What’s changed in twenty years of investing? The rise of the serial entrepreneurs

27 January, 2020

When we consider potential companies to add to our portfolio, we spend as much time evaluating the founder or founding team as we do reviewing the market in which the business operates, its technology, its business model and overall potential. For any we go ahead with, we’re going to be working together for hopefully many years to come, so it’s important that both we and they are aligned, with similar goals and values.

Since starting in 2006, we’ve gone through this with hundreds of entrepreneurs. What’s interesting is how the profile of these people has changed. While the core attributes that attract us to founders are still very much in evidence, in recent years the level of experience has evolved.

Go back twenty years and you were unlikely to be meeting an entrepreneur in Europe that had already sold a significant technology company. That’s very different today. Whether they’re based in the UK, France or Germany, European entrepreneurs are increasingly on their second, third or even fourth business, with successful exits behind them.

From an investor perspective, that brings a level of reassurance. These serial entrepreneurs are realistic, have experience of the process (both funding and exits and, more importantly, building a business that can scale and be worth of investment from a large corporate) and know what to expect in the investor/founder relationship.

Of course, that doesn’t mean first-time entrepreneurs are always unrealistic. Particularly when surrounded by experienced board members and other advisors, they can quite feasibly navigate their fast-growing companies towards successful exits. However, fundamentally it is more difficult to get right first time.

As well as a better understanding of what’s involved, the other trend we are seeing with serial entrepreneurs is their willingness to take their new companies further. To put it more simply, to make them bigger. Having already made money, they are not generally looking for a quick buck – any exit needs to be compelling and right for them, so they are less likely to be focusing on exiting at a point which might be too early, or even too late. This combination of ambition and pragmatism is invaluable to an investor like TempoCap.

For founders, there’s the increased possibility of building bigger businesses. This comes about by working with investors who are prepared to deploy larger amounts of capital behind experienced management teams, people with a proven record of scaling profitably and monetising their investment in a timely manner.

A number of our portfolio companies have at least one co-founder with previous experience. Take, for example, Dedrone, a specialist in securing airspace against malicious drones. Each of its three co-founders have launched and successfully exited a number of businesses operating in different sectors.

These are people that have earned their spurs, built businesses and exited at the right time to create something better, rather than end up with something that’s gotten out of hand for their level of expertise.

There are, of course, no guarantees against failure. Our focus, both as investors and founders, should be on minimising risk. Successful serial entrepreneurs offer one way of doing so.