Succeeding as an entrepreneur comes with many benefits: heightened credibility, new skills, broader and deeper connections. However, once you’ve succeeded, are there any downsides you should worry about?
There are substantial benefits to having already been a successful entrepreneur. (In addition to the things listed above, one specific example: My new “After the Firing” analyses — details forthcoming in the coming months — suggest that being a serial entrepreneur may be the strongest protection against the founder’s being replaced as CEO.) However, on the other side of the ledger, I’ve observed several new challenges faced by entrepreneurs who have succeeded. Among those challenges are the following:
- Less driven to succeed? — Once you’ve succeeded, you may feel less of the hunger or drive needed to motivate yourself to work 24/7 on your next venture, and to persist when faced with the tough hurdles that are sure to arise.
- More pressure to succeed BIG — On the flip side, serial entrepreneurs may also feel pressure to have their second venture be even bigger and more successful than their first (“I’ve built a $100M company already; this next one is not worth doing unless it’ll be more than $250M”).
- One-hit wonder? — Serial entrepreneurs may also feel pressure to prove — both to themselves and to others — that they aren’t a “one-hit wonder” or that they got lucky with their first ventures. (In a related vein, a VC recently observed to me that in some sectors, he felt that the most successful entrepreneurs were those who continually pushed into the next generation of technologies with each of their ventures. In those sectors, he strove to invest in entrepreneurs who had already succeeded. In other sectors, though, he felt that each entrepreneur usually was capable of having only one good idea, and that in those sectors the best investments were in “fresh blood.”)
- Cynicism from others — After he had had a lucrative exit from his first venture, one founder (“Dave”) had trouble convincing the employees in his second venture that his goals were aligned with theirs. In particular, they doubted that he was fully engaged with the venture and worried that he was not making decisions consistent with everyone else’s desire to maximize their financial gains. In this vein, he would hear such comments as, “What does Dave care? He’s already made his millions,” or, “Dave doesn’t have as much riding on this succeeding as we do; that’s why he’s not here until midnight!”
Have you seen these — or, even more important, other — challenges faced by entrepreneurs who had been successful in the past?
What stories or lessons can you share about how those serial entrepreneurs dealt with (or didn’t deal effectively with) those challenges?
Noam, I helped build a multi-million dollar commercial real estate firm in three years. During year four I lost my motivation and drive. I new this was the cost of succeeding. I now know that I will always have to have my hands in many pots to keep the skip in my step! My second career is helping undercover entrepreneurs make the leap from corporate to creating, building,and sustaining their dream jobs. What I love it that I get to ride their wave. I give them the kick in the pants to get it done and they give me the inspiration to keep searching for those undercover entrepreneurs.
I was the founder of an IT security company that was acquired in 2006, returning 25x to our investors, I can vouch for several of the “perils”.I’ve found that a perception sometimes exists that one may be less driven now to succeed — not true in my case, as it isn’t in the case of many serial entrepreneurs I know, but the perception itself is a hurdle to overcome. The only way around this that I know is by demonstration of commitment, whether that means hours, or other forms of skin in the game.As for this devolving into cynicism, I would guess that that is largely self-inflicted when it happens, i.e. lifestyle excesses or other forms of obnoxious and alienating conduct.I can also confirm the pressure to repeat the previous success and to do it on a larger scale than whatever the previous one was. In my case, this comes as much from within as from outside … but I’m not sure it constitutes a problem :-)
Always very thought-provoking posts Noam. The repeat entrepreneur who hasn’t taken up too many hobbies can be great. But some of our biggest winners are either first-time ceos who have been in very successful companies prior so they know the playbook, or repeats who have been in the seat before but had just modest success (or failure) relative to their dreams. The size of those dreams vary widely and is probably the biggest factor in continued leg drive. For example look at Dave D from Peoplesoft for example who has started yet another company.
Noam-I’ve seen the ‘motivation erosion’ syndrome impact serial entrepreneurs. One situation in particular highlighted misalignment between the CEO and the team because he had invested millions of dollars in the Preferred stock from his prior successes. This one did not work out well for multiple reasons, but different motivation between the ‘less hungry’ serial entrepreneur and the rest of the ‘hungry’ team was a factor.My sense is that serial entrepreneurs can be most effective when they are known factors to the investors yet remain highly motivated to achieve additional success- whether due to a desire for greater financial success or the equally powerful force of ego.
I have seen a couple situations where success leads to vastly different feelings going forward. It seems that some who have been successful or will likely be successful with one venture who then start another can sometimes be less motivated and their staff knows it. Some people on the staff, typically those more aligned with the founder in terms of equity, aren’t happy about this and others don’t seem to care either because they don’t have the equity concerns or they simply just like the job and could care less about big financial gains. It doesn’t make for a great team dynamic and probably won’t help the founder retain the best talent.However, when I look at the FeedBurner founders, my colleagues for a couple of years, I see guys who always want to step things up to the next level and hit a higher mark. These are the types of serial entrepreneurs one looks to back as a VC. Guys who always strive for the next rung on the ladder and seem to get more and more motivated as time goes on.
Success is not just making money. That’s not how entrepreneurs, let alone people generally work. Making money is a component of success (and certainly the easiest to measure) but the best entrepreneurs define success to include pride of craftsmanship, global impact, mentorship and other factors in addition to making money.Defined this way, there is plenty of motivation for serial entrepreneurs after just one financial success.If someone just wants to make money, there are much easier ways to do it than startups…just take a look at < HREF="http://www.guardian.co.uk/business/2008/oct/18/banking-useconomy" REL="nofollow">this guy<>.
Noam,I just returned from a conference where I got a chance to hang out with a several very successful serial entrepreneurs who are on their 4th and 3rd ventures, respectively. Having started 3 companies myself, the only one that I think is really on the mark is the desire or “challenge” to make the next venture bigger than the previous. If you’ve already proven you can do X twice, you challenge yourself to see if you can now do it better, or bigger, or more efficiently, etc. I don’t buy the concern about misalignment of interests, as that’s coming from somebody that doesn’t understand there is some ubiquitous degree of misalignment of interests in any startup. The investors have interests that are misaligned from the founders, the founders are misaligned from the employees, the large option holding employees are misaligned from the small option employees, the current comp motivated sales force are misaligned from the small option employees. The job of the management team is to minimize all of this via the various mechanisms available to them (option grants, titles, roles, vesting, acceleration, transparency, consistency across the organization w/ respect to comp, etc.), and it only surfaces in companies where there are other motivational or more seriously misaligned interests.As to the hypothesis that some serial entrepreneurs are less motivated the second time, i’ve never personally seen that. I see people who are more intent than ever to maintain their reputation, prove it wasn’t a fluke, etc. So, i agree that serial entrepreneurs feel pressure to prove it wasn’t a fluke, but i don’t think this is added pressure or stress, i think it’s consistent with the pressure that serial entrepreneurs put on themselves regularly. These are people who are perfectly comfortable in that pressure cooker.
NoamI believe that all the challenges you list occur quite frequently. The interesting question is figuring out when these challenges are likely to occur and how debilitating are they likely to become. I’ll add two additional challenges and then speculate on when they are likely to occur. Founders often suffer from the ‘second system syndrome’ - essentially trying to correct all the problems they ran into in the first company in the second. The problem is that by doing so they can end up with an organization that can get bloated and lose its creative mojo. A close cousin of the ‘second system syndrome’ is the ‘ sophomore slump’ where a founder who has gone through a long process nurturing an idea for the first company feels that he/she has figured out the formula and jumps onto an unworthy idea without taking the time to fully vet the idea. VC’s who are influenced by the earlier success may also play a role in this by letting a not-so –good idea slip through a less rigorous screen. Here’s some speculation on factors that make these challenges more likely- Did the previous venture have a successful outcome for the entrepreneur? If so, he or she is likely to follow the same playbook. This is a problem is the challenges facing the new company are different from those of the first one. If the outcome in the first company was not satisfactory, the entrepreneur is likely to try and ‘never make that mistake again’. The problem is often defined in terms of actions (such as going public) that are appropriate in certain circumstances.- How much personal and professional baggage has the entrepreneur picked up between ventures? Entrepreneurs who suddenly get wealthy often pick up new hobbies (golf), join new organizations (non-profit boards), and take on new projects (writing books, personal blogs) All these activities require time and commitment. More importantly, these activities can provide other sources of gratification that make the venture’s success less important in the overall hierarchy of needs. - How old is the entrepreneur? After 40 someone who has already succeeded a few times may not feel like hanging out at the office late with the younger engineers and salesmen. A lot of the entrepreneurial experience comes from the sense of camaraderie of being in the trenches together and sharing the experience. This is difficult if there is a significant age difference between the founder and the bulk of the founding team. ( I realize that this is a gross oversimplification but I think it is an indicator)
Noam,I am interested to learn what you think of multi-level (network) marketing. That cartoon of the man lighting a cigarette with burning money certainly seems true for real multi-level marketers… until they break through. I would like to know your observations of this fascinating aspect of American life and culture. Edwin