The legendary Dave Winer has written a very interesting post about why the Democrats must turn their backs on the Clintons and in doing so points to some interesting ideas as to why the successful serial entrepreneur is such a rare beast.
To be honest, I’m not really sure that I buy his anti-Hillary argument, but think his analysis of tech startups is very compelling. This isn’t because I’m pro-Hillary by the way - the surest way to get another Republican in the White House is to let Hillary carry on and every day she continues is another Republican victory. But the idea that she won’t be trying so hard the second time around doesn’t seem to be a true reflection of current events. After all, this isn’t her second time, despite her efforts to claim inclusion in many of Bill’s achievements. This is a woman who will go to any lengths to win, despite have a $109 million cushion from Bill’s earnings in the past 7 years. And while the rewards of politics do certainly include money, it’s really all about power - and she wants that badly.
Back to entrepreneurs though. I’ve often been puzzled why entrepreneurs are so rarely successful more than once. Indeed, success in one startup almost seems to doom the new venture, or certainly doesn’t guarantee it any more success than a team without a track record of a huge home run. Despite this, previous success makes it much more likely that you’ll attract funding second time round. Hmmm.
What do I mean by “serial entrepreneur”? People like Branson is frequently used as an example of a serial entrepreneur, but that’s not really true. His role in any startup within Virgin is much more akin to investor than the person who makes the idea happen. The sort of person I’m referring to is someone who exits a business successfully, starts again from scratch and exits again. I’m really struggling to think of high profile examples here, but Jim Clark of Silicon Graphics, Netscape and a few others, is the only one that springs to mind.
As Dave Winer writes:
The first time you ran, you had to sacrifice everything to win. Failure was something you visualized around every corner, but something you could never deal with, so you made sure you didn’t have to. You did whatever it took to make it work.
The second time is different. Now you expect success not failure. You’ve mostly forgotten the sacrificing you did the first time, but you remember some of it, the long hours, the lack of sunshine and exercise or a personal life. This time, you want success on your terms. It’s not enough to win, you have to win the way you (feel you) should have the first time.
Problem is, that’s not how success works. If what you seek is worth something…….there will be competitors, and if they don’t bring the same conditions you do, if they’re willing to sacrifice the way you once were but aren’t any longer, well, you’ll lose.
I think the “expect success” is perhaps the key to it. Someone who has made a lot of money once tends to think that they’re somewhat infallible and forgets that the line between great success and total failure is very thin. Everyone I’ve ever known who achieved success in business can look back to at least one lucky break that made them turn the corner, or kept them from bankruptcy and the clever ones never forget that defining moment.
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Hi Russ,
I think it’s not about “expect success” as we all have some expectation of success when we start our first venture (or we wouldn’t get started at all). It’s that hope for success that lets us push through the threat of failure.
I think the biggest factor is whether a successful entrepreneur retains the skills that allowed them to get their venture started in the first place. In technology startups, the key at the beginning is product and technical expertise. If you are successful, you need to develop skills like sales and investor relations as these become your primary job. Most entrepreneurs get sucked into this latter category and lose touch with (or lose interest in) the original skill set that allowed them to get started.
In this case, they have to approach their future startups in a completely different way than they approached the first startup. A former engineer might need to raise money up front and hire some engineers instead of bootstrapping and writing the code themselves - changing their strategy completely. This greatly reduces their chances of success by preventing them from building upon everything they learned about starting a company the first time around. It’s the same reason few athletes make great coaches.
Sean
Russell: I have to agree with Sean in his assertion that there are many different skill sets involved with bringing a startup to life or running a growth business, and that might be the rub. I especially like the part about athletes being good athletes but maybe not good coaches (or sportscasters, for that matter!) I don’t think most people, or entrepreneurs, have it in them to always be striving, straining, gaining, and stressed. When someone succeeds in business it is because they did all those things. And naturally, they want to take a bit of a break from those things and enjoy the fruits of their labor.
Good thinking Russell. I would want to add to that the “Fooled by Randomness” factor*. That is, you should compare the success rate of all second-time entrepreneurs against the success rate of all first-time entrepreneurs. Could it be that a great deal of first-time successful entrepreneurs can be explained by them being mostly lucky (but hard-working) fools of randomness**?
* = did I remember correctly that you and Carlo were fans of Nassim Nicholas Taleb too?
** = as defined by NNT, not the commonly understood definition
Thanks for the comments!
@Tommie - yes certainly a fan of Taleb, though not sure about Carlo! But your suggestion does sound like the basis of an interesting academic study! There’s not been a lot of work in this area that I know about.
@Sean and Anthony. I think there are actually many reasons why second time entrepreneurs are apparently rare. Though I did ask Fred Wilson (the epinonymous VC) for his take on this and he posted a response on Dave Winer’s original post - apparently couldn’t make comments work here. He said that 10 out of 17 companies in his portfolio had achieved success before and cited as “ego” being the driving force second time around.
For me, entrepreneurship is really, really hard and you know exactly how hard the second time around, which probably puts many off. Personally, if I had the choice, I’d burn my entrepreneurial needs on being an angel investor and advisor. And let some other poor bugger work all hours and have the sleepless nights.
I suspect that this is the route taken by most successful entrepreneurs who have managed a highly profitable exit.
Russell