Ask HN: Ethics of selling using HTML prototypes?

[ethicalornot]

I work at a small startup with some angel funding. We have a launched product and are working on new products that will probably be built and launch in 6 months if the founder closes a funding round he says is almost finalized. We don't have the money to start building them until the funding comes in.

In the meantime we built some HTML prototypes (not functional) for the new products and the founder is showing these to potential customers on sales calls. I am involved in bizdev so I am on these sales calls but I feel really uncomfortable that the prototypes are not explicitly presented as "prototypes" to the potential customers. They are basically presented as being real and most of the customers respond like they are real. It's really difficult for me to answer customer questions about what our products can do when I know the products don't even exist yet. I also worry about what will happen if somebody wants to buy the product before we build it, which seems very possible since it it will take at least 6 months to build. Even if I don't have to come up with the excuse/delay I don't like the thought of it.

A few of my friends say that I'm worrying for nothing. This is how startups work they say. But I still feel that if you're showing a product that is only a HTML mockup and you haven't even started building the real thing you should be honest about what they are looking at.

Am I wrong and not cut out for early startups? Or is what our founder doing unethical?

Any opinions and experiences would really help me make a decision about what I should do next (get over it, tell the founder my concerns, resign).

[zaroth]

I think the headline sums up the confusion. Selling (as in taking cash in exchange for the product) a prototype or mockup as-if it were the real thing would be fraud. Demoing a prototype or demoing features which are not fully fleshed out is not.

The entire Lean startup movement and concept of the MVP is to test your product idea in the market, in front of real customers, before investing too much time trying to build something no one wants.

I thinks its OK to focus the discussion on features, benefits, etc if you can get in front of potential customers. It should not be long before they ask about pricing and availability. That's when you simply say you think it will be ready by date X.

Take for example the email assistant AI startup X.ai. They say in their FAQ that "Amy" is human assisted. For all we know Amy is 100% humans booking your appointments and the algorithm is total vapor. It's not unethical to do this, as long as customers are not expecting some guarantee of no human intervention (e.g I sell you an instance of Amy I claim lives on your desktop, but requests are actually sent over the network for humans to do the work)

If you have a black box in your demo where data goes in and magic comes out, and you say "This is actually taking the input and generating the output in realtime right now" you are sticking your neck out and it's likely to get chopped. Building a new customer relationship on a lie like that would be a mistake. But depending on the specifics it's a calculated risk; if the black box is completely do-able but just not yet quite done, then I think hard coding results in a mockup is time-honored, wide spread and perfectly ethical. But when they ask about availability you've A) confirmed market interest, and B) you state not all of the features are ready but you are expecting to ship on Date X.

[ethicalornot]

Thanks for your comment.

A problem I have with what you wrote is it's all well and good to answer the availability question honestly if it comes up but that doesn't (for me) address the issue that I don't feel my founder is being 100% transparent when the customer convos begin. We are demoing something to customers and they aren't being told that it's just a prototype up front.

Is there a reason he can't say it's a prototype? I get somebody might not be interested in a prototype but isn't the customer going to lose interest when we say that it's going to be 6 months before the products are available anyway?

Another reason I feel uneasy is that we can't even start to build what we prototyped without the funding. If that falls through we are screwed so how can our founder honestly give a Date X with any certainty without the money in the bank?

Edit: also having been in sales/bizdev for years I think "selling" is the process of offering something for sale. It's not just the moment where you accept the money and provide the product/service. Maybe this is where the problem is. I just can't seem to get comfortable asking somebody to consider buying a product that doesn't exist without telling them up front that it doesn't exist yet. That's bait and switch to me.

[galfarragem]

Honesty in business:

My experience tells me that in the long-term nothing beats honesty in business. My fathers' small business showed me that. By the other hand, in the short-term things are less clear. I've worked in a startup where "loosen ethics" really speeded up things. Without it probably this startup wouldn't have survived. The main problem is that "loosen ethics" normally mirror the CEO's character and this will not be just a temporary behaviour.

[kwc98]

This sounds like my company. I work at a startup as well and the founder would often times shows items where the HTML was still wet and not really explain that in order to get this to work, many man hours would be required. I think there is a balance between salesmanship and technical mis-representation. We have moved past this as we matured our development process, but I found it to be dishonest. This type of behaviour continues when we report numbers of users, $, etc. Not good.

[ethicalornot]

How do you cope with your discomfort? Have you expressed your concerns? Have you thought about quitting?

[kwc98]

We have bigger issues, but yes. We eventually cut him out of the loop and would not let him show stuff that was not ready. Working on quitting not from issues like these, but they are not too far off. If you are will to stretch the truth, then basically you are not trustworthy, whether when dealing with end-users, investors or employees. Next it will be 'mis-communications'regarding raises, options, titles, etc.