Don’t keep it to yourself: transparency in the startup world

Category: Ecosystem

Every day, a bunch of startups die. According to Shikhar Ghosh, a senior lecturer at the prestigious Harvard Business School, three out of every four venture-backed startups close their doors. Analytics firm CB Insights backs this claim with more data, pointing out that a significant number of startups die 20 months after raising an average of $1.3 million in venture money.

So, if so many startups are dying every single day, why don’t we know about it? Why don’t we get to hear what lead them to close and the lessons its founders and employees learned along the way? The fact of the matter is that more and more entrepreneurs and investors are willing to share their failures in public, to the benefit of the community. Transparency when it comes to startups has become a trend.

Transparency after closing a startup

A common trait of certain up and coming technology hubs is that entrepreneurs are not willing to help each other. Instead of thinking of their company neighbors as friends and allies, they think of them as pure competition, thus the unwillingness to share with them their ideas -they might steal them!-, problems or even successes.

As ecosystems mature, this tends to change. If you talk to people about the reasons behind the success of Silicon Valley, Tel Aviv and other entrepreneurial cities, you’d find out that one of the main reasons for their success is the community that has been built over time. Sharing is loving, as it’s often said.

In the past few months we’ve seen a lot of entrepreneurs and startups share their failures in public. Post-mortem posts have become increasingly common, as this piece from VentureBeat and collection from CB Insights show, to the joy of entrepreneurs that can learn from other’s mistakes.

Two great of examples of pure transparency after closing a company come from Sonar Media Inc. and Everpix, two startups that shut down their doors recently and that used Medium and Github, respectively, to share everything they learned from their mistakes. The case of Everpix has been commented extensively in the media, but if you haven’t checked all the documents, spreadsheets and numbers they published after closing, you definitely should.

Transparency while being alive

It’s interesting to note that this path towards transparency not only affects companies that have died, but also others that are still alive and kicking. With the trust of investors and employees, startups such as Buffer and Stripe have established transparency rules when it comes to either internal or external communications.

Buffer is a great example of the latter. The company co-founded by Leo Widrich and Joel Gascoigne posts a monthly update on their blog sharing all kind of metrics that in most cases remain private and are only visible to the team and investors.

How much money they’ve made, how many users they have, how many return to the site daily, how many people subscribe to their different paid plans, etc. The quality and diversity of the information is incredible. However, this wasn’t enough for the small startup. To increase even more its level of transparency the company made two bold moves: publish their own salaries online -even explaining the differences among employees- and create a financial dashboard that can be accessed by anyone and that shows, in real time, the financial status of the company.

“Transparency is one of our 10 defining values at Buffer, and we are excited to see this as an opportunity to take transparency even one step further”, wrote Widrich in a blog post.

The case of payments startup Stripe is also interesting. The company embraces transparency on another level, internally. All email communications at the company is public and accessible by anyone, from the CEO to the intern that has just joined the company. Greg Brockman explained that by doing this the company became more efficient: “If everyone automatically knew what was happening, we needed fewer meetings, and our coordination was more fluid and more painless if we could all keep up with the stream.”

This doesn’t mean that every single employee receives all the emails sent by their colleagues. As they explain in this post, Stripe has created a few tools that allow them to make all emails searchable while not filling people’s inboxes. “We don’t just want Stripe to be a successful product and company. We also want to try to optimize the experience of working here. As we’ve grown, we’ve come to realize that open email can help.“, claimed Brockman.

Startup failures. Is it good to share?

From the outside it seems pretty clear that sharing what went wrong at your startup is good for the community. But, can it affect their future careers? Do investors see it the same way?

“Instead of glossy stories of raising big Series A rounds, I would like to read about the deeper truths on what were the underpinnings of that success.”Ravi Belani

This excellent piece from VentureBeat covers this same topic and quotes investors and entrepreneurs. Kevin Spain, from Emergence Capital, says “he tends to prefer entrepreneurs who are authentic and transparent”. Although if they’re not, it doesn’t mean they are less valuable.

Ravi Belani, from Alchemist Accelerator, pushes entrepreneurs to speak in public about their failures, as it will help others and the community in general. “Instead of glossy stories of raising big Series A rounds, I would like to read about the deeper truths on what were the underpinnings of that success.”, he says.

And you? If your startup fails, are you willing to share your story in public?

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Comments

  • NicoleMillerbooks

    Jamie — Thank you for this incredible post! We think this is certainly an important topic and it’s so great to see you sharing and discussing it! :)

    Keep up the amazing work!
    Cheers!
    Nicole
    Community Champion