Startup Life/Opinion/

Founders, here’s how to survive bad press

Whether delivering bad news to investors, employees or the wider public, here's how to avoid a firestorm

Zed Tarar
Zed Tarar

By Zed Tarar

If you run a startup, at some point you’ll need to deliver bad news to stakeholders. Maybe you need to address aggrieved customers — such as in the case of events startup Pollen — or laid off employees, your investors or the wider public. How you execute this can make or break your business. 

And the signs of a tech downturn in Europe halfway through 2022 mean the odds of hitting a speed bump have gone up as startups grapple with tough macroeconomic headwinds.

As a professional bearer of bad news for more than a decade as a US diplomat, I’ve picked up a few tips that work just as well when telling an air force they can’t have the best F-16s as when explaining your latest down round and missed KPIs. 

Don’t rush into an apology

Tempting as it may be to admit culpability and move on from an issue, admitting to a mistake before you have all the facts means tarnishing your brand unnecessarily.

This might sound cold and calculating. Yet the reality is that the best politicians and governments rarely ever admit fault and accept blame, even in circumstances where outside observers would label something as a screw-up. 

Why is this? 

Once you admit fault, there’s no going back. There’s no room for manoeuvre. That’s why governments “promise to investigate the issue” thoroughly but refrain from fully acknowledging wrongdoing or accepting full responsibility.

Dutch carbon offsetting company LandLife had to deal with this recently. A fire started at one of its reforestation projects in northwest Spain and resulted in 14k hectares of land being wiped out burnt to a crisp. 

The company handled it as best as anyone could. It avoided accepting responsibility outright (it’s still early so culpability is yet to be determined), but acknowledged the devastation in a statement.

It focused on the future and on how it plans to address the situation while noting the facts of the case. A textbook example of how transparency and level-headedness are key to managing a bad situation. 

Drop the spin

Most people have a finely honed bullshit detector and will see through any attempt to spin an objectively bad situation into a positive one. 

The fintech Klarna wins the award for worst handling of a downround valuation, after the buy now, pay later (BNPL) startup saw 85% shaved off its peak valuation from 2021. 

Instead of acknowledging the sheer magnitude of the situation and promising investors renewed commitment to making Klarna a global fintech leader, the CEO issued a badly written Twitter thread touting Klarna’s profitability and ending with “what does not kill you makes you stronger”. 

Don’t be like Klarna. Acknowledge the pain, make clear you understand what’s at stake and articulate your plan to make it better. 

Remove your ego

You can’t blame founders for entwining their identities with that of their startups, but as a founder the urge to retreat into a defensive stance must be resisted at all costs. 

When journalists call you for comment on turbulence at your business, you might be tempted to lecture them and explain in detail why their entire line of questioning is foolish. That’s a mistake. 

Whether you think a narrative is merited is irrelevant. Is it fair to highlight operating losses for early-stage companies, ones that are focused on growth rather than immediate profitability? Perhaps not, but that’s what the headline reads, and you need to be prepared to explain your path to profitability in a confident and transparent fashion. And no, saying you plan to “elevate the world’s consciousness” is not enough. 

Stick to the formula

I was once dressed down by a European prime minister while at the UN (the situation was bad but totally out of my control). I couldn’t fix the underlying problem, but I prevented it from getting worse by acknowledging the facts and transparently laying out plans to make it less bad. 

Similarly, what Klarna should have said was something like:

“No company wants to see its market value dip. But despite these difficult market trends, we remain focused on the fundamental profitability of our business, serving our customers and delivering for our investors and employees. 

“We have the utmost confidence that Klarna will weather this economic storm and emerge more resilient than ever.”

As a founder, if you plan to be at the helm of your startup for the foreseeable future, trouble will find you. We’re not infallible, and things will go wrong — it’s how you manage your response that matters. 

So next time you have to deliver bad news, stick to the formula: acknowledge the situation, explain what you’re doing and focus on the future

Disclaimer: While Zed Tarar is a US diplomat, the views expressed here are his own and do not necessarily reflect those of the Department of State or the US government.

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