SHOULD ENTREPRENEURS ADMIT THEIR FLAWS TO INVESTORS?

Ever walked into a meeting and wondered, Should I be 100% real about my weaknesses—or just highlight my strengths? Could admitting you're a bit disorganized or a control freak actually work in your favor?

We've all heard the classics: Play to your strengths. Accentuate the positive. But in today’s world, authenticity is king—even in the workplace. People are encouraged to own their weaknesses, but when pitching to investors, should entrepreneurs really lay their flaws on the table?

Research in entrepreneurial finance says: Tread carefully. Investors are quick to rule out opportunities at the mere mention of a flaw. However, a deeper dive into psychology and finance reveals a more nuanced truth.

The study distinguishes between two types of flaws:

• Agency-excess flaws (e.g., arrogance, being a control freak) signal too much dominance and don’t build closeness—even if an investor shares the same flaw.
  

• Agency-deficit flaws (e.g., insecurity, disorganization) can actually foster psychological closeness, but only when the investor sees the same flaw in themselves.
  

The takeaway? Investors don’t automatically favor those who resemble them. While owning your imperfections might seem like a bold move, strategic self-awareness is key. If you’re pitching, understand your audience and choose your disclosures wisely—because not all flaws are created equal.

Read the study here: Pitch imperfect: How investors respond to entrepreneur disclosure of personal flaws