Singles Not Home Runs
Every founder I talk to thinks their business is going to be the next billion-dollar winner. I love the positivity of people in the entrepreneurial world, it’s one of my favorite parts of being in venture capital. There are a number of high-profile first-time founder monster successes, but they are the exception and not the rule. Most of the founders that build unicorn companies are at least second time founders with some learnings from a prior experience. While it is great to swing for the huge home run ball on your first attempt, don’t lose sight of the fact that a solid single or double on your first at bat is an absolute win.
The venture world is full of big dreamers. The founders and the investors in the space are all shooting for the moon on the daily. It is infectious being around people trying to do huge things, and the massive successes get the headlines. It is also important to remember that the venture capital market functions on the J-Curve, where a small number of winners will drive the outperformance of a VC fund. This means that VC investors are highly incentivized to push every founder in their portfolio to go for the deep ball even if it significantly increases the risk of a wild strike out.
If you are a first-time founder, you can look at stars like Mark Zuckerberg or Evan Spiegel. They founded Facebook and Snap while still in college. It is definitely possible to do this, change the world with your first business. It is just uncommon. There are many more stories of second or even third time founders who hit it big. Reed Hastings ran another startup Pure Software through an exit before starting Netflix at age 37. Daniel Ek started Spotify at 23 years old, but he had already been in a senior role at a company that sold to eBay and then was CEO of two other companies that exited before launching Spotify. A more seasoned founder will have the benefit of their experience from their first effort, and they will also have the contacts and relationships from their first startup. They will have people that have worked with them previously that might be a fit for the new company, and they will have investors inclined to fund them a second time.
So, what does this all mean if you are a first-time founder reading this post? I am not trying to discourage you. Keep following your dream, but don’t worry if you can’t exactly see a path to a billion-dollar exit. A solid win on your first startup could form the base to allow you a bigger one the second or third time out. Thanks for reading today’s post, I hope this allows you to keep perspective as you build your startup.