Transparency matters for startups
By being open and honest across all activities, startups can create a strong culture within their business, passionate brand advocacy through loyal customers, and secure the means of growth in engaged investors.
Transparency is crucial to the success of startups, with an increasing emphasis being placed on openness and honesty by various stakeholders, both internally and externally. So, what are the main areas for consideration when creating a business that will stand up to scrutiny?
Treat your team as equals
The starting point for creating transparency should be within your company. As a founder, you don’t have to overshare negative information or air issues that could damage team morale but you do have to keep your employees in the loop, allowing them to understand your big decisions, the challenges and the wins, and your long term goals for your business. Many professionals will have worked in businesses where critical information is privileged and available only to those at the top of the tree; the hierarchical nature of traditional company structures does not encourage transparency. Startups, by definition, have small, close knit teams so achieving a flat organizational structure and internal comms strategy is much easier and more natural than it might be in larger organizations. As your business grows, resist the temptation to keep certain information privileged for you and your SLT - communication should flow down through your organization or else you may find division and disenfranchisement creeping into your team.
Own your mistakes
Building a culture of honesty and openness breeds innovative organizations. The startup ecosystem is defined by its bravery, agility and ability to learn from mistakes to build better products and services. To be human is to err and founders should be willing to own up to their mistakes, discuss what went wrong and share solutions with their colleagues. This creates a culture where it’s okay to take risks, make mistakes, reflect and improve or solve the issue in question, driving innovation and creativity. Jonathan Wassersum, founder of SquareFoot, holds biweekly, all-hands meetings where anyone is free to ask him questions, and group discussions about the state of the business are encouraged. He explains: “If you’re upfront with [staff] about what you’re working on and where you’re giving attention, they will be more likely to ask to get involved and chip in with solutions.”
Feedback is invaluable
If you want your team to feel valued, a fundamental focus should be welcoming regular feedback and collaboration from your colleagues. Communication should flow both ways and by encouraging honest opinions on the company and your leadership, your team will feel valued, heard and be more likely to come up with valuable suggestions, solutions and ideas. You’re also much more likely to retain talent if you involve your team in decision making, so it’s a win-win strategy.
Investor trust is crucial
The way you communicate with your investors is just as important as how you communicate within your business. The operational side of being an early-stage founder can be all-consuming and it’s easy to get mired in the day-to-day. But looking at the bigger picture, you need to recognise that those outside the company need to be in the know too. Investor relationships need to be nurtured; after all, without investment, you won’t have a viable business. Investors have a stake in your startup and will want to be kept abreast of the company’s performance, progress and challenges. Lay out the plans you have, share your aims and objectives, and outline how you are going to reach them. Be honest about the stumbling blocks you see ahead and outline what support or guidance you could benefit from. Many investors are willing to offer advice and many have been founders themselves, so in setting your situation out to them, you could benefit from support from people who have relevant experience - and skin in the game.
Initially, you should check in regularly with new investors whether that be via email, phone or in-person. You want to build rapport and trust and many investors will be buying into you as a founder as much as your MVP, your pitch deck or your financials, so answer any questions they may have honestly and you could build a long and valuable relationship with them.
With a global downturn, numerous corporate scandals and an ever-widening wealth gap, consumers have good reason to distrust corporations. This is where startups have the upperhand; starting from scratch and sitting outside the arena of ‘big business’ offers the chance to build a transparent brand and win loyal customers. One of the earliest notable examples of this is Patagonia, who established an almost entirely transparent supply chain and to this day, have a strong emphasis on finding solutions to the environmental crisis. They have grown from a small business to one of the biggest - and most sustainable - outdoor clothing brands in the world. Not only should startups want to create businesses that have transparent ethical practices, it also makes sense from a marketing and brand standpoint. According to a research by Nielsen IQ, 94 percent of consumers would be loyal to a brand that offers complete transparency, with almost 75 percent saying they would be willing to pay more for a product from a company offering total transparency.
Don't let your past come back to haunt you
In an age where social media is king, reputational damage can be wrecked by viral tweets and negative Facebook posts. Companies are increasingly under scrutiny, and everything from ESG initiatives and procurement policies to employee treatment and organisational diversity will be under the spotlight. Build a healthy and transparent culture and be accountable to customers by being open about your practices, your methods and your aims. You are marketing yourself to a generation of consumers who will judge you and your business on ethical, social and environmental criteria, so ensure you strive to deliver in those areas.
If you’re looking to build a startup that can secure investment, create loyal customers and satisfy stakeholder demands, a board advisor could be an invaluable resource. Connectd has a vast network of experienced portfolio professionals who specialize in supporting startups’ growth. You can learn more about the platform and how to connect with advisors here.