How can you manage unrealistic expectations from entrepreneurs?

If there is one single thing I have learnt in 30 years of partnering with entrepreneurs - and being happily married to one ! - is that their optimism shouldn’t be tamed. Their ability to create against all odds an often innovative business comes from this exceptional drive they find in sticking to their vision and being certain they will succeed. It is their experience and central to their motivation to prove that all the nay-sayers were wrong. Therefore it is more effective to embrace it but force them to discuss the « how » to get there rather than the « can » we get there. And agree objective and quantitative measurements. Over time, they will always end up adjusting to reality as long as you force them to observe it, here and now.

I think it is very difficult to tell someone something cannot be achieved especially if the other party truly believes is possible. So it is important not to reject their idea. We do not want to dampen their enthusiasm, just their expectations. Consequently, we should work together to set:- 1) Develop a business plan that outlines all their goals, with timeline. 2) Set goals by setting milestones we need to achieve in order to achieve their targets 3) Meet frequently in order to review these goals and reset budgets/targets that are looking unlikely 4) Plan funding that is required to achieve these goals meticulously and stick to the budget! 6) Praise them for hitting goals!

One thing I've found useful as a systems thinker in entrepreneurship is embracing three key principles: First, commit to continuous learning to stay relevant in a rapidly evolving world. Embrace the vastness of unknown knowledge, understanding there is no limit to what we don't know. Second, regularly question your mental models; past successes don't guarantee future results. It's crucial to investigate the truths you hold and be open to new perspectives. Third, value diverse perspectives from customers, colleagues, and the community. Recognising that your view is shaped by your position, seeking varied insights leads to more informed decision-making. Adopt adaptability, inclusivity, and thoroughness in your business mindset.

Happiness = Expectations - Reality. As time goes by, they will understand that they´d rather underpromise and overdeliver. This increases the probability that they get funded and that their investors will end up happier than otherwise.

As an entrepreneur, we must burn the flame of optimism so as drive team spirit and investor support. However, the entrepreneur must be willing to listen… to differing opinions within the team, as well as among shareholders and advisors. Optimism should be matched by a constant building of the pipeline, as the early days of the startup journey will be fraught with skepticism and negative responses. Hence, what may seem like a pipeline of attractive projects, may end up being smaller than forecasted. Have a few contingencies, and build alternative scenarios should initial optimism not pan out.

In the dynamic world of startups, entrepreneurs often dream big. As venture capitalists, it's our role to nurture these dreams while ensuring a grounded approach. 🌟 Key Insights: Open Dialogue: Foster honest communication. Let's encourage entrepreneurs to share their vision while we provide realistic market insights. Education is Key: Offer resources and mentorship on business planning and market realities. Set Achievable Milestones: Guide them to set realistic, incremental goals. Remember, a balance of optimism and realism drives sustainable growth!

If your goal is to manage expectations, talk about them. At the start of your relationship, find out what the entrepreneur needs and what they expect. Be clear about which elements you think are challenging (and perhaps unrealistic) and see if there are underlying requirements or expectations that can be satisfied another way. Make sure both parties have agreed, mutual goals and a good grasp of what each will do to progress, together.

Encourage entrepreneurs to express their expectations and goals clearly. Ensure open and transparent communication channels from the beginning.

To manage unrealistic expectations from entrepreneurs, clear and frequent communication is crucial. By openly discussing investment criteria, due diligence processes, and feedback, and actively listening to their concerns, you can align goals and establish realistic expectations, avoiding surprises and fostering mutual respect.

Communicating often and clearly is critical to entrepreneurs as they are often looking at the horizon towards the finished goal without being worried about the problems and challenges that lay ahead on the journey to get there. Always ensure they are kept abreast of these with clear and adequate communication

Some entrepreneurs have their egos in check and are open to be mentored. Those are most likely to succeed. Others can't admit there's something they missed and try to ligitate rather than mitigate the risks you flag, even if they bide their time and pretend to listen to feedback. If the entrepreneur has an big ego, be prepared to increase your investment - when they learn through experience what is and isn't realistic. If the entrepreneur says, "I'm so glad we found each other. You're the only one who understands and believes in me" - be especially cautious. A good psychological assessment will tell you whether you'll be welcomed as a trusted advisor who sharpens their thinking, or whether they just want a sycophant as a sparring partner.

Entrepreneurs often overlook that investors, particularly active and experienced ones, possess a broader insight into industry sectors and alternative options. These investors are informed about the competitive landscape, activities of fellow investors, and thus view the presented company as one of a select few investment opportunities. Only when a startup founder recognizes the investor's lateral and systemic vision can they effectively position their venture as genuinely distinct.

A sophisticated valuation model can play a significant role in managing unrealistic expectations from entrepreneurs by providing a more objective and data-driven basis for discussions. However, it's essential to use it as part of a broader communication and management strategy. The model should complement open dialogue, transparency, and a collaborative approach to ensure that expectations are realistic and aligned with the business's actual performance and potential.

Below are some suggestions: 1. Clear Communication: Establish open and honest communication from the beginning. Clearly outline what is feasible and achievable within the given constraints. Explain the potential challenges and limitations to manage their expectations effectively. 2. Set Realistic Goals: Work together to set realistic and measurable goals. Break down the objectives into smaller, achievable milestones, emphasizing what can be realistically accomplished within a given timeframe. 3. Educate and Provide Insights: Help entrepreneurs understand industry norms, benchmarks, and standards. Providing data-driven insights and examples can often illustrate why certain expectations might be unrealistic and offer alternatives.

Help entrepreneurs understand the realities and challenges of their industry or project. Also, Provide examples and case studies that showcase both successes and failures.

This is where at the beginning most of the entrepreneurs survive. Sometimes this may cause to shut down the initiative. So what you do ? First of all please mind that, negotiation is not only money, it would be time, it would be give some extra feature, it would be offer support time more etc. If you are confident about your quality, focus on it while doing negotiation. You need to know on what point is your is your last value, and you will politely say, NO.

Often there is some advisor in the background who got the assignment by selling the entrepreneur some dream valuation. Best approach is to walk away quickly and not waste time. Then they may come back to you a few months down the road once reality has set in. So play a long game and don't get sucked into the free education business.

Managing unrealistic expectations in entrepreneurship involves negotiating and compromising on key aspects like valuation, equity, and exit strategy, while maintaining a respectful balance of interests. It's crucial to handle disagreements diplomatically and be ready to walk away if the expectations are overly unrealistic or the partnership doesn't align well.

At times entrepreneurs don't know what they don't know until someone points them in the right direction. I've always found very honest feedback at early stage ideas to be helpful to those working on the idea who sometimes cannot see beyond it. When they cannot see what you're seeing, it's helpful to connect them with someone you worked with in the past or someone you know who can show them or explain how that problem or issue was solved better than you. Hearing feedback and examples of others' failures and successes can help steer them sometimes in the right direction. Offer connections when you can.

Providing entrepreneurs with honest and constructive feedback is essential in managing unrealistic expectations. Timely support on their progress, challenges, and opportunities, coupled with acknowledging their efforts and celebrating achievements, fosters skill development, problem-solving, and goal achievement. This approach also aids in coping with failure, uncertainty, and maintaining motivation.

Remember, frustration comes from unrealistic hopes, not you. Offer empathy, not excuses. Reframe milestones optimistically to show how far they've come, not far left to go. Progress together supports all.

Additionally, adopting a multidisciplinary perspective is key. Consider the entrepreneur's vision through various lenses - economic, technological, societal - to evaluate its feasibility. It's similar to a behavioral scientist analyzing patterns: you're not just looking at the idea, but also at the market dynamics, consumer behavior, and potential hurdles. Encourage them to do the same. This helps in grounding their expectations, turning their focus towards incremental milestones rather than just the end goal. Remember, it's about guiding them to sculpt their passion into a viable, market-ready product, while maintaining their original vision.

Entrepreneurs have a tendency to will their success no matter what the cost. This is a trait that can be both positive and negative. Entrepreneurs need to take the emotion out of hard decisions, which is very challenging. The successful ones are able to separate and make educated decisions. Look at your risk and financial models, use analytics and stay in your swim lane. Use stop-loss methodology to cut your losses on products or services that are not generating profitability. Many startups fail due to throwing good money after bad money due to ego or emotional decisions. Stay the course and navigate the rough waters to achieve your vision.

In addition to all of the above, many times it is good to direct the entrepreneur to other role models, that is, succesful entrepreneurs or failed entrepreneurs who have gone that path before. This gives an additional edge to your opinion because you eliminate the divide between the entrepreneur perspective and that of an investor. In their eyes, it will be more credible if it comes from a fellow entrepreneur. Eventhough, we founders of VC companies are indeed entrepreneurs ourselves (we started from scratch) we are never considered as such, so search for outside thought leaders and entrepreneur role models.

Big visions become actionable when articulated in terms of real people engaging in concrete actions, with motivations we can empathise with. Expectations can be made realistic by considering the practicality of the actions by us and others - who? what? when? where? how exactly?