Never Lie — Especially When Raising Money

This should not need to be said. But it does, because the consequences are severe enough to warrant being explicit.

Why this matters more during fundraising

When you raise money from investors, you are selling securities. That means you are operating under securities law. Misrepresenting facts to investors — whether by stating something false or by knowingly omitting material information — is securities fraud.

This is not a civil matter or a reputational risk. It is a federal crime.

What counts as lying

The obvious case is stating something you know to be false: fabricating revenue numbers, inflating user counts, inventing customer relationships.

The less obvious case — and the one founders sometimes rationalise — is selective omission: technically saying nothing false while withholding information that would change an investor's decision. This is still lying. Courts and regulators treat it as such.

Manufactured urgency ("we have a term sheet" when you don't) falls into the same category.

The practical rule

Be 100% truthful at all times during the fundraising process. If a number is uncertain, say so. If a metric looks bad, address it directly — investors respect honesty about challenges far more than they respect spin.

A founder caught lying loses the deal, often the relationship, and sometimes far more. A founder who owns their weaknesses clearly and explains how they're working on them is far more credible than one who only ever has good news.

Never, ever, ever lie.