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Most Undervalued Startup Skill? Transparency

There is a code of silence among entrepreneurs when it comes to personal ruin. The irony, though, is that most entrepreneurs endure personal ruin -- it's what makes entrepreneurs special. They bring this on themselves in the name of seeing their ideas to fruition.

In case you have any doubt about the craziness of entrepreneurs, there are two, seminal articles about the topic. One comes from David Segal in the New York Times. The article is titled, "Just Crazy Enough," and Segal explains why VCs like CEOs who are a little crazy -- but just short of mental-ward crazy -- when they pitch.

And there's another aspect to the craziness of entrepreneurs: Jeff Stibel, writing in the Harvard Business Review, calls entrepreneurship a disease because you are not likely to make money -- you are likely to die broke. And you work insane hours -- longer than any other job -- and you do it over and over and over again. This is not sane.

So it's ironic that everyone knows that entrepreneurs are insane, but entrepreneurs try so hard to hide what's going on. It's hard to sound crazy and also sound worthy of running a company. But if you are a CEO of a startup you need to bridge that gap.

Here's why: Saras Sarasvathy, professor at the Darden School of Business, did a study on the traits of successful entrepreneurs. And she told me that the only trait that is reliably there through all sorts of successful founders is the ability to network. Successful founders can understand their weaknesses and fill those gaps with people from their network.

And how do you build a solid network? It's not by using LinkedIn or Twitter -- because while those tools might show you who would be good to meet, those are not tools for building meaningful connections The tool for building meaningful connections is vulnerability.

The king of networking is Keith Ferrazzi. I love his book, "Never Eat Alone." And so much of the book is about being vulnerable. He doesn't mean you should talk about your dead cat. Because no one cares. He means you should talk about your failings and shortcomings in a way that other people can relate to.

Given that advice, here are a couple of times when I showed vulnerability as a CEO and it paid off:

1. I said I was out of money.
I was raising a second round of funding the month the markets crashed. I was in a lot of trouble. Investors were impossible to get on the phone, let alone get to the bank. So my company was pretty much bankrupt, and I was pretty much losing my mind trying to make payroll. I blogged about it, and the number of big-name CEOs who wrote to me after that blog post was incredible. Founders like hearing from genuine, real-world voices. And the strength of the network I get from posts like that is what helped me keep my company afloat.

I know all the advice people give out is to hide that you're out of money because you'll get terrible terms if you look desperate. But you know what? Terrible terms are better than closing shop. And if you exit, you won't care that you gave away a few extra percentage points for desperateness.

2. I said I didn't get along with my co-founder.
If everyone got along with their co-founder then there would not need to be any bylaws for kicking one of them out. But there are always bylaws. And, another thing. Remember that research from Sarasvathy? Well, if you and your co-founder think exactly alike then you are probably redundant and one of you should find another company. The best co-founders have different skill sets and different strengths and that leads to prissiness at some point.

So investors expect it, and there is no point in hiding it. If nothing else, investors also expect a degree of honesty and transparency that you would give to anyone you are doing business with.

So no one seemed surprised to hear that I was fighting with my co-founder. We fought when we were out of cash. And we fought even when cash flow was fine. We fought all the time.

But the truth is that a good set of co-founders sticks together because they are devoted to the company. And that's what we did. And we were a safer investment because you can't be transparent about your commitment to the company without revealing the problems you've overcome.