Serial Entrepreneurs Probably Frustrate First-Timers, But They Can Still Fail
First-time entrepreneurs spend a large proportion of their time trying to raise money for their startups so one can only imagine that they must read the news of companies like Color or Airtime founded by serial entrepreneurs Sean Parker and Bill Nguyen flopping and feel frustrated.
Color and Airtime both managed to see early investments of tens of millions of dollars, mainly thanks to the clout of Nguyen and Parker. This fits with the results from studies which show that serial entrepreneurs are able to raise funds in 21 months as opposed to first time entrepreneurs who require about 37 months, a time period many of them don’t have.
While it’s certainly true that there are many venture capitalists out there who are more than willing to put their money into first timers, it’s a sad fact that serial entrepreneurs are a statistically safer bet for investors. In a study conducted at Harvard, it was found that entrepreneurs who had already taken a company public have a 30% chance of succeeding a second time, while first timers only have an 18% chance of success.
Color and Airtime may both be considered to be flops considering the decreased value of Color when acquired by Apple and the stagnant user base of Airtime, Nguyen and Parker are still looking like a safe investment thanks to their track records. One of Nguyen’s companies sold out for $850 million in stock and Parker founded Napster and went on to be Facebook’s first president. Even now, Color managed to gain back the majority of money invested.
This might not be a bad thing for first timers though and goes back to the fat versus lean startup debate. While some believe that starting off fat may be the best way for a startup to succeed, New York based financier Fred Wilson says, “I have never, not once, been successful with an investment in a company that raised a boatload of money before it found traction.”