It might seem that launching a business would be easier the second time around, but the opposite is true.iStockPhoto
Some time ago I met with a partner from Kleiner Perkins Caufield & Byers, a renowned Silicon Valley venture capital firm. She was kind enough to offer me mentorship; we discussed what makes a start-up successful and what attributes she looks for in a founder.
She showed me some research they’d done comparing first-time founders with founders who’d successfully exited from a previous venture. All had been backed by Kleiner Perkins. “Which group do you think were more successful?” she asked.
“Experienced founders are much more likely to succeed,” I replied. “They have proven skills and resilience.”
“That’s what we expected, but we were wrong,” she said. “It turned out that our first-timers have a much higher strike rate. And when they succeed, the companies they build are much bigger.”When we dug into why this might be, she described a theory called “second-time founder syndrome”.
Rebekah Campbell built a successful music management company in her 20s.
Looking back at my recent entrepreneurial endeavours, I see that I too was afflicted with this condition – although I didn’t realise it at the time. In my 20s, I built a successful music company managing the careers of 11 artists, including Evermore, Matt Corby, Lisa Mitchell and George.
When I decided to launch a tech start-up I was confident I’d succeed: I knew how to build a team. I hired someone to carry out market research and another to sell to my first customers. I found an agency to build the technology and a graduate intern to answer all the support inquiries. I put together a PowerPoint presentation and raised my first round of angel investment.
The first version of my concept didn’t take off. I pivoted our approach and tried again. Still not enough traction – but the costs were mounting. Looking back, the mistakes seem obvious. Now, as I prepare to embark on my next adventure, I’ll heed that advice from my friend at Kleiner Perkins: “Always be a first-time founder”. Here’s how.
Campbell grew Evermore’s fan base by booking lunchtime concerts in high schools across NSW.
1. Do the groundwork
I thought I was an expert in building companies and that I could apply this expertise to a new business. I was wrong. A founder needs to be an expert in their own customers, not in starting a business. Facebook’s Mark Zuckerberg knew nothing about raising an angel investment round, but he knew a lot about how university students wanted to connect. By paying someone else to research the market for my business, I missed learning valuable insights.
My next business is in a new area again. This time I’ve allocated a whole year to learning the industry, taking a postgraduate university course to get the same training as the customers I’m looking to serve, and I’m also working in the field. I won’t design our solution until I’m sure the value proposition is right.
Evermore was my music company’s first client. No one knew or cared about my company or the band. We couldn’t get a gig at a local pub. We had to fight to be noticed. Using the Yellow Pages, I phoned high schools across NSW offering Evermore to play at lunchtime. We’d charge students a gold coin donation and they’d get a CD single of the band. For 10 months we traipsed across the state playing in school halls. We’d stay in backpacker hostels and pay with bags of coins we’d collected from the kids.
Working town by town, we started to build a fan base. When I managed to get the CD single sales to count in the ARIA chart, the band’s song started climbing. Radio stations noticed and started playing Evermore. When the band’s album came out a year later it sold more than 100,000 copies. But by the time I launched my second company I’d forgotten the struggle. I thought I’d launch a product and people would just buy it.
Most successful businesses build granularly at first. The Airbnb founders talk about how they personally photographed the first thousand or so listed properties; Yelp held restaurant meet-ups to build groundswell. Almost every large company talks about how much work went into developing a following. First-time founders are prepared to hustle.
3. Stay close to the customers
In my first business, I was the only employee. When someone had a complaint or suggestion, it came to me. In my second business, I recruited interns to be the initial point of contact. They would welcome new customers and respond to support inquiries. I thought this would be efficient, but the cost was huge. I missed out on valuable feedback that would have helped me improve our product.
As a second-time and now third-time founder, it feels that launching a business should become easier, but the opposite is true. Recall what led to success the first time. Stick to the basics, consider abandoning your support network, and be prepared to sign up customers one by one.