This is part of my Startup Advice series of posts.
I heard Bruce Dunlevie of Benchmark Capital say these words at a conference in London nearly 10 years ago. I jotted the words down (I normally pay little attention to anything said at conferences. Most of it is BS) and thought about them much over the years. I later learned that the quote was taken from somewhere else (perhaps as early as the 13th century!) but whoever is responsible I just want to help spread it.
There is a folklore in Silicon Valley that you should fund first-time entrepreneurs. When you see the successes of Mark Zuckerberg, Bill Gates, Steve Jobs, Larry & Sergey, Marc Andreessen and Marc Benioff it is easy to see the allure (either that or invest in people named Mark
But it’s not my strategy. I definitely don’t rule out first timers – I just invested in one to be announced soon who I am really excited about – but I greatly prefer experience. It’s easy to say you’d back a great team that has previously been successful – that’s a no brainer. Fred Wilson outlines why in his piece “Swinging For the Fences.” He outlines that Union Square has overwhelmingly had success with either first-timers or serial succeeders.
I can’t argue with Fred. He has a great track record and I’m a newbie. But I was asked recently whether I would prefer to back a first-time team or a team that had failed once before. Obviously it depends on the team and the idea but holding all else constant I would personally back the team that had previously failed.
I’m fond of saying that I F’d up everything as a first time entrepreneur. Actually, we got much right, too. We corrected mid flight. I believe great entrepreneurs do that. They do what VC’s like to call “pivot.” Boy did I pivot. I went from 92 staff members + 30 contractors (e.g. 122 in total) to 38 people in one day and then down to 33 immediately after that. I went from managing a team to “flipping burgers.”
So in my case, I believe that I acquired good judgment from my previous bad judgment. We eventually got a successful exit but I can’t say it was a Google like exit! I believe that it helped me succeed in my second company.
Seeing how entrepreneurs handled adversity and difficult decisions tells me a lot about who I’m going to be working with if I invest. I learn much from hearing whether they have humility, understanding what they learned from their failure (or success), gauging the speed of decision-making and willingness to admit when they were wrong. I also look to see whether they can make the really difficult decisions (like firing all of your friends – this is no fun.)
The way I like to make my point about the quote is with something that all of us know innately. When your parents told you at 15 not to feel so heart-broken when your girlfriend or boyfriend broke up with you because you’d meet many more people in life you probably remember feeling like the only special person you’d ever meet just got away. They couldn’t tell you this – you had to learn it.
For many of us we had warnings about not drinking too much and yet we still found ourselves “praying to the porcelin G-d” on prom night or at a frat party. Instructing people can’t create wisdon, experience will.
Which is why I recently wrote a post called, “Is it Time to Earn or to Learn” asking people to think about what they hope to attain from their current job or from the job for which they’re currently interviewing. I wasn’t trying to encourage everybody to become a CEO tomorrow – I was encouraging them to learn.
Every day I talk with entrepreneurs in my office. I’ve been a VC for 2.5 years now (an entrepreneur for nearly a decade before that) and as a result I’ve gotten to see many first-timers progress over time. It amazes me the pattern spotting you can pick up from all these meetings. I had so many discussions with people when they launched their companies about what each of us thought would happen and now it’s enlightening to have those conversations 18 months later.
Some of these people are people I wasn’t ready to back but I said, “I’d love to find a way to work with you on your next company.” I think this quote would resonate with most of them.
I prefer second time (or more) entrepreneurs. Sure, I would love to work with people who have had multiple successes. But I’m not afraid of entrepreneurs that didn’t succeed the first time. I want to work with talented people with good judgment. And so I’m out to spread the word, “Good Judgment Comes from Experience, but Experience Comes from Bad Judgment.” Go out and learn.
(Cross-posted @ Both Sides of the Table)