Because, while risky, betting on repeat founders works. It doesn’t necessarily work better. But it does work. (And most things in venture don’t really work.)

Folks that look at the data will tell you repeat founders aren’t necessarily a better bet than first-timers … which does seem to be true. Look at Marc Benioff, Mark Zuckerberg, Evan Spiegel, Bill Gates, Michael Dell, Airbnb, Stripe, Dropbox, etc.

However, the data is a bit misleading. Because what a second-time successful founder does for a VC is take certain specific risks off the table:

  • They (second-timers) know how to build a strong team. They’re already good at recruiting, and in fact, likely already have the “bones” of a great management team already on Day 1. First timers will struggle here, by contrast, for many many years.
  • They know how to grow quickly — once they have product-market fit.
  • They know how to fundraise.
  • They know how to build strategic partnerships, and will get the benefit of the doubt here.
  • They know how to close Big Deals. And they know how to go “enterprise” from Day 1.
  • They won’t “sell too early.” If a founder sold for $150m last time, she probably is looking for $1b+ this time. This aligns well with the economics of big VC firms.
  • They can, probably, be trusted (with capital, etc.)
  • And importantly in some cases, they have a lot of social proof. Which can make it much easier to “get a deal done” in many VC firms. Social proof matters.

The above risks all exist with first-time founders to a much, much greater extent than second-time founders.

Look at Jet, or Yammer, or Workday — big Second Timer success stories. They hit the ground running, once they achieved product-market fit at least.

So if those are the risks that worry you … then betting on second-timers can be a good way to go. Even if the strict mathematical odds don’t really suggest it’s a “better” bet.

Which isn’t to say second-timers don’t have their own special risks. They certainly do. They spend a ton more money, and believe they can magically will product-market fit out of the thin air. Among other risks.

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