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Hyping, shading and puffing are normal in entrepreneurial circles and, properly limited, are probably expected to some degree. People discount the statements accordingly.

Misrepresenting material facts or omitting to disclose something major (like the loss of your major customer the day before a funding) constitutes securities fraud and can get you in a heap of trouble, notwithstanding how it may have worked out in a particular case such as that cited in this piece.

There are also limits to hyping if it amounts to misrepresenting material facts. I was once approached by an entrepreneur whom I turned down as a client and who later got busted for securities fraud for having done a demo claiming that certain of his company's whiz-bang technology was in fact doing something stupendous when it was in reality just a rigged demonstration designed to simulate what he claimed his technology could already achieve. Having raised $7 million based on such demonstrations, mostly from gullible investors, he went to jail for his "over-hyping" of his product.

When it comes to issues such as lying, there are moral issues and there are legal ones. If you are an entrepreneur who wants to avoid serious problems, the rule should always be: never lie in a way that amounts to fraud or misrepresentation (legally speaking), no matter what the supposed benefit. It is not worth it.

Concerning moral issues, the issue for me is one of integrity. Just as we all can stretch something when it helps us, and just as we all do so to some degree, so we can stretch it to the point where it amounts to a pure fabrication. Mild stretching might be considered a gray area. Fabrication is a character issue that can reflect badly on the entrepreneur. Of course, this depends on context as well. If it is clear you are speculating (such as about growth rates), that is one thing. If you are knowingly misrepresenting facts, the natural thought that occurs to people you are dealing with is, "If he will do that once, how can I trust him not to do it again." You might think it is innocent in your mind, but crooks make a living off such misrepresentations. And there is no percentage in aligning yourself with that which is unseemly. I have repeatedly seen the consequences of such activity in courts of law, and they are not pretty in cases when things do blow up.

Another test is: Would the victim be annoyed if they found you had lied? I doubt a VC would get annoyed at inflated sales forecasts (they know it's part of the game), but they would be annoyed if you lied about the feasibility of your project.

I think the best VCs appreciate an entrepreneur who is able to squeeze all possible value from the available facts without resorting to deception.

The sharpest people can back up everything they say. Avoid making ridiculous claims and you appear smarter.

Lying is often an indicator of laziness and a lack of the right kind of creativity.

who wants to go through always having to look up when the maitre de calls out "scumbag. party of two. scumbag."

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