Startups That Fail to Invest in Trust Will All Die

Web startups need access to talent. Often they need capital too (and a smart strategy for managing it). But I am going to argue here that their most essential currency is trust. However, a lot of emerging companies in particular tend to ignore it.

Here's a great example. Coding Horror (via Read/Write Web) has a tale about a downloadable software application that should send a shiver down any consumer's spine.

The story goes like this. Allegedly the developer hard-wired malicious code into the software that harvested the Gmail username and password of every single one of the application's users and forwarded it to his own email account. Whether this is true or not, I can't confirm. However, it's as good as time as any to re-raise the trust issue again.

This is what scares me about the wonderful Twitter API. A lot of these little applications may have access to your Twitter username, password and (in some cases) cell phone number. But how do you know they are trustworthy? You don't.

In a mashup world where web services and APIs rule, if you're going to create a business that in some way or another touches data you must invest in building trust. Every gaffe like this one raises the bar for the rest of the boat. B2B companies that hope to court firms to store their data in the cloud have an even higher wall than most consumer-facing sites.

No startup should launch without at least three things: a) deep insight into how people feel about the particular data they plan to collect, b) a clear strategy on how to build trust (often this includes following certain third-party guidelines) and c) a plan for dealing with company-specific issues and macro industry blunders.

VC Fred Wilson argues that an expensive PR firm may not be worth it. He's right - sorta. It depends on lots of factors. However, often you do get what you pay for and a talented group of PR people who know how to work with the media and the community can help you build trust by factoring in all of the above. Larger firms have deep access to insights, data and relationships that can help here, but obviously working for Edelman I am biassed.

For more on the subject, check out the 2008 Trust Barometer - an annual study conducted by my employer.