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4 Mistakes That Second-Time Founders Need to Be Aware Of

4 Mistakes That Second-Time Founders Need to Be Aware Of

Written by 
Pilot Team
August 17, 2022
4 Mistakes That Second-Time Founders Need to Be Aware Of

After a successful exit from his first company, Ian McHenry set out to do something different—and failed. 

In 2013, his first startup, Beyond Pricing, introduced dynamic pricing to the vacation rental market. It was a natural founder-market fit given his years of management consulting experience helping airlines and hotels with dynamic pricing. After some ups and downs, Ian and his technical co-founder raised $40M from Bessemer, and the company now has double-digit millions in ARRs

Ian left Beyond Pricing at the end of 2019 and wasn’t sure what to do next. Soon after, he dove into launching a new startup, which he says was his first mistake as a second-time founder.

Founder mistake 1: Jumping in too quickly

“I went through this withdrawal,” says Ian, about the transition away from being the CEO of a fast-paced startup for years. 

“I thought maybe I can angel invest and live vicariously, and I did that for a couple of months, and that didn't really do it. Then I thought about wanting to do what a lot of people do when they have a decent outcome—they go and travel.”  

But he has two kids and a wife who’s a lawyer, happy with her job, and wasn’t interested in a big trip. 

“I lasted about four months before starting another company, which was probably mistake number one,” says Ian. “Building a company, building the product, getting users—it's actually fun. And you forget that if this is successful, you're doing it for the next 10 years.”

“When you jump in quickly, you might not have had enough time to think through whether this is truly what you want to do for the next 10 years if it’s successful.”

Founder mistake 2: Thinking you have a superpower

Jumping in quickly can also lead you right into mistake number two—assuming you can tackle any problem. “You think you have some sort of superpower. You did it once, so of course you can do it again,” says Ian. 

“In travel, we used to make fun of second-time founders who would start travel companies,” he adds. Ian explains how he’s seen many founders exit, travel, run into a minor inconvenience, and then try to start a trip-planning company. “All of these fail—they just don't have the experience in travel to know why they’ll fail.”

Ironically, the same trap caught Ian. He had trouble finding a toy for his daughter online before Christmas and it wasn’t in stock at local toy stores. Figuring that all the items have product codes and it’s fairly structured data, he wondered why there isn't a website that can show you what’s in stock.

“You suddenly see all these problems in the world that need solving and you think you can solve them. But that makes you look at opportunities that aren't necessarily in your wheelhouse… they aren’t the best founder-market fit.”

Founder mistake 3: You have to be 10x better

The idea led Ian to create his next startup, In Stock, a local version of Amazon. And it was up and running within a few months. 

“We built it really quickly, and 90% of the time you could find whatever you're looking for online. We’d deliver it to you faster than Amazon and almost always at the same price,” he says.  

“The problem was that we could deliver it slightly faster than Amazon for the same price, or a little bit slower than Instacart or DoorDash for slightly less, and that was not a 10x better experience,” says Ian.

“What we lost sight of and why we ultimately failed was that it was cool—but not that cool. When you’re building a consumer product, it needs to be 10x better.”

Founder mistake 4: Trying to go at it alone

Ian also tried a new approach when starting In Stock. While he knew he needed to bring in someone with technical know-how and consumer experience, he decided to hire employees rather than connect with a co-founder. Which he thinks was a mistake in retrospect. 

“I thought I'm a known entity, why give away half the company to somebody? I can just recruit a founding engineer, give them a few percentage points, and save that equity,” he says. “I forgot about the part where you need somebody who is in the trenches with you and cares in only the way that the founder can.”

That’s not to say you can’t find and hire amazing talent, but it’s not the same. 

“It's not about the equity—the equity just helps them feel that equal ownership so that they will care so deeply about this.”

A new goal

In Stock lasted around a year and a half before it was shut down. They’d raised about a million from investors, but decided to return the capital rather than pivot. After talking to his customers, Ian decided that while there were interesting opportunities that could be viable companies, they weren’t billion-dollar opportunities. He also didn’t feel like he cared about retail enough to stay in the industry. 

“When you don't have that founder-market fit, you don't want to keep making stuff in the space,” he points out. “When you don't care about the space deeply and you’re a second-time founder, you're not trying to prove yourself in the same way and you're less likely to keep pivoting.” 

Ian also shared that he's trying to figure out what’s next. “I had a realization a few weeks ago—I probably have one more company in me. The hope is this next thing can be more impactful.” But the timing isn’t quite ready yet. “I’ve gone almost a year—the goal is to go a year without starting a company.” 

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