Fred had one of his best Cliché of the Week posts a couple weeks ago, in which he discussed what happens when an investor says of his portfolio company that "that vacation didn't match the brochure."
You go for something; a hire, a partnership, or a new investment, based on a certain set of facts and promises. And then it doesn't work out. You feel like you were sold a bill of goods. But when the vacation doesn't match the brochure, you only have yourself to blame. It means you didn't do your homework.
The same approach has to be used if you are in business. If you are a VC, you don't need to read the business plan (the brochure) cover to cover, but you do need to do your diligence. If you an entrepreneur making a key hire, you don't need to spend a ton of time on the resume and prepared references. Even the interviews will only tell you so much. You need to pick up the phone and talk to people who've worked with and for the person in question to truly get a feel for them.
The bottom line is you can't rely on the brochure in whatever form it may take. Because if you do, the vacation will surely not live up to it.
This is an outstanding point, and one that VCs, managers and prospective employees themselves should not lose sight of. But there is another side to the story.
I've frequently seen people - investors, entrepreneurs, and team members - have a particular target in mind (employee, investment, etc) and buy into a deal convinced that they have found what they are looking for, even when all the indications pointed to the contrary. Some examples I've seen (or lived)-
Company A needs a strong engineering manager, but insteady they hire a solid geek whose resume lacks any solid management experience.
Employee B joins a startup in the midst of a major system conversion, taking a sysadmin job with a description that talks about maintaining servers and clearly reads "24 hour pager availability required" and quits a couple months later because he thought he was taking a coding job.
Investor C is looking for an investment with a particular business model, and invests in a company with a completely different plan. The investor's desired business model is never mentioned in the company's powerpoint, and the projections show no revenue or investment which would suggest any interest in that path at all. But the Investor convinces himself that, to paraphrase Fred, the brochure he read describes the vacation he's hoping to take.
In that latter case, I used a different metaphor to explain to a friend what happened:
"Jack (not the investor's real name) walked into the pet store looking to buy a cat. He saw a bunch of cats, but was drawn to this very cute dog, so much so that the line between dog and cat began to blur, and he saw the dog as a cat-like pet - 4 legs, tail, fur.
Jack took the dog home, and began to play with it, and had fun. But then the dog peed on the rug. Jack was patient, and once again showed the dog to the nice litter box he had bought. But the dog peed on the carpet again, and again, and Jack quickly got disillusioned with what he still saw as the new cat he had bought.
Jack tried everything he could think of (non-metaphorical things, like bringing in consultants and changing the team) in hopes of getting the dog to pee in the litter box, but it never happened, and eventually he had no choice but to listen to all the people who were telling him "it's a dog, not a cat, silly."
I was reminded of this story up at Gnomedex, when a friend working on his own new startup asked me for one piece of advice when dealing with outside investors. He seemed to be expecting some negotiating advice, or some particularly onerous clause in the term sheet to watch out for. There are lots of things to know, and many things I've learned after raising money a few times, but ultimately if you are not in sync with your investors about what the business model is when you are first funded, it's unlikely you ever will be.
If your investor can listen to your pitch and paraphrase it back to you in a way that sounds familiar and demonstrates a common vision, then you can intelligently debate strategy and tactics, and do so from the same perspective. If she can't, you're both in for a crappy vacation.