Naval: There’s a running debate among investors about which is best: first-time founders or repeat founders. There’s no hard and fast answer.
I’d argue that most of the value in the industry is probably created by first-time founders. Think of Jeff Bezos, Bill Gates, Larry Page and Sergey Brin, and Mark Zuckerberg: Lightning strikes, things catch fire and the company takes off.
‘First-time founder’ can be misleading
Though, the label “first-time founder” doesn’t really apply to some of these. Zuckerberg had other projects before Facebook took off. Gates founded Traf-O-Data with Paul Allen long before they did Microsoft. They measured traffic and sold the data to cities.
Often, a so-called “first-time founder” has been tinkering for quite a while.
Repeat founders tend to be better at execution
Repeat founders also can be extremely successful. Look at Uber, WhatsApp and Zoom.
Repeat founders tend to be much better at execution. They’re good at recruiting teams and generally more careful about what markets they enter. Repeat founders also have better connections, which makes fundraising easier.
Because repeat founders have been around, they’re more likely to have established long-term relationships with people you know, making it easier to check their reputation and whether they have integrity.
Repeat founders tend to be less passionate
On the other hand, repeat founders tend to be less passionate. They surveyed the market and picked what they think is going to work—not necessarily what they’re super excited about.
They tend to have less specific knowledge about the field because they haven’t been buried in it for the last 20 years; although you sometimes get that specific knowledge with founders coming from bigger companies who incubated a technology they really like.
Deals with repeat founders tend to be more expensive, so your returns are lower. There are tradeoffs. I don’t have a hard and fast rule like “don’t back repeat founders” or “don’t back first-time founders.” I find both can work, and both can not work.