What Makes Second-time Entrepreneurs Unique

Many investors also go for second-time founders as they feel it is a less risky proposition

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The one thing that every startup founder, irrespective of the sector they operate in, encounters is mistakes. They are an inevitable part of every startup journey. While few founders learn from these mistakes and move on, for few others these mistakes turn disastrous, forcing them to eventually take the toughest decision of shutting down the startup. But many a time, entrepreneurs who shut down one startup, end up launching another within a few years of time. Once an entrepreneur, always an entrepreneur.

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And, the second time around, more often than not, success finds them, as this time they tread the path more carefully. That is why investors also often invest in startups that are founded by second-time entrepreneurs. For instance, early-stage focused VC fund Unicorn India Ventures, always looks at second-time entrepreneurs. In fact, in its funds, about 40 per cent of founders are second-time entrepreneurs.

The edge they have

Second-time entrepreneurs, which also include entrepreneurs who exit their first venture for multiple reasons and launch another one, often have an edge over those embarking on the entrepreneurial journey for the first time. "The learnings of an entrepreneurial venture are always there with you, even if it was a failure. A failure teaches lessons about what not to do and these experiences always stay with an entrepreneur," said Bhaskar Majumdar, managing partner, Unicorn India Ventures.

It is also seen that second-time entrepreneurs often think about building a sustainable scalable business from the word go. "The only setback I see is that sometimes the ability to take risks is low in experimenting with crazy ideas," said Deepak Tuli, co-founder and COO, Eka.Care.

Eka.Care, was founded in December 2020 by Tuli and Vikalp Sahni. In the past, they successfully built the travel booking platform Goibibo. Talking about how that experience helped in building Eka.Care, Tuli said, "From setting up the company to product thinking, it helped in all aspects. We don't build anything for the short term, we are only building for the long term. All our product discussions are around how this will play in the next 3-5 years. We are not in a rush to quickly show growth and raise capital."

Talking about challenges for startups in the SaaS sector, Nilesh Patel, founder and CEO of unicorn LeadSquared explained how being a second-time entrepreneur helped him and his co-founders avoid those challenges. "I think at an early stage, the challenge is about finding the right product-market fit. The second challenge is if you have the product-market fit, you need to find differentiation and the third is the market size. And I think once you have all this ready, then you need to grow the ability to scale and distribute your offerings to the world. And I think there you will face challenges, but that's what many entrepreneurs, who are second-time entrepreneurs usually do better. Distribution is a big area where people face challenges as they continue to scale."

Investors' choice

"As early-stage investors, we always look at second-time entrepreneurs. In our funds about 40 per cent would be second-time entrepreneurs, they have an understanding of how to build teams that can run operations, and they understand the entire nuances of the fundraising process, right from how to pitch to the right investors to the documentation process right up to SHAs, and if those entrepreneurs have taken an exit in their previous ventures, it also means they come with the knowledge of right time to exit, which would maximize the returns for all the stakeholders involved," said Majumdar.

Investors feel more confident about investing in startups that are run by second-time entrepreneurs as they bring a certain safety net to the table. However, sharing a word of caution, Vibhore Sharma, partner, Capital 2B said, "On paper, it seems an easier choice because then you get to bet on a person who has failed or succeeded once or more in doing a startup. The person would bring experience, and the ability to raise capital, and take the company beyond starting up and into the growth/scale phases. But that still needs to be validated or evaluated and understood and not merely assumed."

Lastly, experts also feel that companies founded by second-time founders have a higher valuation in general, which means the ability to get a quick return is low but the probability of getting a high return in the long term is very high.