How Open Should a Startup CEO Be with Staff?

CEO transparency. It almost sounds uncontroversial. A CEO should tell her staff everything! Right? Right?!? Of course not. It's a hard topic to write about because it's almost an accepted norm that total transparency is good. It is not. For starters let me use CEO as a proxy to include her inner circle which might mean co-founders or might just mean senior execs of the business. I do believe in total transparency with your core. The Mind of the Founder You took the risk to start your company. You quit your day job and look the leap off of the cliff. It's so much scarier than most people admit even to themselves. Scary why? All of a sudden you know you're going to be judged. Your parents want to know why on Earth you'd leave a job at Google. Honey? Aren't they worth billions of dollars? Yeah, Ma. But I'm working on a large team of people trying to figure out how to make micro improvements to a paid-search algorithm. Fun stuff, I know, but it's time for me to try something more stimulating. Oh, OK, Honey. But aren't you getting married next year? How are you going to pay for the wedding? Your peer group is envious of your finally doing what they've always wanted to do but found it too hard to give up the golden paycheck and predictable future. They can't wait to hear your brilliant idea. What? You left our team to work on THAT idea? A tool to better help you find bars restaurants? Aren't there like 10,000 of those? True. But mine is different. I've finally cracked it. Your VC friends have been egging you on. They told you, Yeah, man, I'll gladly write the first $250,000. Call me when you're ready to leave. Now they heave a deep sigh when they hear what you're actually working on. Dude, we saw a bunch of those last year. We funded one in 2005 and lost a lot of money. Sorry, brah. Scary because that hard-earned $40,000 you have slavishly saved for the future is going to dwindle fast if you can't bring in funding. But so far this is the easy bit. Now you've got to convince your peer group to quit their respectable jobs and career arcs and join you. You've got to convince your buddies to part with their hard-earned savings to back you as angels. And you pull the basic team together with some tech team members working evenings weekends to conserve cash. You scraped together enough for an angel round but not enough to pay yourself a real salary. You have a runway that would make San Diego Airport's look long. 9 months seems like a lifetime but given how long it will take to ship your V1 product (5 months) and how long it will take to raise your next round (3-4 months) there isn't a lot of room for error. How can you show traction on a product that just launched? So as a startup CEO you constantly have to suspend disbelief. Or as I often tell first-timers you simply have to have a blind belief that you'll find a way to make it all work out. You simply can't afford to be overly cautious or you'll never achieve anything. A cautious person wouldn't try to pry people out of Twitter right before their IPO to join my cause!! A cautious person wouldn't stand on stage and tell a large audience she is going to change the world while secretly wondering when the fuck her team is going to work out the bugs in the product so you can actually launch. We. Are tackling. A $1 trillion global market. It's inefficient. And we. Have the breakthrough technology. To change things. We just need your $500,000!! A startup CEO's job is to absorb stress so the team doesn't have to. Her job is to turn up every day with enthusiasm even though her boyfriend just broke up with her, she hasn't spoken to her best friends in weeks and she's beginning to wonder whether this idea was really so great after all. Startups have to be optimists because no rational person would actually believe you could build Uber into the amazing company that it is today. A rational person would have assumed that the taxi organizations regulation would have made it impossible. I've written about the downsides on health relationships and about the insane emotional stresses that people don't generally tell you about. And even about the unbelievable internal pressure to not let everybody down that sometimes even goes to the extremes of founders taking their own lives. Yet the best and the strongest founders are able to overcome the stresses, the self-doubt, the sacrifices and the risks and they press on with optimism every day anyways. Perhaps naive optimism but in reality that's probably the best kind. The mind of a founder is wired differently than most people. They have a higher ability to embrace ambiguity and accept risk. They don't fear personal failure or shame as deeply as the next person. Or as Sir Winston Churchill said, Success is the ability to go from one failure to another with no loss of enthusiasm. You need to accept that you are wired differently to know that most people don't want your full level of data knowledge. I think it's kind of like a terrorism and security analyst. We probably don't want to know everything they actually know. Just that they're working hard to keep us safe. So How Open Should You Be With Staff? Of course you need to be open. I believe in transparency as much as the next guy. But total transparency is what most people think they want, not what they really want. I'd like to give you a few examples that are more nuanced: 1. M A In the startup journey if you have success in your early product launches, fund raising and PR you're likely to get inbound interest from likely acquirers. It's hard to parse out the real level of interest from people just sniffing around or gathering facts. You try to take calls to be polite and let's be honest for many of us the flattery is nice and who knows? maybe this could be a real financial bonanza. But in the back of your mind you're a realist. You know this isn't likely to lead anywhere and frankly you didn't quit your job to pursue your life dream of being an entrepreneur to sell

12 months later in an acquihire. You take the meeting but you're not really pursuing it. But staff can't make the delineation in their heads. They see the dollar signs and the victory. They don't understand VC liquidation preferences or multiple return expectations. They weren't with you when you did the VC pitch where you looked them in the eyes 9 months ago and said, I see only one outcome, we want to build something really big. This project has been my life's dream. So to an actual story. I worked with a startup CEO who decided he wanted to sell his company. I wasn't in favor but when the CEO decides it's the right thing to do you support him. So he went on the road and talked to many acquirers. He told his entire team what was going on. There are an obvious excitement around the office. The company had been hot so he had assumed that selling for just $75 million would be achievable. It was not. Good press and industry mojo wasn't enough to overcome the financial metrics of the business and the offers came in at more like $10 million. I wasn't surprised. We decided not to sell. The startup CEO was not the original founder. He told me that he wanted to transition out of the business if we weren't going to sell it. I know, that sounds terrible. Like most startup situations it's complicated. But we departed on good terms. But here's the shitter. His entire team knew about the process and that we didn't sell. So the tech team departed en masse to find the next great stock option scheme to make their big bucks. Had they stayed I believe we could have done it together. The business concept was strong, we just needed to tweak it to adjust for market changes and we needed patience and