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The Transparency Tell

The Transparency Tell

by Joe Milam

The Transparency Tell

Everybody has a ‘tell’. A way they ‘show their cards’. It is a well-known concept in poker, and arguably the most important skill for a successful poker player to have – to identify the tell of their opponents.

Identifying tells are valuable beyond poker – in other walks of life where an information advantage can mean the difference between success or failure, losing all your money or making substantial sums.

An example of this is investing in startups.

As with poker, with startup investing you can lose it all or make a substantial sum. Knowing when to hold ‘em (invest more in a startup you’ve already invested) or when to fold ‘em (take your losses and capital to support winning hands/companies in the future), or even when to place that initial bet/investment, will determine if you are a ‘casual player’ or if you are in it for the long haul – in it to win.

With startups, maybe the single most impactful tell is the evidence of transparency.

20% Communicate Regularly

Historically, if an investor heard about a startup that proved interesting to them, they would conduct some level of due diligence, then ultimately make an investment. Prior to the advancement of due diligence ‘best practices’, the decision to invest was closer to betting on a horse race than a poker game.

Should an investment get completed, the investor felt relieved, and even honored, or if they got a phone call or an email from the CEO of the startup. And generally, that was when the startup was anticipating needing more funds.

Now, with the tools available today, investors might get a nice Update delivered in via Mail Chimp, or the other free/inexpensive newsletter-writing software tools.


While this is an improvement over ‘typical’ practices of 5 to 10 years ago and beyond, far too few startup CEOs produce these updates regularly, and often when they do it is more of a newsletter (lots of graphics and happy news) and not a balanced report on the status and activities within the company.

True Transparency

True transparency is one of those things that you can’t describe it but you know it when you see it. Fortunately, successful accelerators and active investors in the startup world can attest to the developing definition of ideal and complete transparency.

·      Monthly Updates on the activities within the business – with good news and bad.

·      Quarterly Reports summarizing the quarter’s activities, consolidated financial statements (Income Statement, Balance Sheet, maybe cash flow statement and a cap table), in addition to any ‘Key Performance Indicators’ that are relevant measures of the company’s activities.

Experienced investors have confirmed* that the entrepreneurs that offer proper transparency tend to execute on their business plan better than those that don’t.

Entrepreneurs that offer proper transparency execute better.

There are many factors that impact a startup’s success.

Bill Gross, founder of IdeaLabs, studied the influences of hundreds of startups over time and found that timing was the #1 factor impacting startups’ success. #2 was ‘execution’, then product/market fit, then access to capital.

Given the difficulty of predicting the future, any due diligence effort to understand or improve upon ‘timing’ is problematic at best.

Bill Gross confirms what we have gleaned from our own experience at AngelSpan. The method in which a CEO embraces transparency is a key indicator of that CEO’s effectiveness of execution.

In fact, you could even call it a tell.

How to Spot and Utilize the Transparency Tell


If you are an active investor in startups, you should request the last 3 Updates (non-Quarterly Reports) that were sent out to investors and other stakeholders from any startups you are considering for investment. Their response to that simple question will be a strong tell. Do they stammer? Does the request make the CEO uncomfortable? Does the CEO want to get back to selling the idea instead?

Or does he/she say ‘That will be in your inbox shortly after our meeting. What else can I provide? What else do you need to see to make your decision, yes or no?’

By expecting transparency first, your odds of successful angel investing will jump dramatically.


If you are a CEO that already understands that proper transparency is part of your fiduciary responsibility when you are asking for or have taken capital from others – kudos to you. Feel free to request a copy the survey sited that confirms you are not only in the minority, but also a better investment opportunity for investors.

It will help your fundraising activities – if you need help at all.

And for the less experienced CEOs, the structure and accountability will help you execute better.

For the vast majority of startup CEOs that either know it is necessary and important, but aren’t doing it yet, MAKE SURE IT IS DONE, AND DONE RIGHT. Your personal brand, your company’s brand, and the success of your company will be optimized.

* Texas Venture Labs Survey, 2016


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