Startup Founders: Avoid Politics for The Sake of Your Company and Customers

As election season heats up in the United States, startup founders might feel tempted to voice their political opinions or express support for various candidates. However, it’s worth remembering that reacting to every news cycle be more damaging than beneficial for your startups.

In a recent post on X, Howard Lerman, founder of Roam and Yext, pointed out that engaging in politics has minimal benefits and could alienate customers. “You’re not a billionaire VC with nothing to lose. Your company is all that matters,” Lerman warned.

“Founders, a reminder to avoid taking a public political stand in the US President election. You have zero to gain, & half the world to lose who will immediately judge you and your company. You are not a billionaire VC with nothing to lose. Your company is all that matters,” Lerman wrote on X.

Recent research from Edelman also found that nearly two-thirds of employees expect CEOs to comment on political and social issues. However, while taking a stance on some political issues may briefly boost your employees’ morale, founders should evaluate whether their position will truly impact the situation and consider the potential operational consequences, such as alienating potential customers or losing existing customers.

The situation can become even more complicated if co-founders or team members have conflicting political views, leading to uncomfortable conversations and conflicts.

As founders, consider whether it’s relevant to your business before issuing a political statement. For instance, a fintech company might address financial inclusion and wealth inequality, while a startup focused on alternative proteins might discuss industrial farming or lab-grown meat ethics.

It’s important for startups to have a clear plan before engaging in political issues to avoid distracting employees from the core mission.

Why Founders Should Stay Out of Politics

Navigating the intersection of business and politics can be tricky. While it’s natural for founders to have personal beliefs and opinions, engaging in political discourse publicly can have unintended consequences for their startups. Here’s why it’s often wiser for founders to keep politics separate from their business endeavors.

1. Avoid Alienating Customers: Political stances can be polarizing. Supporting a specific party or candidate might alienate some customers, affecting sales and loyalty. Staying neutral helps maintain a broad, inclusive market base.
2. Maintain Focus on Core Business: Political debates can distract from the main mission of your startup. Time and resources spent on politics could be better used on product development or growth strategies.
3. Prevent Internal Conflict: Political opinions can create rifts within a team, impacting collaboration and morale. A neutral approach fosters a positive work environment where employees can focus on their work without political disagreements.
4. Safeguard Brand Reputation: Associating your brand with political views can affect its public perception. Controversial stances might harm your brand’s image and investor confidence. Neutrality helps protect your reputation and credibility.
5. Regulatory Risks: Political involvement can lead to regulatory scrutiny or legal issues, especially in heavily regulated industries. Avoiding politics helps minimize such risks and keeps your focus on compliance.

Benefits of Remaining Politically Neutral

• Wider Market Appeal: A neutral stance ensures your startup appeals to a diverse customer base, crucial in a global market with varied political views. This can enhance customer acquisition and retention.
• Enhanced Employee Morale: Keeping politics out of the workplace helps avoid conflicts and discomfort, leading to a more positive environment and higher productivity.
• Focus on Innovation and Growth: Without political distractions, you can focus on innovation, product improvements, and growth, enhancing your competitive edge.
• Professionalism: Neutrality maintains a professional image, attracting clients, partners, and investors who value stability and impartiality.
• Risk Management: Avoiding political controversies helps manage risks, preventing potential public relations crises and ensuring your startup’s stability and resilience.

When Founders May Engage in Politics

Government policies increasingly influence the tech industry. There might be occasions when expressing opinions on sector-related issues is necessary. For instance, the US Congress is discussing a tax package (Smith/Wyden) that could impact tax provisions and the deductibility for research and development. This is crucial for startups since changes in tax treatment could negatively affect those investing heavily in R&D.

“The tax treatment of research expenses was changed by the 2017 Tax Cuts and Jobs Act (TCJA). R&D expenses used to reduce taxable income dollar for dollar – if a startup spends $1 million on R&D, its taxable income goes down by $1 million. However, beginning in 2022, startups were required to amortize deductions over five years for expenses in the US or 15 years for expenses incurred outside the US. For many startups, $1 million in US R&D spend became only $100,000 in expenses in 2022, for federal income tax purposes, and many startups that may not have had a tax bill under the old rules could now face a tax obligation.”

In this case, founders can share their views and raise awareness about new government policies with fellow entrepreneurs without risking customer alienation or becoming entangled in politics.

Conclusion

While it may be tempting to engage in political discussions, especially during elections, founders should weigh the potential downsides carefully. Staying politically neutral can help protect your company’s reputation, maintain a positive work environment, and keep your focus on business growth and customer satisfaction.