Serial Entrepreneurship

“In Silicon Valley, part of the reason why so many people start companies is because even if you fail, it is a badge of honor” — Sundar Pichai, Google’s CEO.

We usually do not hear about the huge number of entrepreneurs that failed. We hear mostly about major successes, and a few dramatic failures.

Entrepreneurs are generally young people. Which is good, since they have more time to recover from possible failures. However, I have seen seasoned entrepreneurs in the Valley who are willing to risk their money and reputation in order to achieve great things.

Few people have the entrepreneurial mindset. These few do not want to work for a salary and in an environment associated with earning a salary. They want to take advantage of opportunities that corporations do not see.

The skills associated with job performance in hierarchical organizations tend not to be the skills that are vital in entrepreneurial environments. The essence of job performance is predictability on the job while the essence of entrepreneurship is unpredictability. Of course, if things were 100% predictable, there would be no entrepreneurial profits.

Executives want predictability in a world of uncertainty. They are willing to transfer to entrepreneurs the burden of dealing with uncertainty. They have budgets, standards and deadlines to follow. In contrast, entrepreneurs do not know when the deadlines are, what the competition is doing, what will be the cost in terms of time and money, and how customers will respond to new offerings. The heart of what they are doing cannot be salaried.

VC funds understand the importance of the founders’ entrepreneurial track record when investing. A recent Pitchbook article, “Serial Entrepreneurs Raise More Capital, but at What Cost?”, shows that serial entrepreneurs surpass their unproven and novice counterparts in every dealmaking dimension (2022 YTD):

* Deal sizes: Late-stage rounds led by serial entrepreneurs were roughly 3.4x larger

* Pre-money valuations: Serial entrepreneur-led late stage startups achieve median valuations that were 3.7x higher

* Participation from the top 100 investors: Across all venture stages, serial entrepreneur-led startups capture roughly 2.5x more participation

* The trade-off of receiving more capital to more rapidly scale (evidently) is to get more diluted by the late stage: Serial entrepreneurs own roughly 3% less of their businesses, which amounts to nothing

Conclusion

Indeed, Fabrica Ventures has for long incorporated the serial entrepreneurship dimension in its screening process.