Why don't pitchers get it ?

Today's question comes from one of my university students, who asks: After five seasons, why do so many pitchers still not "get it"? i.e. why do people continue to think their idea rocks, when it sucks ? I've held back the student's name (to protect the innocent) but the question is a good one. Why do so many entrepreneurs overestimate the opportunity at hand?

In five years with Dragons' Den, I've been blessed to hear probably more than 5,000 pitches from Canadian entrepreneurs. In all that time, not one contestant said "our idea is only so/so" nor did I ever hear a pitcher say, "we know our opportunity is small and un-lucrative".

Instead the halls of CBC routinely ring out with "WE ARE THE GREATEST DEAL THE DRAGONS WILL EVER SEE". So why do so many founders overestimate their opportunity? Please note that I didn't say, "overvalue their company" nor "overprice their deal". That is a separate issue. For this blog post, I'm simply interested in understanding why so many entrepreneurs get it wrong. Why so many think what they have is the next Google?

In the spirit of honesty, let me honest first with you. I have no perfect answer. Nor do I think there is only one answer. This systemic issue is most likely caused by a number of factors. So instead of giving you just one answer, I've asked a few fellow investors, and even some of the Dragons, why they think this happens. Here are some of the possible reasons we came up with?

• Entrepreneurs are crazy: As Dragon Kevin always says: "You got to be a little crazy to succeed. But crazy like fox, not a chicken". I get that. I understand that being an entrepreneur is one of the hardest jobs in the world. You have to overcome huge hurdles and combat unlimited uncertainty. You have to be both brave and slightly crazy to think that your idea could change the world. Otherwise, why keep going at 4 am?
• You don't have to be successful to be an entrepreneur: There is a success bias theory in entrepreneurship literature that suggests we overestimate entrepreneurial success, because we only witness the winners (e.g. Google, Facebook, GE) and don't acknowledge the thousands of bankrupt companies that we have never heard of.
• Drinking your own Kool-Aid: In the early days: it is just you and your idea. At this stage all you have is passion and a dream. One must really be passionate to pass on all the other opportunities in order to pursue the dream. And to help us stay strong and not have regret, we convince ourselves that we wouldn't be pursuing this opportunity if it wasn't great. Or more to the point, since we are pursuing this opportunity, it must be great. Think about it this way, have you ever met a mother who thinks her baby isn't cute?
• Blind Spots: Because sometimes all one has is their passion, one sometimes has to focus myopically on that dream (e.g. they don't see the forest for the trees). In law, we call this "willful blindness"; in business we call this a cognitive blind spot. Overcoming these blinds spots is huge part of the reason why early sales are so important. After all, every pitcher tells me their product will sell millions, but few come with millions in sales. If you can't get sales then you need to take your idea out of the basement and see if what others say. You can't live in an echo chamber, where the only feedback you get is from co founders, family or friends.

What do you think? Post your suggestions below.