Kim Lisa TaylorSecurities Attorney, Founder, Syndication Attorneys, PLLC · Corporate Securities Attorney, 2x Best-Selling Author, Nationwide Speaker | Private Placement

Promising 20% Returns? The Dangerous Trap of Overpromising to Investors!

19 Nov 2024 · 1 min

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In this brief advisory monologue, the speaker warns founders and fund managers to be meticulous in how they describe projected investment returns. The core recommendation is to adopt an "underpromise, overperform" approach: present a modest expected IRR range (e.g., mid‑to‑high teens) and then aim to exceed it. By doing so, if the actual return reaches 20% or higher, investors view the manager as exceptional. Conversely, overstating expectations and then falling short leads to severe backlash. The speaker emphasizes that precise, conservative language protects credibility and builds trust.

Chapters

So you got to be very careful on how you word these projected returns. So you're always better to underpromise and overperform. So if you say that, you know, that it could be in the mid to high teens and you— they end up getting a 20% IRR, you are God. You are like the best thing since sliced bread. But guess what? You didn't tell them that's what you were going to give them. You just said. You know, it's projected to give somewhere between the mid to high teens. It's better to over— it's better to underpromise and overperform than to overpromise and underperform. That's when you're going to get blasted.