Investing in startups is risky and 90% of startups fail. With investing in startups being a risky game, how have second-time founders performed compared to first-time founders? In this blog, take a look at some statistics about startup success and failure, founder success and failure, and some key considerations for investing in second-time founders.

Investing in Second-Time Founders

Investing in a startup is not just finding opportunities on a product or service, it’s also finding opportunities in the person building it. A second-time founder has already experienced ideation, creation, feedback, and iteration. From building decks to pitching to investors, from finding product-market fit and gaining customer feedback, the processes common to startups can be already familiar to a second-time founder. They may have experienced success and failure, built a network, and understand the time and mental commitment to running a company. This could be advantageous to a new startup, if the founder can apply previous learnings and experiences to new opportunities.

Founder Statistics

Taking a look at some statistics, compiled by Exploding Topics:

First-time founders have a success rate of 18%
Business owners who failed in the past have a success rate of 20%
Second-time founders who started a successful startup in the past have a success rate of ~30% for a new venture

These percentages are still very low, showing the risk of all startups. However, some experience, whether failure or success, may have slightly higher success rates in future ventures.

What Second-Time Founders Learn From

So, what are some of the skills that second-time founders might have learned from past experiences to apply to their new venture?

Building Teams

Building a startup can necessitate a great team with diverse skills, abilities, and experiences in order to contribute in a meaningful way. A first-time founder may not have the eye or experience for hiring and managing employees, or knowing what employees are most needed in the initial, leanest stages of a start-up. A second-time founder can have experience in hiring, to help them determine what traits to look for, ones to avoid, positions to prioritize, and financial limitations on salaries. They may be in a better position to build a stronger team sooner.

Raising Money

Raising capital is a complex skill. It can involve telling a compelling story, negotiating deals, analytical analysis, and managing investor relationships. A repeat founder may have gone through the capital raising process previously, or even multiple times. They could be better positioned to know what investors want to know and how to close a round efficiently.

Avoiding Mistakes

First-time founders often learn by making mistakes. They might spend money too fast, target a market that’s too small, or focus on the wrong metrics and goals. A second-time founder may have learned from their mistakes and avoid them in future ventures.

Final Thoughts

It’s important to understand that backing a second-time founder is not a sure thing. There is still significant risk associated with investing in startups, no matter how many successes or failures they may have in the past. Past performance never guarantees future results, and investors should be conducting thorough due diligence, considering their own risk tolerances, and assessing their own financial needs before investing in a second-time founder.

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The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.

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