- There’s a growing lack of transparency in Silicon Valley boardrooms, and startup founders report that they’re deprived of mentorship.
- Founders report that investors are often unable to engage in difficult conversations.
Last year, the amount of available venture capital within the US swelled to a staggering $US71.9 billion – the second largest amount of available venture capital since the previous record of $US76.8 billion in 2015. While this influx of new funding is making it easier for entrepreneurs to kick start their companies, it’s presenting a new set of problems of its own.
With more money flooding into early stage deals, some critics are saying that investors aren’t able to spend enough time guiding fledgling entrepreneurs. Not only does this lead to potential opportunities for professional missteps and entrepreneurial blunders along the way, but it’s altering how founders and investors interact.
Startup founders, too, are finding that they’re unable to engage transparently with their investors who often have little time to spare.
One startup founder who asked not to be named told Business Insider that he felt that he couldn’t approach his investors with the delicate business dilemmas his company had faced in the past.
“There’s this feeling that I couldn’t be transparent about my own company,” he said.
After a falling out with his co-founder, the unnamed founder said that he felt that he was unable to confide in his investors as he re-built his company alone.
“I was in such a bad place,” he said. “Because of the sensitivity of the situation, I couldn’t go to any of my investors and talk through this.”
The thing everyone is talking about privately is never openly discussed
This glaring lack of transparency between entrepreneurs and their investors is becoming a growing trend, according to Josh Rahn, an early Facebook employee who hired close to 200 people at the company.
Rahn, along with former Foursquare president Steven Rosenblatt and former Google executive Glenn Handler, has founded Oceans Ventures, a mentorship program for startup founders.
Rahn said that opacity in boardrooms is increasingly becoming the status quo within the tech industry.
“One of the fundamental issues that we’re seeing in boardrooms is a lack of transparency and hard conversations taking place,” Rahn told Business Insider. “What most founders and investors usually find out too late is that the thing that everyone is talking about privately is never openly discussed.”
Rahn’s co-founder, Steven Rosenblatt, said that undisclosed problems can lead to more insidious issues within companies later on. Rosenblatt cited the recent Theranos debacle, in which the notoriously guarded blood-testing company blindsided its investor to liabilities with the company’s chief product early on.
“You have to start thinking about these problems early,” said Rosenblatt. “Every founder should be able to address the things that could potentially derail their company with their investors.”