There are only two barriers to entrepreneurship: technology and brand. But even revolutionary technologies mostly only affect 10-20 years, while brands have a lifelong impact on businesses.
Today I saw a true story that shook my soul.
The protagonist is a scammer entrepreneur who relies on PPT to create cars. Despite not achieving anything, he uses lies to deceive others and raises four rounds of funds in a row. In 2020, he went public through a backdoor listing, with a market value of up to 34 billion US dollars (surpassing Ford Motor Company).
This entrepreneur’s name is Milton and he is the founder of the hydrogen powered truck Nikola. Prior to the verdict, he was referred to by the industry as the “second Elon Musk”. The most exciting part of the story happened in 2016. Milton released the first hydrogen fuel cell truck and released a video of the vehicle on the road. The reality is that the car doesn’t even have power, let alone hydrogen fuel.
The truck in the video was towed to a hillside and traveled a distance relying on inertia – but Milton promoted it as a “300kW fuel cell+320kWh battery pack” and “can run nearly 2000 kilometers on a single hydrogen charge”.
However, it was such a “star entrepreneur” who blew up a “hydrogen version Tesla” foam with one lie after another, and brought the company to the market, with personal assets exceeding 8 billion dollars.
However, recently this story has undergone a major reversal: Milton was found guilty of fraud (securities+telecommunications fraud) by the court, with a maximum sentence of 20 years.
This story shocked me a lot. Over the past six years, Pencil Path has been practicing the concept of “authenticity”, hoping that it can become the mainstream value in the entrepreneurial circle – but it has also seen many negative examples.
I use my 6 years of experience to responsibly give all entrepreneurs a piece of advice: never tell a lie that harms others and benefits oneself, especially one that infringes on the interests of the majority. Even a small lie has a lifelong impact on entrepreneurs.
As we all know, today I will talk about two small cases, both of which were personally experienced by Pencil Road.
The first one is the “otaku washing” incident. In 2016, we reported on a company called “Home Laundry” that specializes in “O2O laundry” services. According to the founder’s description, in order to increase orders, he once sent colleagues to cut off the wires of a self-service washing machine at a certain university, “forcing” users to use the “home wash” service.
The negative impact of the situation is significant, as the practice of “using homestead cleaning” has made headlines in major newspapers and television stations, and has been criticized for lacking public morality. The team saw the situation was not good and explained that it was commercial hype, a lie, and that the “cutting of wires” did not actually happen.
But regardless of the truth, the objective impact has already been caused. Half a year after the incident, an investor told me that they were in talks with “Zhai Daixi” about investing at the time, but they terminated it directly after seeing the news.
One year after the incident, the founder participated in a startup camp: when he learned that the “otaku cleaning” team was going to join the camp, the entrepreneur stood up and expressed strong resistance. The matter of entering the camp was ultimately abandoned as a result.
Later on, I never heard any news about this company again. The Internet has a memory. Once personal reputation is damaged, it is difficult to repair it without 5-10 years.
The second case I want to share happened recently. We helped a project with FA, and both the team and business developed well. We were also noticed by a well-known organization and have reached the end of due diligence.
But suddenly one night, we received a hurried phone call from an agency, saying that their legal colleagues had discovered that the team had a “fraud record” at the police station 10 years ago.
My colleague then consulted with me, and I felt very regretful after listening. However, at the same time, I had already anticipated the outcome: we couldn’t get it in this round, and we won’t get it in the next round either. Or in other words, investors will not invest in any company with the founder’s name as its legal representative.
Sure enough, the next morning, the institution gave a clear response: after discussing overnight last night, they made a painful and helpless decision not to vote.
The so-called ‘fraud case record’ is actually a small matter, but as long as traces are left, reputation is damaged. I later consulted with the founders of many institutions, and although the matter was minor, the answers they gave were very clear: NO。
I can responsibly say that in the innovation and entrepreneurship circle, as long as any entrepreneur is stained with a “reputation stain”, it may not be washed away in 10 years.
There have been many major cases in the industry, such as Luckin Coffee’s fraud. When I started my business, Lu Zhengyao (founder of Luckin Coffee) was a prominent figure in the industry. Before starting my own business, I once wrote a report about Shenzhou Car Rental, which was praised by Lu Zhengyao in front of my former boss and greatly inspired me. And once ‘financial fraud’ occurs, that admiration and respect will be completely lost in my heart.
This is a credibility bankruptcy. For this reason, I still don’t want to drink Luckin Coffee.
We are often asked: What are the barriers to your entrepreneurship? I believe many entrepreneurs are too lazy to answer. The level of barriers is closely related to the duration of their impact – for example, if A is done well and can have an impact for six months, and B can have an impact for one year, then B’s barriers are higher than A.
In entrepreneurship, there are only two barriers: one is technology, and the other is brand. But even revolutionary technologies mostly only affect 10-20 years, while brands have a lifelong impact on businesses.
Starting today, set a small goal for the long-term success of the enterprise: be truthful and not lie. Believe me, this may be the most valuable thing you have ever done for a business.
