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Keep It Real

Got a good line to feed investors? Don't bother-they've heard it all before.

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This story appears in the May 2001 issue of Entrepreneur. Subscribe »

Tulip mania swept Holland in the 1620s. And in the flower frenzy, speculators bid up values to unheard-of heights. As a matter of fact, the price of one black tulip bulb went as high as the cost of a typical five-story row home along the banks of Amsterdam's canals. How could such a thing happen?

The answer to this question may be found in the more recent Internet mania, which drove company prices to stratospheric levels as well. When looking at the values that are placed on businesses under the cold and objective light of hindsight, their absurdity depended on two factors: a lack of truthfulness on the part of entrepreneurs about the prospects for their businesses and a willing suspension of skepticism on the part of venture investors.

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