People nod in agreement when they hear this rule. It’s because the underlying notion is obvious. In fact, it’s almost expected that people follow this rule to the letter.
But of all the things you need to focus on as a founder — shipping product, generating revenue, managing capital, hiring talent and forging partnerships — this rule is much more difficult to consistently live by.
And it’s difficult for two reasons. The first is that founders are busy and as much as that’s true, it’s a small part of the equation. The second reason relates to the psychology of communicating company progress.
I can tell you from experience that communicating the status of a company involves continuously resolving a mix of competing priorities, the desire to maintain the positive trajectory of their company story, the fear of communicating ‘bad’ news and to some extent, procrastination.
All of this while ensuring that the golden rule is never broken.
The intent of this rule is to preserve transparency on strategy and operations. To investors, this means regularly communicating with high-level candour to the people who have a vested interest in your success.
It’s not rocket science. For the most part, this means sending a quarterly email that provides updates on milestones and progress relating to:
- Product Development
- Sales and Distribution
- Capital and Runway
- Team and Hiring
- Issues and Risks
- 3-Month Activity Forecast
This isn’t fancy, it’s an email using Arial font, basic headings and bullet points. And a distilled version of these messages should also be shared with teams, key partners and suppliers because they’ve also bought into helping build your vision. This approach helps avoid this type of question:
“Why am I only finding out about this now?”
If you’re on the receiving end of this question, there’s a good chance you’ve broken the golden rule. And here’s the thing, there’s no reason to be in this position.
In the last decade enough companies have been founded and invested in (and lessons learned and documented) that founders should know what’s expected of them and if they don’t, investors should set that tone.
I’m still surprised when I learn of founders who don’t just break the golden rule but smash it into a million pieces by acting in ways that leave team members and investors unexpectedly scrambling to save a venture. These events damage reputations, sometimes irreparably, and are completely avoidable.
In response to: “I need to keep this story positive”
Positive momentum is important but there is no place on earth where a company story is only ever positive. In fact, people grow suspicious when the story is only ever positive.
Investors and entrepreneurs understand that solving big problems involves riding a rollercoaster of wins and setbacks so communicate them regularly in the context of the company mission and strategy. It’s part of the journey.
In response to: “I’ll get around to writing the update”
Bad idea. Just do it and then stick to a quarterly update tempo. At the speed at which circumstances change in startups, a lot can happen in a short time and the longer you procrastinate, the more you’ll need to explain.
This might not seem like a big deal when times are good but that will inevitably change. When it does and you’re left having to explain a series of potentially complex and interconnected events, you may come close to breaking the golden rule. It’s avoidable, so avoid it.
In response to: “But it’s hard delivering bad news”
Yes, it is. It sucks and no-one likes doing it. It also goes without saying that delivering difficult news in a forthright and productive manner is an essential leadership skill and one that gets better with practice.
It’s natural to think that people will be upset on receiving bad news. But what makes the situation worse is a lack of context for why the situation went from normal to ‘bad’.
The clearer people are on context, the more prepared they are to work through challenges with you.
I think about maintaining the golden rule as being as much about respect as it is strengthening trust with allies. Respect and trust with allies is a potent combination. Without them, you’ve got nothing.