The Bright Side of Sharing Bad News With Potential Investors With potential investors, honesty is the best policy.

Q: How do I tell all without scaring potential investors?

A: It's a critical balancing act, but remember: Investors want to hear everything. Kevin Choquette, founder of San Diego's Fident Capital, who's been on both sides of this discussion, offers three critical steps:

1. Don't whitewash. Most entrepreneurs want to coddle potential investors, Choquette says, but that's foolish: Everything will come out in due time anyway, so it's better if it happens early. "Be honest about the magnitude of the challenge," he says.