In startups, employees expect a level of transparency that doesn't exist at large companies.
Transparency should exist to protect from fear, unite everyone toward a common goal and keep each piece of the puzzle operating efficiently together.
There's another very important reason for transparency in a startup: culture.
Your internal culture also ends up impacting how you treat customers. If you're secretive and distrustful, or, god forbid, you lie to your employees, you can bet your bottom dollar that that's exactly how your employees end up treating your customers.
In some industries, having a great, positive, transparent, trustful culture is a competitive advantage. For example, GrantTree competes with a lot of accountants and other R&D Tax Credits practitioners who are typically very accountant-like, closed up, secretive. In this industry, having GrantTree's culture is a great competitive advantage, because it comes through on our site, in our communications, in our attitudes, in the way we talk to clients and in the way clients talk about us.
In others, e.g. most startups, such a culture is not simply an advantage: it's a cost of entry, both in terms of attracting good people and in terms of your reputation with customers. If you're a closed up, secretive, boring company competing with startups, that will be a competitive disadvantage, and may be a killer depending on your customer base.
Finally, culture is also what makes your startup a nice place to work - both for you and for your employees. If your culture is closed and secretive, it may not be good enough to retain even you!
If you read this far, you should follow me on twitter here.