There is much to be learned from entrepreneurs who have achieved success. Yet those second-time entrepreneurs could squander their advantages, such as easier access to capital and talent.
Most of those second-time mistakes come from a loss of intellectual humility which causes them to believe that their brilliance and dedication were solely responsible for their startup success.
Here are the 4 second-time entrepreneur mistakes to avoid and what you should do instead.
1. Don’t underestimate the role of luck in your company’s success.
Some successful entrepreneurs see themselves as warriors burning with a desire to prove their naysayers wrong. That view of the world leads them to take joy in recounting stories which feature them as swooping in at the last minute to win a key customer or solve a technical problem that keeps a customer’s business from shutting down.
This way of thinking also causes the successful entrepreneur to filter out the role of luck in a company’s success. Luck often plays a crucial role. For example, when I started my consulting firm, I was fortunate to have published a book, Net Profit, about how to evaluate and invest in different Internet business models that came out in 1998 — as the dot-com bubble was expanding. That lucky timing led to a flood of new business.
If you delude yourself into thinking that you were solely responsible for the success, you will lost the intellectual humility that causes you to admit what you don’t know and fill your team with people who can better perform critical skills required for your startup’s success.
What you should do is remember that customer needs, upstart competitors, and technology are constantly changing and unless you adapt your company to those changes you will endanger its future.
2. Don’t surround yourself with mediocre sycophants.
Second-time founders have often built teams of people with whom they are comfortable working. There is a danger that second-time entrepreneurs will surround themselves with the team members who bow down to their superior wisdom. Hiring such sycophants can mean that bad decisions are not challenged — thus sinking the company.
Sometimes such teams can be successful in a series of entrepreneurial ventures. For example, Boston-based cloud storage service provider, Wasabi Technologies CEO David Friend has started and achieved success in several ventures with co-founder Jeff Flowers. Friend handles the business side while Flowers develops the technology.
Since each cofounder excels in their area of expertise and they have worked together well in the data storage field for decades, bringing in the same people works for them. Friend is now on his seventh venture.
The point? Figure out the skills you need to make your company successful and surround yourself with the most talented people in those key jobs. Encourage them to debate strategies and choose the best ones.
3. Don’t set your business strategy while looking in the rear view mirror.
Venture capitalists and entrepreneurs love to boast about “pattern recognition.” This is their way of patting themselves on the back when they see that a current opportunity is like one they triumphantly seized in the past.
This way of thinking can result in applying old solutions to new problems — resulting in wasted capital and time. Rather than mechanically apply solutions that worked in superficially similar situations, dig deeper to expose what is different about the new challenge or opportunity.
Your prior mistakes could strengthen the intellectual humility you should use to identify and learn what you need to know to create a new solution to solve the new challenge.
4. Don’t take more money than you need to meet your staging goals.
One thing that certainly happens when you have been successful once is that your previous investors will want to throw money at you — hoping for an even bigger win on your second startup.
Yet as NFX, a San Francisco early stage investor, pointed out, your initial success may have come from your ability to adapt your company to capital constraints. Taking too much capital before you need it can result in a loss of focus in achieving the critical outcomes required to make it through each of the four stages of scaling about which I wrote in Scaling Your Startup.
Having too much money can cause you to overlook the need to create what I call scaling levers — creating a culture, developing a growth trajectory, defining and staffing key jobs, and holding people accountable — that are essential to reaching success.
As NFX warned, “It’s very common for founders who raise too much money to have a brain shift that ruins their leadership and eventually their company.” If you have the luxury of access to too much capital — don’t be afraid to turn some of it down.
