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Fooled by Randomness, Start-up and Serial Entrepreneur

October 8th, 2008 · 1 Comment

Andy Sack posted a list of things that will make a deal smell like money. I agree with most of the items on the list, but I don’t agree with the first one — "Proven entrepreneur — someone who has sold a business before for 20MM or more". I think we give way too much credit to serial entrepreneurs.

I recently finished reading Fooled by Randomness: The Hidden Role of Chance in Life and in the Marketsby Nassim Nicholas Taleb. What a great book! If you haven’t read this book, run to the bookstore NOW and get it. You won’t be disappointed! 

Wikipedia has a brief summary of Fooled by Randomness.

This book made me think: how much of a start-up’s success is due to luck? When a company becomes successful, there are tons of media coverage on the company founders and management. Entrepreneur’s vision, management’s execution, and hard work have a lot to do with a company’s success. But, I think that being at the right place at the right time also plays a role in start-up successes.

This made me wonder: what’ll happen to an entrepreneur who is starting his second or third company after initial success? Is his chance of success higher or lower?

The conventional wisdom is that serial entrepreneur is golden — they’ve been there, done that. And their next venture is more likely to succeed. After reading this book, I’m not so sure.

And this is consistent with my own experience of working at start-ups. The founder of a start-up company I worked at was very successful at his first venture ($100 million+ exit). Because of his success, he had no problem to raise venture funding for his second and third companies. But, neither of the companies went far. I have seen plenty of so-called serial entrepreneurs keeping failing after their initial successes.

On the other hand, looking at "home runs" in the high tech industry — Google, eBay, Amazon.com, Dell, Microsoft, Cisco, Yahoo, Apple … they’re all founded by first-time entrepreneurs.

Next time, when a start-up company tries to recruit you to join them, don’t be "fooled" by their founder’s past entrepreneurial success — they could just get lucky the first time around. What’s the chance luck strikes twice? 🙂

Tags: Start-up Success

1 response so far ↓

  • 1 Ted Howard // Oct 10, 2008 at 12:24 pm

    My 0pinion on this is that a serial entrepreneur has experience and wisdom. When they need to increase the hiring rate, they have that experience. When they need to raise a round of funding, they’re done that. And so on ad naseum.

    I don’t think that means that they will be more successful. It means that they will do things faster and spend less time and effort on them, leaving them free to do more, do ‘other things’, or do thing better. While a new entrepreneur may be overloaded trying to both learn how to raise funding and actually raising the funding, an experienced entrepreneur will only have to raise the funding. That’s an advantage in terms of resources and possibly in terms of the quality with which such tasks are done.

    I think ‘luck’ in some form (http://blogmaverick.com/2008/10/04/how-to-get-rich/) is the key ingredient to startup success.

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