There is a lot of handwringing and navel-gazing going on in startup land with the denouement of two of the largest scandals the industry has ever seen: Theranos’ Elizabeth Holmes (sentenced to 11 years in prison for fraud) and FTX’s Sam Bankman-Fried (vaporized $32 billion of value through mismanagement and fraudulent accounting).
Why Startups Should Embrace Radical Transparency
It’s in founders’ best interests to not only accept, but invite, oversight.
November 22, 2022
HBR Staff/Plainview/Liudmila Chernetska/Getty Images
Summary.
After high-profile startup failures like FTX or Theranos, investors, employees, customers, and policymakers all ask what might have been done differently to ensure accountability and prevent mismanagement. But startup founders should join that list: It’s in their interest to accept transparency and accountability, especially with regard to their investors. This advice runs counter to some misguided ideas that have become popular within startups — namely, that it’s in a founder’s interest to accept as little oversight as possible. In fact, to maximize the growth and impact of a startup, founders should embrace the accountability that comes from raising outside financing. It will make their company stronger and more trusted.