Decoding Press Releases: An Industry Insider’s View (Part 1)
Has that company actually raised a gazillion dollars to expand to a billion customers in 2 years?
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No denying they could literally mean what they are saying. But there is always the possibility that companies do make positive or over ambitious statements even when they don’t mean it.
What’s going on here? We spoke to a respected industry insider to find out.
“Of course there is the chance that these startups do mean what they say, it could be 100 percent true. No exaggeration, no masala.
But more often than not it will always be a statement that is stretching the truth. By how much the truth is stretched will depend on the founders, the PR consultants phrasing the press releases, and of course on the journalist’s interpretation of the news.
But you must remember: whether it’s true or whether it’s incredibly forward projecting, when a company puts out news of their own volition they do so to create buzz, it’s a strategic exercise in building public relations aimed at consumers, potential investors, clients and even the government.”
What does it mean when a press release says, “X startup plans to invest many hundreds of crores”
Industry Insider: "There’s the possibility they mean it word for word. In addition it’s to let people know that they have so many hundreds of crores to invest in a certain area, they are also letting people in on what kind of business model they are trying to build and what strategies they plan to follow for the next couple of years.
More often than not these plans for investment and areas to operate in change over time at which point you will hear more news on how the company has pivoted.
Added to that not every company will have so much money in ready working capital.
A large ecommerce company did, that’s how they were able to expand in India so quickly and put in more money in addition to the billions of dollars they had already announced when they needed to expand further.
On the other hand when a large coworking space player announced expansion in India, but didn’t have the capital ready, it was more about announcing the news and hoping the capital will come through."
What does it mean when a press release says, “We are not looking for investors, we are perfectly comfortable with what we have.”
Industry Insider: "Almost always not true. Everyone is looking for more investment. I would say about 65 percent of the startup founders who say this in the media are definitely playing it cool and trying not to let on that they are on a keen search for capital.
5 to 7 percent may genuinely mean it. For example I know one founder who was running a hospitality and travel tech company with no external investors for 10 years before going out and getting funded."
What does it mean when a press release says, "We currently have x amount of users/products. We want to have 400% of users/products by 2025.”
Industry Insider: "90 to 95 percent of these statements are not entirely true. It’s a PR strategy to attract more investors. It’s a classic example of juggling numbers. These figures are calculated and crafted in such a way to give inflated numbers that look phenomenal.
It will always attract the attention of an investor. But investors are never fooled. While performing their due diligence and breaking down the calculations for these figures, the investor most likely negotiate for a lower valuation of the company and/or a higher stake for a lesser amount of money than founders would have originally asked for."
More press release decoding? go here.
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