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Confirm your hypothesis before presenting it as fact

Make sure investors understand fact versus your hypothesis!
Make sure investors understand fact versus your hypothesis!
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Entrepreneurs are excited by their technology and they should be. They create reasons to explain why everyone should be excited because it helps sell the ideas when raising capital and it helps convince consumers to buy products. The generation of a story about the company and products is a great way to relay information to investors and retain their attention. The same type of storytelling occurs when explaining problems or failures that occur with the technology or the company. However, there is a fine line between presenting ones rationale as to how an issue occurred and a factual reason backed up with data. Facts can stand on their own and can be backed up by data or solid information that can withstand a diligence review. A hypothesis for the cause of a problem may sound good but is not yet confirmed by data and it may or may not prove to be a fact in the end.

It is common in research to develop a hypothesis to explain a phenomenon. The next step is to develop a solid study to evaluate whether the phenomenon may be explained by solid data. Proving the hypothesis occurs via valid studies. Once confirmed, the facts allow one to conclude the phenomenon is a valid explanation. Entrepreneurs often run into problems when they draw conclusions about an issue without supporting data to confirm the conclusions. They may or may not be correct in their assumptions, but a presentation of any hypothesis to investors may be misinterpreted by them as fact. This may lead to unrealistic expectations and future problems if you are wrong about the explanation.

All investors are not likely to be knowledgeable about the technology and issues a company faces. They will have different backgrounds and be able to follow a story, but their ability to discriminate between hypothesis and facts of any given situation will vary. Investors tend to hear the story and process it according to their own backgrounds and educational experiences. This translates in some hearing a story and believing it without questions while others may understand the caveats and need for further testing and validation.

It is critical for entrepreneurs to understand situations and determine the causes as it relates to their investment. Sometimes there is more than one reason a problem may occur. The contribution of each factor contributing to a problem has a bearing in determining how to repair the problem or prevent it in the future. It is very easy to assume a cause and proceed without evaluating whether the assumption is accurate. Failure to confirm validity may allow for future issues or failures. When this occurs, presenting new stories to investors will be complicated because they assumed you knew what you were talking about when presenting the last unconfirmed story.

To avoid confusion, it is a great idea to look at any problem and try to understand the reasons a problem occurred. Sort the potential causes into areas where some type of testing can be used to confirm whether the potential cause is contributing or not. Once you eliminate those reasons not supported by data and confirm those that are supported, use the data to back up the conclusions reached. It is much easier to show the data leading to the conclusion and create a solid story than have to continue explaining problems over and over again because you missed the real reasons in the first place!

Taffy Williams can be found on LinkedIn, Twitter @twilli2861, ColonialTDC , photo website, Google+, Facebook, and Startup Group. He has written more than 300 articles for: Startup Blog and Examiner Charlotte, NC- small business. More on the agile concepts may be found in soon to be released book: Think Agile

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