Conflicts of interest don’t have to be startup killers

Ask employees what conflicts of interest are, and you’ll get wildly different answers.

Some point to vendor relationships with family members. Others mention workplace romances. In financial institutions, people think of undisclosed stock trades.

All these are valid examples, but the confusion reveals why conflicts of interest are often mishandled and why they erode trust in some of Southeast Asia’s most promising startups.

Image credit: Timmy Loen

As I see it, a conflict of interest is when personal interests interfere with professional judgment. The danger extends to how it appears to investors, employees, and partners.

A conflict of interest can be actual, like a founder awarding a contract to a sibling’s company without disclosure. It can be perceived, like an employee repeatedly pushing a vendor run by an old roommate. Or it can be potential, like a board member exploring an advisory role with a competitor.

These can lead to trouble for any organization. Even small lapses can spiral into scandals or create subtler problems for startups of all stages.

The good news: simple habits of disclosure and documentation can keep founders and their companies out of trouble.

Why early-stage founders can’t ignore this

In my work helping companies build integrity systems, I see the same pattern: organizations underestimate the risks arising from conflicts of interest until they explode. They then spend more energy trying to contain the fallout than they ever would have spent preventing it.

In a recent case I worked on, a fintech startup founder held an undisclosed equity stake in a key supplier. Investors uncovered this during due diligence and paused a funding round while external reviewers checked past contracts.

See also: A guide to building whistleblower protections for startups

Fundraising was delayed for several months, bridge financing became necessary, and the eventual round closed at reduced terms. The disruption was avoidable, as a disclosure and recusal would have resolved the issue.

Early-stage founders often dismiss conflicts of interest as problems for mature companies. That thinking is costly.

As the case with the fintech firm shows, a conflict of interest doesn’t have to spiral into a huge public scandal to affect a business. Friction in the fundraising process can be the death knell for a young company, so why take the risk?

Southeast Asia’s conflict accelerators

Detection is prevention

The cost of inaction