How transparent should founders of a startup be, is at the heart of all startups and it can quickly lead you to the startup valley of death; a place where startups go and die.
Do founders or does a CEO need to be transparent with his staff or investors? Does this sound like its uncontroversial? Let’s try to discuss these concerns on how a startup CEO should be open to his staff or the investment team. Keep in mind that it’s a hard subject to discuss and write about as there are personal views from different types of people and truthfully because it’s nearly an accepted standard that transparency is good while it’s not.
For startups CEO or co-founder of any business, total openness with your core is a key but with a filter approach. If that makes sense. When you are looking to find investors, the following doesn’t apply.
The Mind of the CEO
CEOs take risks to start their own company. They quit their daily job and try to take the leap off a cliff or the startup valley of death. This is so scary that even most individuals admit to themselves. Scary why? Because you know all of a sudden you are going to be judged by people around you! Your parents ask questions as to why you quit your job to run a startup. Your peers are envious of the decision that they have always wanted to start the same, but they realized its complicated to give up their predictable future and the golden paycheck. Convincing someone to quit their illustrious careers and jobs and join you is not an easy as it sounds.
CEO Wanting to Show Traction
So how can CEO show traction on the products that he just launched? A CEO has to suspend the disbelief or have a blind belief continually he will find a strategy to make it work out. He can’t afford to be too cautious or else he won’t achieve anything.
A cautious individual wouldn’t try prying people out of Twitter before their IPOs to join his cause. It’s hard for him to address a large audience on how he can change the world when he’s secretly worried about his or her team working out the bugs in their product so that they launch it.
A startup CEO’s work is to absorb stress to free his team from it. His job is to show up every day with enthusiasm regardless of his current situation. They have to be optimists all the time because no rational individual could can make it. Strongest and best founders overcome stresses, sacrifices, self-doubt, and risks. They press on that optimism each day in anyways.
The mind and thinking of a founder are differently wired than most people. They can embrace ambiguity and accepts risks. They do not fear shame or personal failure like most people do.
What does this have to do with transparency? Well its important to understand the stress a CEO or a founder goes through. When you’re being transparent or avoiding it, there are usually good reasons for it.
How Transparent Should a CEO be?
Of course, it’s essential for a CEO to be open. However, transparency is what many people think they want but not what they want. Here are 2 examples.
During your startup journey, if you succeed in the fundraising, early product launches, and PR, the chance is that you will get inbound interest from potential acquirers. It’s not easy to parse out the true level of interest from individuals who just sniff around or gather facts. Sometimes you have to make the call and be polite. This can be an actual financial bonanza. However, in the back of the mind, you are a realist. You are aware that this is probably not going to lead anywhere and you do not quit pursuing your dream of being a successful entrepreneur or pursuing the startup valley of death.
You take a meeting even though you are not actually pursuing it. But employees can make the delineation in their brains. All they can see is the victory and dollar signs. They don’t take the time to understand multiple return expectations or VC liquidation preferences. The staff was not with you when you conducted the VC pitch.
In the real sense, you can’t tell your employees when you have M&A activities. It will be a big distraction as you go through the entire process. What’s more, things will get worse when you accept to be acquired. You’ll have to deal with endless minutiae of details regarding tax problems, disclosures, and indemnities.
Runway of Cash
Being a CEO, an employee can just walk up to you and say that they would like to purchase a house. Then they could ask you to draft a letter that can assist them to get a loan.
Then you will be thinking, purchasing a house? Are you serious? We have just been operating for five months! What’s more, the angel investors are not lining up offers to your company. Of course, the revenue may be increasing, but it’s not adequate for raising an internal round. Honestly, this is not the time for anyone to be purchasing a house, not even the CEO.
Of course, you cannot tell your staff member all that. Those are the thoughts that are running through your mind. But you could tell them that the company is new and its riskier compared to if he/she was working at a company that is already established. You could also inform them that your angel investors are not supportive at the moment and you anticipate that the future will be brighter. Mention that it would be unwise to purchase a home under such circumstances, but if they really need to buy a new home, you will happily draft a letter. This is transparency, even though it’s not total transparency or the ruthless transparency.
Startup Valley of Death Summary
There are many transparency problems around redundancies or firing and some issues surround performance of staff members. There are board debates, merger discussions revenue misses, product miscues and endless delicate topics.
You should believe in being direct and open if you want to avoid the startup valley of death. Give people a sense of the company performance as well as the challenges the company faces. The company metrics can be publicized and used as a motivation to create a unified sense of direction or purpose. Being a startup CEO, you will need to develop your unique comfort level regarding what to share and with whom to share it with. It is your job to shield your staff from the dangers they might face.
From my experience and with examples above there has to be a certain level of transparence from the leaders of a startup but it cannot be 100% transparent. Being 100% transparent is going to cause chaos or panic as not all staff members or investors are strong minded or think like a CEO and eventually direct you to the startup valley of death.
Does a CEO or a founder want to be 100% transparent, yeah! Can he/she be 100% transparent, I don’t think so.
You be the judge and share your experience or your thoughts below.