How to Unlock Trust in Startups? Evidence from TheICircle

In the startup world, the attention usually goes to innovation, fundraising, growth, disruption, scalability, and market potential. Founders are encouraged to move fast, scale quickly, and capture market share before competitors do. Yet behind the entrepreneurial narrative surrounding startups lies a far less glamorous reality: most early-stage ventures are not destroyed by bad ideas, but by organizational fragility.

This is something we experienced directly while building TheICircle.

Founded in Rome, TheICircle operates in the student accommodation industry, connecting international students with verified local hosts through personalized matching and ongoing support. At first glance, the business may appear relatively straightforward. In reality, operating inside a fragmented and trust-intensive market quickly revealed a much deeper challenge: building a startup is not simply about creating a service people want. It is about becoming credible enough for people to trust you before you have the resources, routines, reputation, or stability of an established company.

Long before the rise of startups and digital platforms, in 1965 the sociologist Arthur Stinchcombe described this exact condition through the concept of the Liability of Newness. His argument was simple but extremely powerful: newly founded organizations are structurally disadvantaged because they lack legitimacy, established routines, stakeholder relationships, and operational experience. More than sixty years later, the concept remains surprisingly relevant.

Digitalization has amplified these vulnerabilities. Today, startups are expected to validate markets, attract customers, secure funding, and scale operations in extremely compressed timeframes. While technology has lowered barriers to entry, it has also increased competitive pressure and drastically reduced tolerance for operational inefficiencies. In hyperconnected environments, legitimacy can disappear overnight. A negative review, a failed customer experience, poor communication, or operational inconsistency may spread rapidly before a startup has had enough time to consolidate trust. For early-stage ventures operating in industries where uncertainty is already high, this fragility becomes even more dangerous.

The student accommodation sector is a perfect example. Over the last decade, international student mobility has grown rapidly, transforming what was once a mostly informal housing market into a hybrid ecosystem sitting at the intersection of education, hospitality, real estate, and digital services. Yet despite its growth, the market remains deeply fragmented.

International students often search for accommodation remotely, without knowing the city, the local regulations, the quality of neighbourhoods, or the reliability of landlords and listings. Many arrive in a foreign country having signed contracts they barely understand for accommodations they have never seen in person. At the same time, hosts face their own uncertainties: administrative complexity, communication barriers, unreliable tenants, and limited knowledge of international student expectations. The result is a market dominated by informational asymmetries and lack of trust.

This is exactly the gap TheICircle was created to address.

What we quickly realized, however, is that operating in a trust-intensive industry changes the nature of startup building completely. In many sectors, startups can initially compensate for organizational weaknesses through aggressive growth or marketing. In student accommodation, operational inconsistency immediately becomes reputational vulnerability.

We realized very quickly that, in student accommodation, people are not simply trusting a platform — they are trusting where they will live, who they will live with, and whether they will feel safe in a foreign country. Trust is not a branding exercise. It becomes operational infrastructure.

This realization shaped almost every strategic decision we made as a company.

Rather than operating as a simple open marketplace, TheICircle adopted a governance-intensive model focused on reducing uncertainty for both students and hosts. Accommodations are verified either online or in person. Hosts go through onboarding and screening procedures. Students receive personalized matching based not only on budget and location, but also on lifestyle preferences, cultural sensitivities, university proximity, and co-living expectations. In some cases, even details that may initially appear secondary become crucial. Certain students may require women-only accommodation environments due to cultural or religious reasons. Others prioritize quiet study-oriented households, proximity to specific universities, or compatibility with host lifestyles. What emerges is a model that functions less like a transactional platform and more like a structured trust intermediary. This positioning also shaped how we approached growth.

One of the most underestimated challenges faced by startups is legitimacy building. New ventures enter the market without reputational capital, historical track records, or established stakeholder trust. Customers are therefore asked to trust organizations that, structurally speaking, have not yet fully earned that trust. For startups operating in sectors involving housing, safety, and international mobility, this challenge becomes even more sensitive.

As a consequence, many of our early strategic decisions were designed not simply to improve operations, but to signal reliability. Verification procedures, direct communication, personalized support, transparency, and continuous coordination all became mechanisms for reducing perceived uncertainty.

Even participating in startup ecosystems played an important role. During its early stages, TheICircle reached the final phase of StartCup Lazio 2024, gaining visibility within the regional entrepreneurial ecosystem. Beyond exposure, experiences like these contribute to legitimacy building by reinforcing external credibility and expanding institutional networks.

At the same time, building a startup also means confronting the absence of organizational routines. In the early phases, founders operate in a constant state of improvisation. Customer support, partnerships, onboarding, crisis management, operations, marketing, and strategic decisions often overlap simultaneously within extremely lean organizational structures. The romanticized version of entrepreneurship rarely talks about this reality. Most early-stage startups are operationally fragile systems held together by adaptability, continuous learning, and intense coordination efforts. Over time, survival depends on the ability to progressively transform improvisation into structure.

This transition became increasingly important as TheICircle expanded its host network and student placements. As operational complexity increased, we were forced to formalize onboarding systems, standardize communication flows, clarify internal responsibilities, and strengthen coordination mechanisms.

At the same time, scalability itself became a strategic trade-off. The startup ecosystem often glorifies hypergrowth, but fragmented and trust-intensive industries require a different balance. Scaling too quickly without adequate governance structures may generate operational failures capable of destroying trust much faster than growth can create value.

For this reason, TheICircle adopted a relatively lean and sustainable approach to expansion. In the early stages, much of the company’s growth relied on organic channels such as referrals, WhatsApp and Facebook groups, student communities, and network effects rather than aggressive advertising spending. This slower approach may appear less attractive from a purely growth-oriented perspective. However, in markets characterized by uncertainty, sustainable trust creation often matters more than rapid volume expansion.

This is perhaps one of the most important lessons emerging from the broader concept of the Liability of Newness. Innovation alone is rarely sufficient for startup survival.

What ultimately determines whether a startup survives is often its ability to progressively build legitimacy, routines, governance structures, stakeholder relationships, and operational consistency while operating under resource constraints and continuous uncertainty. In other words, startups survive when they become structurally reliable. The broader startup narrative often celebrates disruption, speed, and visionary thinking. Yet building a company inside a fragmented market teaches a much more pragmatic lesson: before startups can scale successfully, they must first become organizations people genuinely trust.

The experience of building TheICircle demonstrated that overcoming the Liability of Newness is not about eliminating fragility entirely. Fragility is part of the entrepreneurial process itself. The real challenge is progressively transforming uncertainty into structure, relationships into organizational capital, and trust into a sustainable competitive advantage. And for many startups, that may be the hardest innovation of all.

This blog post draws from my graduate thesis entitled "Countervailing the Liability of Newness in the Student Accomodation Industry: The Case Study of TheICircle”. In March 2026, I discussed this thesis as the concluding step of my Master of Science in Business Administration at the University of Rome Tor Vergata, School of Economics.

Thank you!

Caterina