings for any clear or apparent fraud. Since you started the site, you’ve matched around 100 buyers and sellers who all seem generally pleased with the experience and what they’ve received. Seems simple. Unfortunately, the fact is, you have completely misrepresented your product, your transaction history, and fundamentally, what your company does to provide value.
It may seem harmless because your users are satisfied, but what if an angel or VC firm is so interested in your pitch that they want to invest seven figures into your business? You’re a startup. You need money. Depending on the angel or VC, it may also provide significant clout or publicity to your business. So, now you’re stuck between Scylla and Charybdis. Do you perpetuate false information and financially insulate and benefit your business? Or do you turn down the money and attempt to rectify the untruths which may severely impact your business’s ability to survive? Neither is a good option. The fact is, because you touted the potential future state of your business instead of its current reality, you’ve engaged in “fake it ’til you make it” and, depending on the outcome, committed fraud.
Related: The Truth About ‘Fake It ‘Til You Make It’
Reality-based model
Now, how could this have been done ethically, while still generating interest and buzz in your business? It’s simple. In your marketing materials, you could state your value proposition as a technology company/marketplace that helps buyers find sellers, sellers find buyers and ensures that each party is comfortable with the legitimacy of the pieces of art. Your goal can still be the creation of algorithms that help match buyers and sellers as well as an AI-based fraud detection software, but that isn’t what you are currently selling.
In order to make sure users have a good experience, you can have team members in the background manually poring over the listings to find the best matches and those same art experts perusing the lists for forgery and fraud. The truth is, the users will be happy as long as they have a good buying or selling experience, get what they want and feel as though the platform provides transactional transparency and certainty.
Publicly, your marketing materials can tout that you’ve successfully matched “numerous” buyers and sellers and even use quotes and endorsements from those satisfied customers. Angels and VCs will see traction and may very well decide to invest in your vision without believing it to be the current reality. Most importantly, you haven’t committed fraud or compromised yourself ethically simply to boost your ego. You’ve simply used grit and ingenuity to provide a good experience without relinquishing a much grander vision for the future.
We’ve now seen the result of the “fake it ’til you make it” culture — Sam Bankman-Fried, Elizabeth Holmes, Charlie Javice, etc. Right now, we’re operating in a legal climate where the traditional startup mantra is having real and serious repercussions. But that doesn’t mean it won’t change in the future. More importantly, it doesn’t mean the temptation won’t be there for the next generation of entrepreneurs and startups. It’s hard to be patient. It’s hard to grind. But it’s also the only real path to success. Speed kills is another old adage that has existed for generations. Perhaps that should be the new mantra for startups.
Related: The 5 Worst Tips I Received When Starting My Business
This story originally appeared on Entrepreneur
