In 1980, following the breakup of the American band The Eagles, Don Henley was asked when the group would reunite. His response, “When hell freezes over.” Surprisingly, hell froze over 14-years later, when The Eagles launched a highly lucrative tour and TV special. According to Guitarist Glenn Frey, “We never broke up, we just took a 14-year vacation.”
The story is familiar. A young band gets into music for the sex, drugs and fame. They record a few songs, have a couple hits and then hit the road. The rigors of touring, along with the instant notoriety and unending public scrutiny cause the band to disintegrate, often to the point of declaring they will never work together again.
In many cases, once the money (and sex and drugs) run out, the band members forget the days of rancor and only recall the “good old days” when creating something from nothing was fun. Eventually one of the band mates swallows their pride, picks up the phone and proposes a reunion tour. A similar phenomenon occurs in the startup world, without the drugs or drama endemic in the music industry.
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It is not uncommon for successful entrepreneurs to work as a team, take some time off for a victory lap or two and then “get the band back together” in order to build upon their prior successes.
At Rincon Venture Partners, the single most important facet we consider when contemplating a new investment is the quality of the Serial Team. One way to assess quality is the degree to which the team has demonstrated success in an adjacent market.
Rincon’s Fund I portfolio is comprised of a number of such Serial Teams, some of which include:
Alma mater, Rent.com: sold to eBay for $430 million. After nailing lead generation in the apartment listing space, they are now killing it with respect to lead generation for higher and career education.
Alma mater, CallWave: 2005 IPO. At its peak, CallWave generated $55 million of recurring subscription revenue in the Internet telephony space. The team has applied its deep understanding of telephony and online marketing to create an infrastructure which allows advertisers to track phone calls like clicks.
Alma maters, Traffic Marketplace and Tagworld: sold to Vivendi and Viacom, respectively. The team is applying its ad network and ad serving insights to the emerging world of mobile advertising.
Alma mater, Overture: sold to Yahoo. The team is leveraging its expertise in search infrastructure and optimization to dramatically increase the reach, relevance and profitability of search campaigns.
Focusing on serially successful teams and not individual serial entrepreneurs offers investors a number of advantages, including;
- Group Dynamics – Serial Teams have already resolved potential interpersonal issues. The chances that the team will blow up because of personalities and/or office politics is significantly diminished. Roles are understood and the team is able to efficiently leverage each member’s strengths while shoring up individual weaknesses.
- Shared History – Serial Teams can draw upon a common history that facilitates communications and problem solving. However, as discussed below, this advantage can also prove to be limiting, especially if the team does not embrace a diversity of opinions, as described in Dirty Team Building,
- Fox Hole Mentality – Social bonds made under duress are extremely resilient, as evidenced by well attended military reunions decades after the soldiers fought together. Although clearly not on the level of battle-tested warriors, Serial Teams who toil together often form life-long social bonds which motivate them to ensure the team’s mutual success, even at the expense of personal gains. This deep mutual respect also serves as the cornerstone of a healthy corporate culture, as described in Core Values.
Serial Teams also entail certain risks and disadvantages. Although the advantages usually outweigh the potential drawbacks, the negative aspects of Serial Teams should be heeded in order to minimize their impact:
- History – Serial Teams speak in shared code, based on their prior collective experiences. This common set of experiences facilitates communication but can be bewildering to new entrants to the team. Such history can also cause adVentures to apply inappropriate solutions to new problems, based on what worked in the past.
- Cronies– It can be difficult for new executives to assert themselves within an existing Serial Team. Even when an explicit effort is made to incorporate new talent into an adVenture’s executive staff, the institutionalization of the company’s approach to problem solving can make it difficult for a new executive to express their opinions without forcing them to sharpen their elbows and excessively raise their voice.
- IP Risk – The closer the Serial Team’s new adVenture is to their prior successes, the greater the risk that they may be accused of infringing on their former company’s intellectual property (IP). Thus, care should be taken when crafting the band’s reunion tour to ensure they do not inadvertently run afoul of third-party IP rights.
- Diapers – It can be difficult for junior members of Serial Teams to grow into positions of greater authority. This phenomenon is partially due to the fact that the senior members of the Serial Team, much like a parent, fail to realize that the younger team members have matured and are no longer as inexperienced as they were when they first joined the Serial Team.
Let The Lead Singer Go Solo
In highly successful bands, it is not uncommon for one of the more visible members of the band to abandon the rigors of touring and enter into a state of semi-retirement. In other cases, such frontmen leave the band and go solo.
The same phenomenon occurs in the startup world. In many instances, one or more of the senior members of the Serial Team generate enough personal wealth to take a permanent vacation from their careers as operators. As such, when a Serial Team reforms, it is often comprised of operational lieutenants, such as Vice Presidents and Senior Directors rather than C-level executives, (e.g., CEO, CFO, etc.). Ideally, the members of the Serial Team should be senior enough to effectively operate a fast-paced startup, yet are sufficiently financially hungry to deploy the requisite time and energy required to make their adVenture a success.
Be A Roadie
The factors that cause Serial Teams to be good investments for venture capitalists make them equally advantageous for young entrepreneurs. A team of proven winners that self-selects to work together again usually create a healthy environment in which to learn and grow. Serial Team mentors will make fewer mistakes than a comparable adVenture led by inexperienced people who are learning on the job. Thus, young entrepreneurs are well served to seek out the company of Serial Teams.
“Relax” said the night man, “we are programmed to receive.”
“You can check out any time you like, but you can never leave!”
The Eagles, Hotel California
As discussed in The Fringe, entrepreneurs are pathological. Most of them simply cannot help themselves and are thus repeatedly drawn back to the startup world. They often temporarily “check out” from the startup treadmill but many of them “never leave”. Savvy investors and young entrepreneurs take advantage of this phenomenon by joining Serial Teams and helping them leverage their past successes to achieve new startup victories.
John Greathouse has held a number of senior executive positions with successful startups during the past fifteen years, spearheading transactions which generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.
John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara’s Faculty where he teaches several entrepreneurial courses.
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