In today’s episode of The Startup Chat, Steli and Hiten talk about the lies that startup founders and staff tell to make their company look better than it really is.

They highlight that lying has been and remains a commonly accepted way to communicate, popularised by successful startups and founders. This social acceptance has left founders without the awareness of how damaging lies are for the very thing that they are trying to protect, their company.

Lying is defined as deliberately making a false statement with the intention of deceiving the person receiving the information. We have all heard the euphemism ‘fake it till you make it’, but appearing to be perfect isn’t believable for any business. Many founders see lying as part of the ‘day to day’ of keeping their startup running. But the value of being vulnerable and honest, may be the missing ingredient to resonating with the people most important to your company.

Tune into this week’s episode of The Startup Chat to explore the question ‘Why do Startups Lie?’ and why lying can damage your companies image. Steli and Hiten, show how all companies have things go wrong and most companies are struggling with something. They define the kinds of lies that founders tell and look at alternative ways of communicating.

Time Stamped Show Notes:

02:02 The startup grey zone.

02:25 Lying popularized on the road to success.

03:40 Buying into the ‘Hero’s Journey’.

04:24 Definition of being a founder.

04:52 Why do founders lie?

08:19 An example of a lie that a startup may tell.

09:14 The pros and cons of lying.

12:14 The main reason not to lie.

12:56 The perception of lying.

16:10 The price of lying.

3 Key Points:

  • There’s a difference between lying and framing your problems in a way that is productive for your company.
  • You are paying the price for every little lie you speak, and the price just isn’t worth it.
  • First, you have to recognise that you are lying then you have to stop it.



Steli: Hey everybody this is Steli.



Hiten: And this is Hiten Shah.



Steli: Today in the startup chat we will talk about start up lies. Here’s why I want to talk about this with you specifically. In recent months there have been a few cases where founders that are friends of mine or founders that I’ve been advising … That have kind of uncovered or told me that they’ve been lying to either investors, their team members or their families. They’ve been lying for a variety of reasons and they didn’t say, “I’m lying,” just in my conversation with them I realized holy shit, he or she’s lying about X, Y and Z and I could get into some examples very quickly. The first time it happened it kind of broke my heart and it made me think wow I’m so glad I don’t have to deal with any of this in my life and it feels so distant like running a company where you have to lie to investors or ask friends to sign up and put in their credit card so you can in your next board meeting report some fake … Like just that type of shit but the recent example I had was again one where through a startup employee I basically learned that one of my … A startup that a friend of mine is running that they’re bending the truth in a way that I would call a lie to make certain numbers look good for the investors and I was like shit I need to talk to about this. Like this idea of a lot of startups think that … A lot of times do live in the gray zone right, there is black and white and all sort of do things that are sometimes not fully legal and do things that are slightly ethically questionable and there’s a lot of stories of founders getting away with it and becoming successful and never hurting anybody. So, I feel like a lot of the founders because of the pressure they get and because of the maybe all these stories out there of like I don’t know, Steve Jobs on stage pretending something’s working whatever it was I don’t remember the story exactly like some kind of interface working but it was really working. We know all these kind of stories and maybe startup founders in particular feel like it’s okay to lie or bend the truth to get to the next milestone or to survive or to avoid conflict or to not rock the boat with their employees and team members. I have strong opinions about this but I want to hear yours as well. I just want to talk about this. Is it okay, is it cool to lie, why do startups lie, let’s unpack this. Let’s talk about it.



Hiten: Why do startups lie? Oh my god.



Steli: Why do founders lie, I don’t know.



Hiten: Why do people lie Steli?



Steli: Why do people lie?



Hiten: Let’s start with startups and founders I think that’s solid topic and the truth is I don’t think most founders when they lie know that they’re really actually telling a lie that’s going to hurt them. What I mean by that is excuse me, all the stories we hear are all about straight up like how successful these companies were or how much they struggled in the beginning and then they figured it out. I’m talking about like the best case stories of struggle and then they figured it out and I can give lots of examples but every single company has some form of that early like hero’s journey type of story, right?



Steli: Right.



Hiten: And so I think people have just gotten to believe in someone else’s story and the way these stories developed and so you know, the reason I’m mentioning that is like I just think founders get a lot of things in their heads especially first time founders about what being a founder is. My opinion is that what being a founder is, being a founder is being a business owner that’s it. Maybe it’s a different type of business owner because you have a lot more risk on your business and the product and what you’re creating but who doesn’t? Even a coffee shop owner who just opened a coffee shop in a corner or a restaurant owner whatever, these things that have been around before tech and before startups, what we call startups today, these are the old startups. They had the same as business and I think that people don’t realize that lying in business gets you in a lot of trouble and the lies come from the fact that you just want to look good. You want to sound like you’re always crushing it so part of this to me is like this whole crushing it factor like “Oh, I’m crushing it I’m doing really well.” Even if everything’s just hitting the fan all the time. Even some of the largest companies that are out there that are growing super fast, shit’s hitting the fan all the time and so I think there’s a difference between lying and framing your problems in a way that’s productive for you.



Steli: All right, so let’s unpack that because here’s the bottom line from my perspective and I think most people would be surprised by that because I’m such a loud mouth and people are like sales guy probably has no ethical problems bending the truth all the way to a fool full on lie but actually-



Hiten: They don’t know you so drop the bomb.



Steli: I actually hate that shit, I’m incredibly uncomfortable with anything like it. I am not uncomfortable at all with giving you an edited version of the truth not when it’s again not when it’s getting to the territory of a lie but I can say, “Hey, we are offering you a limited access offer, we’re going to partner with 10 companies, now we’re currently talking to 20 and we’re selective who’s going to be part of it.” That’s all truth that makes it seem like there’s a lot of demand and very little supply, I make myself very attractive and I might be talking to you and I’ve said that I have a bunch of calls and conversations and they might all not lead to anything but that to me is very different from telling you, “Well we have already 40 companies agreeing to work with us and you could be one of them.” When in fact no company is agreed to working with us yet. To me there’s a huge difference between framing something in a positive way and in a strong way and outright lying about the truth.



Hiten: People lie because they think it’s better to lie and they’re going to look better. In fact when someone catches you in a lie you look really bad and then they don’t want to do business with you, they don’t want to help you. I think like it’s almost like a psychological nuance in a way the difference between a lie and like you said framing something in a positive light. I just want to tell people not to lie but that’s very dangerous because I think people don’t know that they’re lying. It’s like this weird thing with founders especially where they want to believe that what already … Like their whole job is to create what doesn’t exist all the time. So, if you’re here trying to create what doesn’t exist there’s some part of you that has to believe it already exists. What do you do with that part of you, what do you do? My trick there, what I would say is, don’t ever tell anyone anything that doesn’t exist, just don’t but you can tell yourself whatever the heck you need to to keep going.



Steli: You can tell yourself any lie that positively impacts your actions.



Hiten: All day.



Steli: All day.



Hiten: All day. Do not speak that to anybody else.



Steli: Yeah, we’ll talk about this for a second. I want to actually unpack why people shouldn’t lie instead of just keeping it conceptually is like lying is bad, talk about like real consequences. What are the pros and cons practically.



Hiten: Yeah, but Steli lying is bad.



Steli: Lying is bad but I want to talk about why but even another example recently I didn’t even realize it we were just talking about this, I need to be careful how I’m going to speak about this not to say too much but we’re partnering with many different companies right now doing all kinds of different cool marketing campaigns and stuff like that and just a recent example where a company sent over some copy of promoting something with us and that copy had facts in there that weren’t true. Saying specific numbers about something that just was not true yet and I was like why are we saying this and is this actually true? I don’t think so and our internal team was like “No.” They seem to be doing this. This seems to be common practice on how their team is promoting things and I was like well but it’s not common practice on how we’re promoting things and is lying in this email really going to bring massive success? I don’t think that this specific fact really matters as much so we took it out but it made me feel a certain way about that company and it is just a general thing I think when you’ve been around the block like you have and I have, we’re much more critical when we hear companies talk about how green their grass is and how amazing everything is they do, you kind of go, “Well maybe, maybe not.” I’ve seen enough companies behind the scenes to know that everybody is fucked and everybody has problems. I don’t know it was just another recent example of a company just being super comfortable. It’s part of the way that they market things, to just use numbers that are factually not true and seeing how uncomfortable I was with it although this is not like lying to investors, this is not going to really harm anybody, it’s just … It’s an inconsequential lie other than that I felt like it’s totally unnecessary to do that. I do think and we can go now into the consequences, I do think it matters a lot because the moment I speak up against that, the people on my team get reaffirmed that when I tell them things they can trust me because I’m not comfortable telling even a stranger a lie. I do think how can people within a company, how can my team members and everybody that works with me and my customers, how can all these people my family my friends, how can they trust what I tell them if they know I’m lying to other people. If I know that you’re lying to other people I will assume that you might not be trustworthy and things you’re telling me might not always be true and all of a sudden this is a tidy little thing but I think setting that example internally and going, no we’re not going to lie in this because that’s not what we do, sets either example of how you want your team members and employees to treat customers and to do marketing and sales and all that but it also reflects to them knowing, “Hey, when Steli says things they’re probably true because he’s not comfortable lying even in the tiniest least consequential way possible.”



Hiten: I think it’s really important you reinforce things like that and it’s because you don’t want people around you lying either and you want your culture to be very honest. It’s like this, I think you have to really think about if you lie whether you can get away with it or not and I know that sounds weird because we’re talking about not lying but it’s like really if you think you get lie and get away with it, your ability to remember all these lies over time is not going to be very good and you will not be able to get away with it. I think it’s like it’s not … The reason you shouldn’t lie is so that you just make your life easier because otherwise you have to remember what you told different people all the time. You have to remember all those lies that you said that you probably don’t even believe and that’s when I think things go really wrong. People tend to remember these things that you say to them and so if you’re constantly making shit up and telling them oh I have a customer when you actually don’t, there’s this other level especially around sales and customers and all that where it’s like somebody and this is totally we’re talking about because this is what I mean by people don’t know they’re lying. Well if I believe that I’m going to close a deal next week, right Steli?



Steli: Yup.



Hiten: And say, “Hey I’m going to close five deals next week, I’ve already got them down the pipeline, they’re at this stage bla bla bla,” and I only close three. Did I lie to you?



Steli: It depends. If you really believed you could close five and you had enough indication for it no, you didn’t lie. You just said wrong expectations.



Hiten: See that’s interesting. I think that someone else could look at that and say, “Oh no you lied to me.” My whole point in saying that is if you’re not sure don’t say it. If you’re not sure you’re going to close the five don’t say it or because you could say it in a different way and say, “Look, based on the stages we’re at, it looks like five deals will close next week but Steli you know how deals work. There could be something we miss, we’re still early.” you know, if you’re early. So, I think that honesty is more about giving people context when you say something and that helps you not lie. That helps no one else think you’re lying. The reason is a lot of this is perception and that’s really the big problem with this. Like you said that wasn’t a lie. I agree it probably wasn’t a lie but if you did do it and you said you were going to do it generally that means you’re lying.



Steli: It definitely means that you’re going to pay a cost in credibility. It means that I’m not going to take you as serious next time you say something or I will judge your character as somebody that is overly optimistic or doesn’t have good judgment on how realistic a deal is to close and come through or not but I honestly think that … I’m not even talking about these like being overly optimistic or having some kind of a slightly distorted view of the reality of what could be done or could be accomplished, I’m talking about people saying I have three customers when you don’t. I’m talking about people saying, “Hey, my 10 friends can you log in and put in your credit card, I’m going to give you that money back I just need to show that I had some paying upgraded customers in my next meeting with investors.” I’m like this is absolutely nothing to do with being overly optimistic. This is … You’re just lying to get over some kind of bomb crisis to look good, to feel confident when you talk, “This is my first customer I need to … When they ask me “Do you have other customers?” We’re just going to say “yes” because we’re afraid to say no. That shit like yes we have other customers, it’s not true. It has nothing to do with being optimistic and I think that oftentimes people do it I mean obviously they do it because they think they need … Because they either are afraid of conflict, of a confrontation that could happen, they’re afraid of the consequences maybe, “I’m not going to be able to close my first customer if I don’t lie to some.” Or maybe “I’m not going to be able to keep the investors to supporting us if we show them that we still have not gotten a single upgraded account here.” People are for “Maybe my employees will lose trust and not want to keep working with me as hard if they see that extra financing hasn’t come through.” So I’m lying to people to not have to deal with the negative consequences but it doesn’t matter if you can get away with a lie or not, I think honestly you know, ultimately you know you’re lying so it’s going to affect your mood, it’s going to affect your body language, it’s going to affect your spirit, your mind, it’s going to affect you. Other people in close proximity will pick it up even if it’s your co-founder and they’re in on the line. Now your co-founder knows that you’re willing to lie. If you’re willing to lie to somebody else you might be lying to them so how much trust can there really be between you. Your employees like … Even if the lie doesn’t come out and becomes a huge deal because you lied to an investor and the investor is suing you or kicking you out of the company, even if it doesn’t get to that extreme case of consequence, you’re paying a price for every little lie you speak and the price is just not fucking worth it. It is not worth it. If you can’t be confident while maintaining the truth, you’re just not cut out for this shit. I mean honestly you’re just not and this is coming from somebody, I’ll tell you I don’t remember like I thought about this not just to be preaching to others but I don’t know about you you seem like an incredibly honest person but I you know, growing up as a kid, I was a liar, I was lying quite a lot. Never really anything too big which is even worse like I would not say any gross, painful really significant lie but I would lie all the time about little things for no reason whatsoever just to make a conversation go smooth or to make myself seem more interesting. In a social setting I would slightly edit the truth X happened would add X+1 to make the story funnier or to make something more interesting and I don’t even know why I was doing that. All the way to my 20s I just lied about a lot of little things and I felt totally comfortable with it and I don’t even remember right now when the shift happened internally for me, when I decided no I don’t want to fucking do this anymore and when I completely stopped lying about anything whenever possible and this even goes to my children. I had a big debate with my mother the other day that lied to my two boys for little things. She basically said, “There’s no chocolate in the house.” They wanted some more chocolate from their grandma she’s like “Oh, sorry I don’t have any more chocolate.” Although she has more chocolate and then I went in the whole debate with her that I’d like to tell my children, “I don’t want to give you more chocolate because you already had enough, chocolate is not good for your body and I have made the decision that you’re not going to get any more,” verses telling them “Oh, we don’t have any chocolate any more.” Telling them these small little bullshit lies because I don’t like to lie to my children. I don’t like to lie to anybody and I don’t know when that shift happened but I think for many people that shift just doesn’t happen and they feel especially in like high stress situations, they feel like as a founder it’s okay for me to tell this lie to investors because we’re going to … The reality is going to catch up to it. Next week I am going to close these customers, I am going to get ten upgrades, I am going to catch up with that lie and then everything is going to be fine but it’s not, it’s not. You’re paying a really high price. It breaks my heart when I see founders lying to employees, to co-founders, to investors, to customers, it’s just a shitty thing to do and it’s going to be bad for you ultimately. We talked about this I want to shout out some episodes here. We talked about fire fighting in business in episode 84 and we talked about crisis management for startups in episode 128. Both episodes I think are super important for founders that feel like they need to lie, listen to those two episodes to hear why those other solutions to this as well.



Hiten: You don’t need to lie. First you’ve got to recognize that you’re lying.



Steli: First you’ve got to recognize that you’re lying and then you need to decide to stop it. You can be a successful founder without lying, you can get through crisis situations without lying, you can have confrontations and use the truth and still come out okay, you really can and if you the people that are listening to us right now if there’s anybody out there that’s listening to this and feels like we’re criticizing them personally and feel like they’re in a situation where they cannot be honest, send us an email and-



Hiten: Yeah, let us know.



Steli: At least we’ll brainstorm with you and see if we can offer you a better alternative to what you’re doing right now. Just shoot us an email at and the two of us will try our best to offer you another strategy, another solution and another way.



Hiten: Yup later.



Steli: Later.