Brian, you are missing something. The “underdog” that everyone roots for is not Glenn or Redfin, it’s the buyers who are often left with the short end of the stick in the real estate arena. Everyone is “rooting” for the underdog, the buyer, getting a little more control of information and commission negotiations. Redfin spearheads that movement.

His transparency was attractive. He has an innate ability to get you to “root for the underdog”.

I was shocked that he asked for Greg Swann’s contribution in redefining his pricing model. However, both players are true mavericks with an eye for change. Sometimes, strange bedfellows makes beautiful offspring.

Same thing with these VC’s. “We beat expectations” sounds great after the original .com bubble burst where money was continuously poured into companies that didn’t even come close to meeting expectations.

As ben points out though, this is pretty much MBA 101 (or even BA101). I learned how to write a business plan and it was always beat into me to set my revenue goals low and my expense budget high. That way I wouldn’t run myself out of business.

Also, thanks for the plug, I wasn’t intending on it being “cute”, but I sure don’t mind.

If you think about this tactic in the simplest terms it makes sense. If I put money in a savings account that says they’ll give me 5% back and I don’t get 5% back I’ll be pissed. But, if they give me 10% back I’ll be happy. If they give me 10% back 3 quarters in a row I’ll put more money in. Wouldn’t you? If they drop back to 5% – c’est la vie. Do I care that they obviously low balled what they’d give me back? No. The market then corrects for this… if you have 3 banks they need to start upping that % return without failing too often. With competition, abusing this concept is hard to do.

But you have to scratch your head when the basis for more money seems to so heavily rely on the fact that they outperformed the worst expectations by a smidge…no?

It’s not Glenn or Guy that I question, it’s the logic of those pouring the money in. Could it really be as simple as being able to set the goals so low that you almost can’t help but outperform them? Are investors really that easily fooled?

One person thought it out… the other person is just guessing.

There’s a place and a time for hope, faith, enthusiasm, emotional decisions… but if it’s part of your business plan you’re screwed. You might get lucky, you might not, what kind of business plan is that?

I wonder how much they paid Guy for MBA 101 advice?

By presenting a pessimistic view and not overreacting to how great you think your new company is then you are giving your potential investor a ‘realistic’ view of their returns. I think it would be irresponsible to present anything other than the worst case scenario when talking to investors.

Ardell doesn’t seem to be thinking from the investors point of view. If you are an investor you are ‘agreeing’ to give money to someone based on the projected return. If someone gives you their pessimistic view and you still find it an acceptable return and decide to invest then of course you would be happy if they beat your acceptable return.