Oct 14, 2022 | Financial Acceleration

Does “underpromise and overdeliver” work for investors?

Q. Dear Zenagos, I’ve always been taught to “underpromise and overdeliver.” Does that work for pitching to investors?

If you underpromise to an investor, you risk never getting the investment. You obviously need to tell the truth. (Check the example of Theranos for an extreme example of what can happen when an entrepreneur misleads investors.) However, there’s little benefit to intentionally sandbagging with investors.

Optimism is Expected
Entrepreneurship is by its very nature an exercise in optimism. In starting a new venture, everyone is taking a big chance, including the investor. So, pitches are generally optimistic. Investors expect the projected financials to be slanted toward the “best case” scenario, so they will generally deflate the numbers, cutting them by a third, or even in half. If you are too conservative, investors may assume that you don’t have confidence in the idea.

Investors Have to Pitch the Idea to their Investors
Sometimes when you make a pitch to an investor, that person is the sole decision-maker. However, most of the time, that investor answers to someone else. Venture capital and private equity investors answer to their limited partners (their investors). Investors in venture capital funds are typically very large institutions such as pension funds, financial firms, insurance companies, and university endowments (Zider, 1998), so the venture capitalists must be able to justify their investment choices to sophisticated stakeholders. At the very least, investors will want to be able to talk about their investments to other investors. Every investment has the potential to affect the investor’s reputation. So, the investor who chooses to back you will need to pitch your idea to several other parties. If you can’t make your pitch exciting, then the investors certainly won’t want to risk their reputations.

Enthusiasm Sells
Investors will often refer to an entrepreneur who gives a highly energetic and salesy pitch as “a classic entrepreneur.” This phrase may be slightly pejorative (as it implies someone who is a bit unrealistic and overdramatic), but it is always said with admiration. There is a prevailing belief among investors that the most promising entrepreneurs are the people who are the most determined and enthusiastic. So, while you might think that an investor would appreciate a very serious presentation, enthusiasm sells (Yang et al., 2021).

Sandbagging Can Decrease Your Value
The price of an investment (the percentage of the company that is taken in exchange for the money that investors put in) is determined based on many factors, including the agreed-upon financial plan. So, if you knowingly underestimate the numbers in your financial projections, then investors may receive a higher percentage of your company. In this way, underpromising can directly cost you money.

Walk the Tightrope
Before you pitch to an investor, make sure that you have a mentor, an experienced businessperson, in your corner. You can get a free mentor at SCORE, or hire your own executive coach. This person can help you walk the tightrope, determining where to be realistic, where to be optimistic, and where to be cautious. You need to be ethical – providing your potential investors with accurate information and disclosing all material information – but you also need to sell yourself and your idea with confidence.

You might also enjoy our blog article about types of investors.


Yang, H., Shi, H, Wu, Y.J., Zhang, L., & Xie, S. (2021). Entrepreneurial passion and venture capitalists’ willingness to invest: The role of relational capital. Frontiers in Psychology, 12. doi:10.3389/fpsyg.2021.728589

Zider, B. (1998). How venture capital works. Harvard Business Review, 76 (6), 131-139.


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