What Founders Should Do in a Crisis

Unless you got an early start on Thanksgiving you probably heard that OpenAI fired and then rehired Sam Altman as CEO over the last week.

Much has been written about that and the structural issues that led to OpenAI saga already so I won’t rehash anything here, but what stood out to me over the last week is how authoritative and self-assured many of the opinions I saw people post on X were… only to be proven wrong hours later.

I get it, some people are just engagement farming. But it made me realize most people have never been on the inside of a true existential crisis situation at a startup…

But I have, both as a founder and an investor + board member of another company.

So this week I’m sharing what actually happens inside a startup when a crisis is happening and how founders can manage their investors, team, users, legal counsel, the press, and each other.

But if you are interested in the OpenAI saga, here are some of the most well rounded opinions I’ve seen (here, here, and here).

Crisis Management 101 for Founders

The hardest part about a crisis is managing your psychology. The most important thing you must do is stay level headed.

As the founder, you and your co-founders are the only ones who can actually decide how to respond. And crises are icebergs — no one else will have full context about what’s going on (things will simply move too fast) but they all desperately want you to keep them in the loop. You can’t do this fully for everyone, because moving quickly to resolve the crisis is critical.

As a result, some people you trust will cave to the pressure they’re feeling from outsiders and turn on you.

It’s especially terrifying if this is the first time you’ve gone through a crisis and the startup that you’ve poured blood, sweat, and tears into is at risk of going under. You don’t know what move to make, everyone’s waiting for you to make a move, and everyone you’d normally go to for advice on various things is making contradictory recommendations.

Bad crisis management quickly becomes a game of whack-a-mole. Good crisis management requires a steady, consistent approach.

How to Work With Stakeholders

Not all crises play out in the public arena like OpenAI’s did. If yours is able to remain in-house, that’s one less thing to worry about. Focus on addressing the issue with the necessary stakeholders head on.

But for the ones that become newsworthy, it’s another level of chaos. Here’s how to work with each major type of stakeholder during a situation like that.

Co-founder(s)

Your most critical relationship during a crisis is with your co-founder(s). This is the one place where you cannot afford for things to go wrong.

You need to operate at extremely high levels of trust to not turn on each other, communicate flawlessly even as you learn information in real time, and divide and conquer wherever possible.

Quickly meet to stack-rank priorities, assign which areas you’ll each be responsible for, and set up a process to check in regularly (ideally you’re together in person so this last part is considerably easier). Then get to work.

If this relationship breaks down (especially the underlying trust in each other’s leadership, roles, and judgement) then the chances of the company failing will rise dramatically.

Investors (& Board)

If an investor speaks publicly against one of their investments it is a terrible signal to everyone else. People assume investors have inside info, and they’re financially invested. If they’re speaking out publicly, people will assume the situation is quite bad inside the company and the ship is sinking.

Crises also bring out an investor’s true colors. You learn that there are two types:

1. Investors who primarily care about the success of their startups

2. Investors who primarily care what their LPs will think

At first it may honestly be hard to tell which type someone is, but you’ll quickly realize because the second type requires a lot of your attention at the worst possible time.

It’s up to you whether you think this is worth it or not. The more they can hurt you (either by going to the press, with a big social media audience, or if they’re your lead investor), the more you should humor them.

The second type will want to spend time with you too, but on your terms. They want to be in the trenches as much as you need them to be.

Need PR or legal help? They’ll connect with you the most senior expert they have a connection to as fast as possible.

Going through a crisis makes it clear which investors actually add value. In our case a16z, our lead investor, was tremendously helpful and had seemingly endless time to help us with whatever we needed. Can’t recommend them highly enough.

Team

It’s surprisingly easy to overlook your team during a crisis. This actually makes sense — you expect them to support you so your instinct is to focus on other fires.

This is a mistake.

If you’ve been a good boss and they trust you, a good portion of the team will look to support you. But some won’t. And the longer the crisis goes on for, the larger that number will become.

They have to answer to customers, each other, and if the story is big enough then even their friends and families. People will quit. There will be infighting between team members. Some may even burn the bridge entirely and speak out against you publicly.

This isn’t as bad as an investor speaking out, since the public assumes team members have less context than investors, but it’s still bad.

The way to prevent this (as much as possible) is to run the Sam Altman playbook: engage your team directly and with full transparency, and make public statements of admiration and support for them.

Lawyers

You’ve probably heard that “anyone can sue anyone for anything” which is largely true.

Even if you listen to all of your lawyer’s advice during a crisis, you can still get sued. In fact, it’s more likely — since letting the lawyers run the show will make the situation more likely to end in failure and failure attracts lawsuits.

Lawyers are risk averse and will always advise you to take protective action (that’s their job). In practice, this tends to translate to “don’t do or say anything that increases the risk exposure for the company” which is often the wrong decision.

Saying less makes you look guilty in the eyes of your team, customers, and with the press and general public.

With that said, be sure to check in with your lawyer initially to understand the legal landscape you’re operating in.

Users

During a crisis your users will swing back and forth. Some will be on your side and many will not.

They’ll demand information. They’ll churn. They’ll send you nasty messages without remorse (and without any of the underlying information, of course).

What you’re dealing with is a potential mob. The way to influence it isn’t by wading into it yourself, but rather by leveraging the press.

You’ll notice that Sam didn’t even speak directly to users much during the OpenAI criss. The only time he did was to reassure them that OpenAI’s products and services were being actively maintained and would remain stable:

Other than that, all of his posts were about his team. He let the team and everyone else say the things on his behalf that everyone was thinking.

PR People + Press

Unless you have a full-time in-house PR person (which most startups don’t), your PR person or agency is incentivized to help their friends in the press get access to you as they are to help you navigate a crisis.

No, they don’t want you to fail — it’s just the reality of their position. By getting access for reporters, they’re able to sell themselves as someone with strong relationships (to help their other clients get stories in the press). It’s a bit of give and take for them.

And unless you yourself have strong, friendly pre-existing relationships with the press then there is a 0% chance they will be your friend in a crisis. Even if you do, the chances are low.

The key to success with the press during a crisis is knowing how to play the game by sharing tiny bits of information that are enough for them to write an article about, which will put pressure on the other side, but not enough to let write the more full-featured article they want to write.

Do this enough times, like Sam and his team masterfully did last week, and you build momentum.

What You Should Actually Do

The way to make it through a crisis and reach the outcome you want is to be the one driving the narrative.

You should be:

• Dividing responsibilities with your cofounder(s)

• Ensuring your investors and board members are backing you

• Transparently sharing what you can with your team, while praising them

• Engaging legal counsel only when necessary

• Sharing bits of info with the press through proxies

By subtly directing the public conversation, you spend less time on defense figuring out how to respond to things. Instead, you can spend that time working to resolve the crisis directly.

The bigger benefit, though, is that if you do it effectively it creates supporters who not only empathize with your position, but also are inspired to independently apply pressure to help resolve the crisis too.

The two most important traits you’ll need to have:

• Adaptability → These situations move fast and are unpredictable. You’re operating at incredibly high intensity for long hours. You need to be able to change course on a dime.

• Authenticity → Be human. Be open. People want to see what you’re really thinking and feeling. You can be measured with this, no need to share everything — but whatever you do share better be real.

Sam delivered a masterclass on this during the OpenAI crisis.

He started out by allegedly being blindsided about being fired. However his reaction was to immediately post without any bitterness, with the ability to fondly reflect, and with admiration for his team:

This disarmed people — it’s hard to think someone who’s able to handle a difficult situation with perceived grace is guilty. A guilty person would be listening to their lawyer or afraid to say anything.

Over the next few days, he continued to hype up his team publicly and say little else. However, it was clear his team was the side leaking information to Bloomberg and other outlets (all of the leaks served his goals or implied he was increasingly likely to get back into the company).

This kept morale high on his team and galvanized support from the public, right before twisting the knife by sharing a damning quote from one of the board members.

The board played right into his hands, too, by not saying anything at all. It was only after two board members had resigned that we started to see more negative articles come out about Sam.

Say what you will about the legitimacy of their concerns, but they took the high road in the dispute and they lost because of it.

📚️ Founder’s Library

Brett Adcock shared his crisis playbook during the SVB crisis back in March.

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