Our partner Audrey Miller recently gave a keynote at SaaStr on the mistakes we see repeat founders avoid. We’ve summarized the key points from the presentation below.
Starting a company, working with founders, or investing in startups inevitably involves encountering mistakes. This universal truth holds for everyone, including repeat founders. However, repeat founders differentiate themselves through the quality of their mistakes and the numerous pitfalls they avoid.
At Tapestry, we collaborate with and support repeat founders who are building their next ventures. These are individuals who have previously built businesses from the ground up, culminating in either successful exits or valiant failures.
Remarkably, 49 of the top 100 public technology companies were founded by entrepreneurs who had built companies before. Often overlooked is the fact that half of these founders had more modest companies and exits before revolutionizing their respective industries.
Repeat founders bring a unique set of ‘expensive’ experiences, having learned from their previous ventures. They lack the naiveté often associated with starting a business and are serial innovators, industry veterans, and technical experts.
We’ve distilled insights from our experience working with and investing in over 50 repeat founders, summarizing the top seven mistakes they avoid:
1. Don’t Chase Glory Metrics
Metrics like Twitter followers, Substack subscribers, and website impressions are often misleading. Repeat founders avoid focusing on such “feel-good” metrics, recognizing that they can distract from genuine business health.
It’s very easy to get distracted by the wrong KPIs or by chasing a false North Star. Similarly, unicorn status, Forbes 30 under 30, top hot startup lists, are great for recognition and glory. Repeat founders aren’t building for glory. They understand that these accolades, while validating, can be distractions.
First-time founders have told us they regret chasing metrics like FTEs growth or spending money on fancy offices that gave them a false sense of progress and stability. A second-time founder of a stealth AI company we backed just closed their Seed round, which was competitive with multiple term sheets. When discussing which term sheet to accept, the founder said, “the highest term sheet wouldn’t necessarily win” because they understood the dangers of chasing too high a valuation too early. Repeat founders can and do raise a premium, but they know that choosing an overinflated valuation too early can feel like a win but may be detrimental to the business they are building.
2. Don’t Fish in Small Ponds
Building a big business is just as challenging as building a small one. Repeat founders avoid markets with a small Total Addressable Market (TAM).
There is nothing more frustrating than building a business in a category with a small TAM. While there’s many ways to course correct along a startup journey, TAM is difficult to grow if it is too small.
Stripe, most recently valued at $65B, aims to increase the GDP of the Internet. Previously, founders John and Patrick Collison started Auctomatic, an auction management software which they sold for $5M in 2008. The second time, they went to fish in the ocean.
Sachin Duggal, founder of Builder.ai, is changing the way software is built. Sachin learned from his experience with his previous company, Shoto, a photo-sharing app. Despite the seemingly large TAM of photo sharing, the competitive landscape and low defensibility proved challenging. After Shoto, Sachin founded Builder, which leverages AI to enable any company to develop applications without coding, thus targeting a much larger market.
First-time success can enable founders to create moonshots. Bobby Healy’s journey also underscores this point. After founding and selling Cartrawler, Healy ventured into drone food delivery with Manna. This new endeavor tackles a significantly larger and more challenging problem.
3. Don’t Overbuild
Repeat founder Eoin Hinchy closed his first paying customers for his security workflow product with screenshots alone. Only then did he start to build what customers wanted. Repeat founders realize that sales are the most important part of growing a business and are customer-obsessed. Technical repeat founders don’t treat company building like a computer science project. While launching a high-fidelity, specked-out product feels productive, it often is not the best use of time. There is so much to learn from how early customers interact with a product that over featuring it from day one can waste time, delay launch, and confuse customers.
Yoseph West, a repeat founder building SMB challenger bank Relay, has many products to build to service customer needs. He prioritizes based on customer needs rather than what the company may want to build or what might sound cool. This focus has contributed to Relay growing 7x over the last year.
4. Avoid Wasting Time
Building a company is hard, and even the second time around, founders face difficult decisions. Taking time to make the right decision is important, but once a decision is made, repeat founders waste no time executing it. Hiring is a classic example where slow decisions can be expensive. One repeat founder shared, “every great hire will wow you in less than two weeks.” The corollary is also true; serial founders fire fast when a hire isn’t working. They don’t waste time if it’s not the right fit.
The same is true for other difficult decisions. We’ve seen repeat founders say no to big customers who they believed would distract their team from building the right product. We’ve seen pre-emptive financing turned down because founders didn’t want to waste time fundraising when it wasn’t the top business priority at the moment.
Repeat founders have typically already deployed someone else’s capital, gaining ‘expensive experience’. They know that the runway is finite and translates to a limited amount of time to prove a thesis, leading them to make decisions with more agency.
5. Don’t Ignore Unit Economics
VC can be very momentum driven - things are not (crypto, BaaS, no-code, robotics), and then they are not. It can be easier to fundraise during one of these hype cycles. Repeat founders don’t chase hype. Chasing hype can lead to a grow-at-all-cost mentality, which often harms the underlying business. Even when building in “hyped” categories, repeat founders take a business-model-first approach. From day one, they focus on building a sustainable business.
Carl Pei, who previously founded OnePlus, is now building consumer AI electronics business Nothing. Consumer hardware can be challenging, and many scale-ups prioritize growth at the expense of margins and cash flows. Carl Pei did the opposite, leveraging his experience from OnePlus by bringing in a seasoned CFO early to mature the financial functions within the organization. He also ensured profitability on a per-unit basis from the first sale.
Bobby Healy, who founded Cartrawler, is now building drone food delivery company Manna Aero. Drone food delivery requires a lot of R&D and is a hardware-heavy, operationally intensive business. Unlike competitors, Manna is providing this service profitably, with positive unit economics for each flight, allowing them to scale quickly while expanding margins. Bobby recognized the importance of building Manna profitably rather than scaling at all cost.
Similarly, Navid Hadzaad, founder of instant grocery delivery business Zapp, is one of the few remaining players in that category. The instant grocery delivery funding wave of 2021 caused many new entrants to expand rapidly without understanding the fundamentals. Navid focused on delivering each order profitably, contributing to his survival and continued growth after many competitors shut down.
6. Don’t Ignore Stakeholders
Repeat founders have experience working with investors, board members, and external advisors. They know that you cannot build a company in a vacuum and that taking external capital involves relying on stakeholders. Their experience navigating these relationships has taught them their importance. Repeat founders know how to leverage their stakeholders. The repeat founders we work with at Tapestry share information openly and on time, sending quarterly, if not monthly, updates with consistent metric tracking and key asks. They are hyper-responsive, preparing and posting information ahead of board meetings to get maximum value from investor relationships.
7. Don’t Raise Because They Can
Repeat founders know that if their Seed stage hypothesis is proven correct, they will spend the next 5-10 years building a company against the idea and so they want it to be the right one. They see their time as having a much higher “cost of capital” than a first time founder, most typically due to age and life stage.
Data shows founders raise 1.7x faster from company formation. However, repeat founders also spend a lot more time validating their ideas before company formation. By the time they’ve committed to building they have done the work to convince themselves of the idea.
We start talking to folks months, sometimes years, before their next idea. Many of these conversations look the same. Some founders have had huge financial success and money is no longer a motivator. Some founders have been mission driven and now that problem has been solved (or they have a non-compete that prevents them from building in the category again!).
The founder spirit is like an incurable bug, though the motivation behind company building may change, the desire, and in many cases, need to scratch the itch doesn’t go away. We speak to repeat founders early in their next journey and often help in the idea validation process.
If you are a repeat founder ready to explore your next idea, say hi!
