Last week on his blog, Ben Horowitz of Andreessen Horowitz diagnosed “Second Startup Syndrome,” a condition that many successful entrepreneurs often suffer from. Second Startup Syndrome, says Horowitz, can derail entrepreneurs as they move from one successful startup to founding their next company. Second Startup Syndrome places too much emphasis on business models and not enough on developing the core product, says Horowitz. The company glosses over important details “assuming that what worked the first time will automagically work the second time.”
But even without suffering from Second Startup Syndrome, a second startup can simply fail to get off the ground. Markets, technologies can quickly change.
Past Results Not Indicative of Future Performance
Such was the case with Jeff Ready’s company Volt Capital. Ready had planned for Volt Capital to take advantage of some of the natural language processing technology of his past company Corvigo, a successful anti-spam service that he’d just founded and sold. Volt Capital was designed to be a hedge fund, utilizing some of the AI expertise to analyze the stock market. But due to a combination of factors – even before the economy took a nosedive – Volt Capital never got off the ground. Ready was stuck with a major technology investment that he used to successful launch his most recent company, Scale Computing, a data storage vendor.
Volt Capital had built a supercomputer in order to store and process the information it would receive daily from the markets — around 40-60 GB per day. At first, says Ready, he and his business partners thought they would use this hardware to start a virtualization service. After all, VMWare had just gone public and it seemed a good market. But as Ready started to do some research, he found that he’d be better off working to address a storage, rather than a virtualization, solution.
Listen and Learn
Although it’s easier, perhaps, to learn from a mistake, Ready says it’s just as important for entrepreneurs to learn from their successes as well. You cannot simply assume that because something worked in one company that it will transfer to another.
Evolve your idea “before you write a line of code,” urges Ready. He stresses the importance of doing the right research before your engineers get to work.
And while plenty can be found via Google, sometimes it’s best to go to people directly. “Cold calling,” recommends Ready, who picked up the phone himself and surveyed a variety of businesses in order to gauge where to develop his next business. It sounds intimidating, perhaps, but these aren’t sales calls. You’re asking for advice, says Ready, and you can earnestly tell the recipient of your call that it’ll be “the most interesting phone conversation you have that day.”
These phone conversations can provide you with a good glimpse into the direction of the industry and into the minds of your potential customers. The conversations can provide powerful anecdotes when you make pitches to investors, adds Ready. And these people make great call-backs when you can offer them beta access to your new product or service.
The approach that Ready took with forging the direction for Scale Computing placed a lot of value on being “genuine, candid, and useful.” It seems as though these qualities might be good antidotes to Second Startup Syndrome.