We plant a tree for every confirmed investment. Seed with SeedBlink and Act for Tomorrow.

SeedBlink Blog

editorials

Founders Must Have Qualities. Transparency (Part III)

screen-shot-2022-09-15-at-14

Ionut Patrahau

· 4 min read
Founders Must Have Qualities. Transparency (Part III)
Without transparency, it is increasingly difficult to maintain or gain the trust of investors.

Transparency is what builds trust. We know that, on the one hand, it is very difficult to really build trust in the short term without transparency, but on the other hand, we also know that doubts can be perpetuated over time despite the full openness of the founders. So we can formulate this assertion as follows: Without transparency, it is increasingly difficult to maintain or gain trust in the eyes of investors.

Considering that trust can be built over time and lost in an instant, and that trust is a case-by-case value that can be granted unconditionally from the beginning and then quickly diminished in the absence of full transparency, we can thus consider transparency as a crucial value that may or may not characterise startup founders.

If founders were aware of the paramount importance of trust when presenting themselves to investors, they would likely do everything they could to prove it, to build it as quickly as possible. But sometimes it happens that founders ask to sign a non-disclosure agreement to start an initial conversation about their idea, as if funders are idea hunters rather than quality founder hunters.

Frankly, I am tired of looking at each idea individually if it does not have a business model, a market-proven use case, and potential or real traction. An idea is not worth a peeled onion if it is not executed with passion and skill and the founder does not focus solely on it. Beyond the idea, the concept of a business starts to become so complicated that no one can successfully copy or imitate it to a reasonable extent. Certainly, funders are the last to try.

So we see that transparency starts with the founder's initial confidence in his own company, in himself and consequently in his stakeholders in general. That's where it all starts, and that's why I said earlier that core values are acquired in childhood or early adolescence. It usually takes some kind of shock for the founder to move from distrust to unconditional trust, and this shock is usually not predictable in any way. Self-confidence can also be learned over time, but it needs a catalyst that constantly stimulates it.

As business discussions progress, the funder asks various targeted questions that can quickly reveal the characteristics of one company or another. Targeted questions need precise answers, otherwise everything remains shrouded in mystery, which is not conducive to exploratory talks.

Founders usually have two main reasons for keeping certain elements secret.

The first reason is that they hide certain obvious elements in order to win the "beauty contest" in which they believe they are participating. When the level of confidence required to reveal the true numbers is reached, a short circuit occurs in the minds of the funders that decisively characterises the founder in question. Usually, no one seriously continues the relationship that has just begun.

The second reason why the founder communicates reality sparingly is the fear of losing his precious confidentiality, living with the impression that secrecy is the only guarantee that he owns something valuable. In tech startups, there is no real privacy. On the contrary, the more they collaborate, the more ideas are shared, the more feedback the founders receive. They can learn how some failed and others succeeded, they can find shortcuts on their way to success or dead ends they could not foresee.

You have probably all noticed that there are large tables in new generation cafes where young people mingle and chat as well. In this way, they not only stubbornly prove that there is no privacy, but also that sociability really helps creativity. This is in contrast to the communist pubs where everything is built around the booth to facilitate whispered discussions, where the large tables set up by 'savvy' businessmen are wheeled out.

As if that was not enough, the way founders create trust in the team defines the culture that early stage startups confuse with the initiator's culture. Cohesion comes from transparent information, from honesty, both when it suits us and when it does not. Team members need to know when things are going well and when they are not so rosy. Everyone must have the chance to contribute to success, just as everyone must have the chance to be wrong once in a while.

All of this contributes to a 'stickiness' that keeps people together in any situation, but especially in critical situations. This is what funders look for in founders. It's what they invest in in the first place, that's the condition for businesses not to fall apart at the first major problem on the horizon.

All three elements that define the quality of a founder or an entire team - character, discipline, and transparency - are essential if the funder cares about quality. But without integrity, they do not contribute to the overall profile. The problem with integrity is that if there is no track record - in which case it's good to do a little research beforehand - it only comes out when things 'go south'. On the other hand, close observation of founders over a period of time can bear eloquent witness to verticality.

Who can put a label on someone who resorts to various unorthodox tricks to save their company? I think the financiers are the prime suspects in this case. Before they jump into a deal, they have to check off all the items that can be ticked. But we will talk about that in the final instalment of our in-depth analysis, where we try to outline the definition of quality for startup founders.

--

SeedBlink is a full-service investment platform that enables everyday and accredited investors to access curated European tech startups through crowdinvesting and angel syndicates.

To learn more about startup investing and tech opportunities, sign up now.

Subscribe to our newsletter

The place from where you get all information and details about the European startup ecosystem, technology trends, the VC and business angels world, investment opportunities, and news.

LogoW

SeedBlink Crowd SA (registration number PJR28FSFPR/400001 from 3rd of November, 2022) is authorised and supervised by the Romanian Financial Supervisory Authority (ASF).

Investing in start-ups involves risks, including loss of capital, illiquidity, dilution, lack of dividends. It is suitable only for investors capable of evaluating and bearing those risks. In any event, it should be done only as part of a diversified portfolio (meaning a portfolio in which investment in start-ups represents only a fraction of the total investments or assets). Before investing please read the risk warnings available at https://seedblink.com/generalterms as well as the risks related provisions of the investment facilitation agreement that will be provided to you for the relevant round. SeedBlink is not responsible for any information provided by the start-ups, even if distributed through or by SeedBlink. SeedBlink does not endorse any start-up for investment nor does it advise you on the merits of your investment. Seedblink does not provide to you any other advisory services. The decision to invest is yours only. If you require help in evaluating a decision to invest, you should consult a professional adviser. The messages and documentation you receive from SeedBlink or the start-ups have been neither verified nor approved by the Romanian or the European authorities. Nothing in this message shall be considered an offer to sell, or a solicitation of an offer to buy, any security to any person in any jurisdiction to whom or in which such offer, solicitation or sale is unlawful.