Does Serial Entrepreneurship Negatively Impact Investors?

Nearly every investor checklist, especially for startups, includes some variation of the following question:

Does the Founder have a successful track record (i.e. exits)?

The purpose and philosophy behind this question is simple. If the Founder has successfully taken a venture from idea to exit; that is generally considered a favorable sign.

Why?

Logic says that someone who has done something once before successfully has a higher chance of doing it again successfully. Therefore the risk for an investor is perceived to be lower.

One common buzz-word being thrown around today by many Founders on their Linkedin profiles and About pages is the title “Serial Entrepreneur”.

This title is shared with pride, and it’s used as a calling card to say “I’m proud that I have exited from multiple ventures and good at what I do.”

Hence, from the lens of the typical investor checklist, where an “experienced entrepreneur” is considered a smarter investment, it is logical to assume that a Serial Entrepreneur Founder is even better, because they have “done it” multiple times.

As eluded to in other writings, we believe that arguably one of the most important factors for any investment is the leadership of the venture. A bad leader can run a wonderful venture right into a coffin. A great leader can do amazing things with a venture that’s “meh”.

This is why we have an investment principle around this idea of serial entrepreneurs, because although most investors generally consider this a favorable quality, we believe this can be dangerous for the investor, and requires much more scrutiny than just a couple shallow questions on a checklist.

Days could be spent writing about this very topic, but for the sake of brevity, let’s focus on one consideration that all investors care about; return on investment (ROI).

Do serial entrepreneurs yield the highest ROI’s

Tony Robbins says that if you look at the most successful people in any profession, that you generally find people who have been tenacious in their “one thing”. Take Tony for example. He’s the most successful in his field of coaching by a long margin – and guess what? He’s been doing it for decades. Not weeks, not months, not years, but decades.

In present times, Tony has several businesses under his purview, but he paved the way with his tenacity in the self improvement space.

Now imaging what would of happened if Tony only did coaching for five years and then decided to sell out and start something new. Would he have achieved what he has today in total? Doubtful.

Let’s take a look at Steve Jobs. No single Founder to date has impacted the cell phone market more than he has – and it required literally all of him for decades. Again, imagine what would of happened if after the first two or three years had gone by and he sold out; most likely not even a tenth of the present outcome would’ve been achieved.

Yet this is what is happening today with many startups. We are observing more and more Founders looking for as quick of an exit as possible so they can make a few million dollars and move on to the next 2-3 year chapter in their serial entrepreneur journeys.

This shortsighted serial entrepreneur perspective negatively impacts investor returns. If a Founder pining for a quick exit sells their venture at a $20,000,000 valuation as opposed to a $200,000,000 valuation 10 years later, just look at the impact that has on the investor.

We have observed that in every area of life, commitment is what wins in the long run. It’s sad to see all these promising startups giving in to their shortsighted greedy desires at the expense of growing their ventures into much larger and impactful entities.

For this reason, when a prospective investment comes across our desk with a founder using the “serial entrepreneur” tag, we scrutinize them even harder.

Blessings.