Should You Consider Launching an Open Startup?

Over the last few years, we’ve seen a new trend emerging where businesses are sharing behind-the-scenes information about their work with the public. Popularly known as the open startup trend, it’s a transparency movement that’s been adopted by such companies as Buffer, Ghost and ConvertKit.

There are many reasons why these companies have chosen to go the open and transparent route, but whatever the impetus may be, there’s excitement in the business community about those willing to share their work publicly.

What Exactly Is an Open Startup?

An open startup is one that has made metrics about its company public. Usually, such companies share revenue, traffic numbers, churn rate and users, but in some cases, they go further. Open startups are typically transparent about their key performance indicators (KPIs), which means that anyone can pull up their dashboards and see exactly how many customers they have and how much revenue they’re generating.

Transparency within organizations is not entirely a new concept. One prominent example is Whole Foods, which has made its salary data available internally since 1986, and its stores post daily and regional sales data each week for all to see.

Is It a Good Idea for Founders to Adopt?

While there are those who think the open startup trend can be controversial, many believe that if companies are transparent about how they make their money, it can lead to many positive changes – some that are especially appreciated by investors and customers alike, because they keep the companies accountable. One such positive outcome is the growth of independent development communities, wherein an increasing number of products are being built by individuals and small companies who don’t trust the methodologies used by large corporations.

Let’s look at some advantages of having an open startup:

• Being transparent lays all the cards on the table and acts as a measuring stick for entrepreneurs so they can understand what normal is, or what could be. For instance, it shows real-world examples of how a high churn rate can hurt growth.
• Openness and transparency can be major motivators for companies to do better, so they can prove to their customers and investors that they’ve got a sustainable and growing business.
• When businesses talk about strategies that worked or didn’t work for them, it’s difficult to know what that means and if it’s of any relevance to you. But with live numbers, such details become tangible and concrete.
• Being open keeps businesses accountable by fostering a certain level of responsibility on their part. This way, the customers have a better idea of where their money is going.
• Publicly sharing company KPIs can be a great marketing tool, especially to increase traffic. Similarly, sharing a growing user base is the perfect social proof for potential customers.
• Sharing roadmaps and development progress can be an interesting way to get real-time feedback from existing users and potential customers.
• Being transparent can help dispel the many myths surrounding startups for founders, customers and investors. It can also help the industry progress as a whole and give potential entrepreneurs the confidence to launch their own businesses.

We can’t talk about the benefits of open startups without mentioning a few potential drawbacks. Here are some risks associated with the concept:

• Making the numbers public can give rise to increased competition, as there may be people who want to simply copy an idea that has seen success.
• Many businesses believe that there are way too many people looking at their data without sharing their own, which can be risky and counterproductive.
• When the world can see the numbers on a public platform, there will be those who will assume without understanding the full picture. A temporarily high churn rate, for instance, could make the business look unhealthy. Similarly, seeing low revenue numbers could deter customers.
• It might take time away from building a solid product and business, especially in the early days.

While these cons may seem daunting for many entrepreneurs, it's important to review both the positives and negatives so you can make an informed decision about whether operating an open startup might be the right choice for you.