This guest post is written by Glen Kelman, the president and CEO of real estate startup Redfin. Previously, he was a co-founder of Plumtree Software, a Sequoia-backed, publicly traded company that created the enterprise portal software market.
American lives, F. Scott Fitzgerald once said, don’t have a second act. As the New York Times’ Gary Rivlin reported in his profile of PayPal co-founder Max Levchin, Silicon Valley hasn’t noticed. More companies than ever are being started by serial entrepreneurs. The second coming of the Internet bubble, Web 2.0, has in some ways been the love-child of Entrepreneur 2.0 — wealthy from his 1990’s success, restless from his time off. Venture capitalists have lined up with funding.
While second-timers’ experience may lower the likelihood of failure, from 82% to 70% according to one study, no one has noticed that it also seems to limit the magnitude of success. Every Silicon Valley colossus — Amazon, Apple, Dell, Ebay, Google, Microsoft, Oracle and Yahoo! — was started by a first-timer 30 or under. Facebook was founded by teenagers.
Yet we still insist on believing in the serial entrepreneur with the Midas Touch. We make celebrities of our entrepreneurs because we’d rather believe in talent than luck. And we tend to overlook reasons why second-time entrepreneurs are actually worse, not better, for their experience.
For example, many second-time entrepreneurs are so intent on replicating their success that they manufacture an inferior idea where the first one grew naturally out of a problem that had been bothering them. Some become so obsessed with how great their first company was that they spend all their time trying to copy it rather than building something different and new. They often hire top-heavy teams from past ventures, or strain to grow fast enough to meet higher expectations. Most strike out on their own without the partners they depended on for candor in their first success.
And for all the rhetoric about working just as hard the second time around, few second-timers operate at the same level of savagery that drove the early, destitute years of their first startup. Most don’t even try. A friend of mine had a great idea, raised money from his old investors, then took a three-week yachting trip. Another is often reported by his subordinates to be “golfing in outer space,” a catchphrase for exotic vacations that mere mortals could never afford.
No one is likely to call us out on it. I was on a panel last Thursday with a three-time entrepreneur who said that the typical money-raising process is one of the only real sanity checks a business plan is likely to get. But his current company never got that early scrutiny: because of his experience, he said, he was able to raise capital before really understanding his target customers.
I’m not even sure the experience investors think they’re buying is the right kind of experience. I know this from my own career. Like the PayPal entrepreneur, part of my interest in a second startup was a shot at being CEO. This means that what I used to be really good at — designing software — I don’t do as much of anymore, and what I never had to learn how to do — manage people – I now do all the time.
Meanwhile, some of the things I have learned aren’t much help. The chairman of the company I co-founded in 1997 often complained that “you don’t even know what you don’t know.” But that ignorance about a startup’s challenges lets first-time entrepreneurs think big. Once you learn your limits, and you reflect on your shiny new reputation, you get cautious.
Of course, none of this will stop an entrepreneur from starting another company. The way that Charles Dickens once described his depression — as the child inside himself who won’t stop crying — always seemed to me to be a better description of the entrepreneur’s insatiable unhappiness with a world that could be so much better.
And it probably won’t prevent many second-timers’ companies from reaching safe, profitable outcomes. But to be really great, I wonder if second-timers have to forget some of what it cost us so much to learn.
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Stop with the guest posts. We only come here to hear from Mike and Duncan.
Good post. Sounds like something that is the case in other realms of life, not just entrepreneurship.
Contrary to “StopIt”, I welcome the guest posts. They’re better than Erick…
do you guys practice at being assholes or does it come naturally?
They might as well be called “Serial Enterpreneurs” because the second time may not be the last time..
Blazing fast video search
http://www.meetingflex.com/SearchVideo.aspx
“For example, many second-time entrepreneurs are so intent on replicating their success that they manufacture an inferior idea where the first one grew naturally out of a problem that had been bothering them.”
It’s not about building up and selling out. We sold one of our huge products over a year ago and we’re still here about to release the first Canadian search engine ever.
If you’re a one product “entrepreneur” then you will not repeat.
That’s the problem with these web 2.0 business models. Bill Gates and Warren Buffet did not stop when they could no longer sell calculator Altair8800 software, or whatever. They adapted and expanded.
The exit strategy IS the strategy today and the market can not possibly absorb that much failure as an upsell. It WON’T. Just like the subprime mortgages.
“do you guys practice at being assholes or does it come naturally?”
For me it’s natural. I don’t filter my thoughts and it offends people.
When you hit your first perfect 10 in the olympics, your first championship ring, your first grad school A, is the next ever as sweet? Doubt it.
I wrote tonight about the Community CEO and why it won’t work. (click my name if interested)
What’s interesting is that most might think the second time you have more to prove than the first time.
Love the post! I wouldn’t mind more of these type of posts. Interesting perspective but it makes sense upon reflection. The flip side of the argument though is that when a young entrepreneur hits it big like Mark Zuckerberg, Larry, Sergey, etc, people often give them way too much business credit. IMO, luck plays the biggest role in their successes.
I wonder how different it is for entrepreneurs whose first company was not successful. Intuitively they would have gained valuable experience but be driven even harder to make it work since they might have come close to success.
ok who’s the marketing genius that decided to stick “serial” in front of “entrepreneur?” am i a “serial investor” because i bought more than 1 stock? or maybe a “serial father” because i have more than 1 kid? or maybe a “serial programmer” because after i wrote that first program i wrote a bunch more!
don’t use that again. don’t be a serial offender. i’m not kidding. i’m totally serial.
We (your readers) learn from the best…
Good point Gilltots, but it is possible to invest in many companies at one time, while it’s hard to start or lead more than one company at a time. At least in this sense, entrepreneurship tends to be sequential or serial…
Kudos on a well written post. People don’t take a step back and make fun of themselves or analyze their flaws nearly enough.
The fact of the matter is that these serial entrepreneurs have made their fortune through previous entry starups, have been acquired -and essentially financially wealthy individuals- but don’t put a dime of their own money into the next project. they don’t, because the capital community makes it extremely easy to gamble with money other than their own. Every goddamn venture capital firm is lining up at the door handing out cash as if it’s holy water. The VC community has lost or doesn’t have any discipline and unfortunately, more cases than none, those backed startups rarely bring any value or substance once the hype has died.
I applaud the angel groups who take minimum 6-9 months before writing any checks. they study the party carefully because it’s their money rather than the firms ‘portfolio on the line.
In any case, nice post for ca change!
Cheers Glenn
Great post! I like the idea of having occasional guest posts.
FWIW being as “asshole” comes naturally to me, too, but I find that it’s not so much me being as asshole as others wanting responses to be sugarcoated in “managerial” speak
Seems like a sales pitch just to get techcrunch readers to go to Redfin’s site.
Glenn, get your own blog.
And Michael, stop being a baby. Did the big bad commenter’s hurt your feelings?
What a refreshing post. Informed, insightful, honest…Glen you should start a blog, ‘Reflections of a Former Nerd turned CEO’
He should have made a distinction between poor serial entrepreneurs and wealthy ones. There is a huge difference, one NEEDS to achieve some level of success while the other treats a new business as a game of chess. Both may have passion and deep commitment in their ideas but at the end of the day, one has daily reminders of failure while the other of success (basement vs castle). There is incredible knowledge that can be gleamed by both though that is of value to everybody in the business community.
Luck has more to do with success then talent though, just because somebody got hit by lightning once doesn’t mean their odds have suddenly increased to get hit again, first time or serial.
Jon
One of my favorite Yvon Chouinard quotes is “only from the extremes of comfort and leisure do we return willingly to adversity”. That said, I’m generally more skeptical of execs AND founders who have already made a ton of money, and want to get back in the game.
I’ve witnessed too many highly comfortable individuals *want* to get back into the startup world because they remember the good days and they’re bored, but bail when they begin to remember just how hard it is to build a company. The more $ they made, the harder they’ve forgotten how to WORK.
Startups are hard, whether it’s your first or fourth. In my opinion, you’ve gotta have something driving you past the point where you consider giving up — the “eye of the tiger” (ughh, Rocky too?). Maybe it’s pure competitive drive, maybe you just can’t stand the thought of having to get a “job”, or maybe you just have to show some assholes that you’re better than them.
Whatever it is, if you don’t have that drive and especially if you’ve already made your money — you’re far more likely to bail when the shit starts to fly.
Glenn had a cool post over on Guy Kawasaki’s blog a few months ago - I enjoy reading his articles;
gilltots, whats more serial?
Manbearpig or the smug cloud? For serials!
Great post Glenn - Hope things go well with your third and forth ventures
I welcome the alternatative writing style. In my book TC has made real inroads lately. While it’s always been worth the read, historically that’s been because of the referrals to somewhere or something else, and the opinions linked to each. I’ve always used TC as a market research tool to find out who is doing what and how.
The new feature content creeping in here and there is valuable in it’s own right, and interesting not just because it sends you somewhere else. It’s almost like TC is becoming a destination as well as a roadmap.
Sure, I’m on the ball. I know who is doing what and how, and in some cases I even feel like I understand the why, based upon a picture built up from different sources. But how cool is it every now and then to read about the actual people behind the what, how and why?
Mix it up, and you’ve got something really good going on here. After all if I simply wanted referral there are any number of blogs and sites now detailing the 200+ ways that someone else has built a widget that … etc.
btw. Go Mike! Get personal with your audience
See #4
great article Glenn and Mike and I enjoyed this as much as anything any regular has written. Fresh and honest perspective is what this koolaid drenched valley needs. Yeah, I know of what Glenn writes… all too much.
A very good post indeed - ironically coming from a ’second timer’:-)
Oh, and talk about irony, I just came here from reading this:
http://money.cnn.com/2007/11/1.....2007111414
Nice post. Thank you.
Hey Glenn– great great great post.
the problem is that your first start up is most likely something you are truly passionate about, something you thought out for years, because you were pissed off that there was no product like the one you wanted to use.
The 2nd time around, ideas aren’t as hot because you used up your good one already, or much worse is that you just pick an idea because its the bandwagon thing to do and everyone is doing it.
Great post!
5tacos
Who cares if it’s a guest post, Kelman is the media’s #1 gigolo - Redfin is the RockStar here - keep going and turn the industry into a transparent conversation for the consumer.
Congratulations Glen on a phenomenal post! What I meant was to praise you and offer my advise on a change of executive co-editor? Michael, you still have the strength to criticize. Erick Schonfeld is simply promoting start-ups and failing to critically evaluate. Erick was better off at Business 2.0 while Duncan Riley is much more formidable for the co-editor position.
I reread the post and Glenn and I really have a lot of the same thoughts….As we get ready to release the first Canadian engine ever and finally show google how search SHOULD be done, we are going through many of the same struggles he mentions that entrepreneurs go through.
I’m proud of the fact that my team has been proven to be one of the brightest in Canada and as we continue to release new blockbuster products, it is important for us to keep in mind the wise advice Glenn writes in his post, especially as we ascend to our greatest triumphs to date.
Great post.
I’ve seen parts of this happen — some of the reason for the lameass Web 2.0 sites is because VC’s often times can’t see beyond a pedigree and to the heart of the stupid idea being presented: http://www.fuckedsuit.com/?p=6
The phenomenom isn’t limited to the tech industry by any means. Think about bands that came out of nowhere and released hugely successful debut albums only to fall victim to the sophomore slump and never release anything close to their initial work. No matter what we’re talking about, it’s tough to keep the passion alive once you’ve “made it”.
Now I like Redfin
Chris R.:
Stop.
Karma is a bitch.
And not yours either.
I love too how many serial entrepreneurs will admit that it’s ridiculous that VC’s will invest in them the second time with no business plan, no marketing strategy, just a simple markup of an idea.
Is it a ‘proven management team’ when the guys don’t even know their market? A lot of serial entrepreneur web 2 companies seem to be folding…. maybe it’s time to invest in some more 20 year olds who smell bad, working out of a studio apartment, but aren’t worried about the mortgage or the family time or anything else. I like guys who jump all in ’cause they have nothing to lose
For the record I don’t consider Glenn’s company web 2.0… redfin has great potential and my friend who works there loves working for him
Glenn is a funny guy (in real life); and what he has done so far with Redfin is pretty amazing. Go Glenn! I hope Zillow buys you for $100 million plus! You are practically neighbors.
“Venture capitalists have lined up with funding.”
One thing getting on my nerves lately is how many blogs make it sound as though VCs are just throwing money at anyone who walks in the door with an idea on the back of a napkin. I talk to a lot of people going through the rounds and it’s not easy raising capital. The best bet seems to be if you’re known, have done it before, and therefore probably already have an existing relationship with the VCs, so perhaps this in itself is a strong driver in perpetuating this cycle. The VCs want a repeat performance, so someone who’s been successful in the past and has the existing relationship will much more easily get their new idea funded than the ‘young’ (unknown) person.
Great post, much enjoyed reading it. I’m not sure that I buy into the theory that second time entrepreneurs have a lower chance of achieving phenomenal success. I think its more simple than that - phenomenal success, by definition, is extremely rare. Being phenomenal successful with multiple startups is like lightening hitting twice.
thanks Glen, Good post.
I’m in the process of launching the first californian search engine EVER! . . . its the largest underserved segment ever left behind by google. . . despite of the big G being located in Mountain View, CA. what dumb asses!
Did you know if california was a country it would be the 6th largest economy ever! . . . even more relevant over $1,000B is spend on advertising by californian businesses a year. . . if I only capture 1 basis point of that advertising spend!
its ridiculous no one ever thought to launch a californian search engine. . . I’m gonna be rich. . . so rich!
Antje: Redfin has never quite been the darlings of venture capitalists, so I should have been less flip about their willingness to invest in just anyone.
Dazed: Real estate information sites wouldn’t want to buy Redfin because the acquisition would antagonize real estate advertisers. We’ve always known we have a long, interesting road ahead of us, unless of course we run out of money!
BJ: thanks for your kind comment. Redfin is a Web 2.0 company in that we were one of the first to combine data and tools from different online sources into one application: listings and government records on a map. Our application isn’t as social as we would like it to be, in part due to rules about commenting on other broker’s listings that led to fines against Redfin this summer, in part because our site just needs to get better.
To everyone who refers to the company as my company: Redfin is a group effort, and I like being part of the group (really true, even if it just sounds like a cliche). Thanks for all the kind words!
@41
Who in their right mind calls the people at Google d*******s.
Today Michael Arrogant called his customers assholes. (#4)
Today I read Techcrunch for the last time.
Great words from a familiar voice. Enjoyed the article.
#4
There is only one asshole here and it is me.
“Karma is a bitch.
And not yours either.”
Bad press is my press Sammy, bring it on.
Hey Glenn:
I’m a big fan of you and your company for your brazen defiance of the real estate infrastructure.
I wanted to ask you a question, if you’re still around..
I’ve got some realtor friends, and they sure spew some dirty filthy stories about your company; stories that you and I know are blatantly untrue. My question is: you know the real estate establishment is out to destroy you by any means necessary–and are actively attempting to do just that–how do you establish yourselves in a steadfastly old school market as a radical innovation? (I know you already have your foot in the door, but I’m talking about the mainstream, here.)
Thank you for the excellent post! We’ve recommended it in Venture Commons
Glenn - good post. Mike - good call - always good to shake things up.
Chris R - please go away. Or at least sign your posts with a link to your YouTube video so others can see the dynamic, exciting and vibrant work environment you work in (http://www.youtube.com/watch?v=_xKHz-UsMVQ)…. (people - please watch this - it’s a bloody classic).
Can’t wait to see your ’search’ engine fall flat on it’s face as you deal with the 40 hits a month you’ll be getting.
And word of advice: this is a comment thread about entrepreneurs - not piss ant college students who work NINE TO FIVE so why are you even here?