What there is in for me:
- Why communication is a key attribute for entrepreneurs
- How to build trust using communication
- How to communicate bad news
It amazes me how few people talk about communication and transparency for early stage startups. Communication is probably the most underestimated skill for entrepreneurs, although everyone knows that is an important skill for great leaders.
I’m not talking about the ability to speak well and inspire people, although that is also an important skill, I’m talking about the ability to keep people informed about relevant information.
People tend to communicate well when times are good but shut them down when things go badly, however, these times are the ones that need to overcommunicate to prevent even worst things to happen, to not break trust, and to get help.
Harry Kraemer, a Kellogg professor about Leadership (I highly recommend his book From Values to Action), tells a simple equation:
CHANGE + UNCERTAINTY = CHAOS
In a startup, change is constant. Nonetheless, uncertainty is only created when people don’t communicate properly about the changes to the stakeholders.
There are two important stakeholders that invested literally their career and money into the startup, and that need to be aware of what is going on with. Your team and your investors!
I will break this topic into two posts, one for the investors and the other for the team.
Communicating with your Investors
I think most first time entrepreneurs are afraid of their investors and don’t want to show their weakness and mistakes. They only report the good news, leaving the bad stuff hidden. Although that seems logical, good investors know no entrepreneur will ever get everything right. Shits happen! Investors are more concerned how the entrepreneur react when that happens than the problem itself. If your investors expect you to get everything right, I’m sorry to say you this, but you probably got the wrong investors!
If entrepreneurs report only good news, this will lead investors to mistakenly believe everything is fine while it isn’t. When the investors discover what is really going on, they won’t trust anymore the entrepreneurs, leading to a micromanagement and a lot more reports.
When something serious happens with the startup, entrepreneurs should immediately contact the investors; I know its not easy but you need to do it. Making a parallel, if your friend gets seriously injured, you know you need to call their parents to give the news, it isn’t easy but is the right thing to do. Although investors aren’t your parents, they not only are in this endeavor together with you but also is in their best interest to help you out!
Frequently and direct communication with your investors is key to building confidence.
When I worked at Wayra Brazil as the responsible for the acceleration process, we had a one-page monthly report with the main KPIs of each startup with some business updates.
The startups that were struggling kept complaining about not having time to fill the reports. Interesting enough, the best startups delivered the report on time and without any complain, and they had much more work than the previous one.
My conclusion is that the best entrepreneurs understand that communication is key to develop trust with investors, and communication is a characteristic of great leaders. In the second part of this post, I will explore how to communicate with your team.
- Report frequently to your investors
- Report good news as well as bad news
- Report critical news as soon as they happen and ask for help
- Don’t be afraid of your early stage investors; they invested in your startup mostly because they believed in you
- Change + Uncertainty = CHAOS