Are Second Time Founders Better?

Better is subjective, but we often hear that second time Founders are better, more investable, and more successful than first time Founders.

A big factor is if a Founder succeeds or fails with their first company. A second time Founder who already has a successful company under their belt is a completely different scenario than a Founder who’s first company failed. I’m going to focus on the Founders who failed and are giving it another go.

Hopefully, a second time Founder is better — through having learned about themselves and the process of starting and growing a company. Presumably, a second time Founder should be better at sales, product management, recruiting, raising investment, and telling their story. Even improvements across all of these areas aren’t enough to make the second company outcome different from the first. The incremental improvements across so many different areas of the Founder role and company can add up to larger aggregate improvement, but probably not significant enough in any single area to make the difference between success and failure.

So if incremental operational improvement across a myriad of areas isn’t enough to make a Founder better and to increase the odds of success the second time around, then what is?

Awareness.

Second time Founders are likely to repeat the same operational mistakes from the first failed company if they aren’t consciously aware of how things could have gone differently and how the process and components of starting a successful company actually work and are intertwined.

Here are some macro awareness areas that second time Founders can improve upon:

  • Themselves: Starting a successful company is the hardest professional thing anyone can do. It is mentally, emotionally, financially, and physically taxing. A Founder who knows how they think, act, and react is much better able to navigate the mercurial journey of starting a company. Most first time Founders take the entrepreneurial leap before they are self-aware and as such, they have difficulty managing themselves let alone a product, a team, and a company. Second time Founders are much better equipped and capable of managing themselves and the other aspects of the company because of the self-awareness gained through the failure of the first company.
  • The Team: First time Founders are often naive and lonely. They can get desperate for people to take the journey with them. So desperate in fact, they will ask or let people onto the team that don’t belong there and who can’t contribute to the company’s roadmap. Having others along for the ride feels better than waiting for the right people to take the ride with. Second time Founders are protective of their team seats and they get much better at recruiting and interviewing. Second time Founders realize the second most important thing is having an exceptionally skilled and committed team. They hold the team seats in the high regard the seats should be held in and although they recruit with vigor, they hire with patience waiting for the right people.
  • Customers: It is likely a Founders first company failed because the company couldn’t acquire enough customers fast enough to warrant continuing. Most companies fail because of a lack of customers more than anything else. Yes, even more than a lack of investment. First time Founders aren’t aware of how challenging it is to acquire customers. Too often first time Founders have a “build it and they will come” mentality even if they know that almost never works. They can’t help themselves. By the time they realize customers aren’t going to just come, it is too late. The awareness second time Founders have around customer acquisition is paramount to the second company’s success. A second time Founder isn’t yet good at acquiring customers because they haven’t actually done it successfully yet, but the recognition that customer acquisition is and will be hard gives Founders a chance to get it right versus not having the awareness at all.

If you build it, will they come?

  • Problem and Product: First time Funders undervalue and under appreciate the time needed around understanding the problem and aligning the product with the problem. We have clients at AWH that have spent a decade or more around a problem before attempting to solve it with a product. It doesn’t always have to take this long, but it doesn’t happen overnight either. Moving and iterating quickly on a product starts with deep problem understanding and working closely with customers. Second time Founders understand the value of the problem understanding and product iteration time versus rushing to force something to get built on top of a misunderstood or low value problem.
  • Advisors: Similar to letting the wrong people have a team seat, first time Founders will listen to and take advice from the wrong people. First time Founders want to be and feel validated so an advisor that tells a Founder what the Founder wants to hear will be music to the Founder’s ear. First time Founders quickly figure out that most so-called experts and advisors don’t actually know what they are talking about, but by then — time, energy, and money has been wasted. Second time Founders will listen to potential advisors, but they do so with a trained ear the second time and are much better at qualifying who can help and who can’t.
  • Investors: Investors do like second time or even more experienced Founders better than first time Founders because they know that these Founders have gained more awareness across the spectrum of the things it takes to build a successful company. Often a failed first time Founder is more appealing to investors than a new Founder because the investors know the new Founder has a lot of learning to do. Investors invest in people and it is less risky to invest in Founders who are more aware than not. It’s that simple.

Founders can gain a tremendous amount of awareness through their first company whether the company succeeds or fails. This awareness is what can also help the Founders to be better and to increase the odds of success for their subsequent companies. Awareness is always the first step to any change and improvement. Being a Founder is no different.

-Ryan Frederick, Principal at AWH

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