First Time Founders vs. Second Time Founders

What's up, everyone? Welcome back to another episode of Founders Journal. I'm Alex Lieberman, co-founder and executive chairman of Morning Brew. I want to give a huge shout out to Lindsay L., a Founders Journal listener who finally took the leap of faith to shoot me an email to say what up. Our email conversation led to a Zoom conversation, and I learned so much about her industry and how she thinks about being entrepreneurial within a large firm. She said it took her 10 Founders Journal episodes to finally muster up the courage to email me, which means there are a lot of you out there that haven't done so. Want to. So what I'm about to say is directed to you. Do not wait. Today is the day that you reach out and we start a conversation. I want to get to know you and your story. Shoot me an email to alex@morningbrew.com and tell me a little bit about who you are, and I'll take it from there. Now, for today's episode, today we are breaking down some of the key differences between first-time and second-time founders. My guest is Dan Seroker, a serial entrepreneur who is currently the co-founder and CEO of Rewind, a personalized AI that captures everything you've ever seen, said or heard. And prior, he was the co-founder and CEO of Optimizely, a $500 million martech business that does over $110 million a year in revenue. Dan recently started a series on Twitter that I'll call First Time, Second Time Founder, where he shares the biggest differences that he has observed in himself as a seasoned entrepreneur versus when he was a first-time entrepreneur. He's going to take us through all of his posts in the series, as well as a few new ones he has never shared publicly.

Let's hop into it. Dan, thanks so much for joining the pod.

Thanks for having me.

So I noticed over the last week or so that there was a theme to your tweets, and I found a few of them interesting, but then I was also interested by this theme and why you started doing it. So you started putting out these posts that were basically 2-liners. You had a statement about what first-time founders do, and then you had a statement about what second-time founders do. I want to talk through the 6 or so of these that I've seen you put out. But before we hop into the specifics, why did you decide to start doing kind of these thematic posts?

It came out of this realization that I would be so much better at my job if I took the version of me as a second-time founder and put me in the shoes of a first-time founder. about 10 years ago, and I just reflected on how much I've learned. The reason I think these tweets went a little viral is because there's some authentic truth to both parts. I made all of the mistakes. All the first-time founders, I'm not dogging on first-time founders. I made every single one of these mistakes, and I also now learned as a second-time founder the better way to do things. And so that's why I put it out there. It's just like, these are the fundamental things I just learned by reflecting on what I could have been doing better if I'd known what I know today.

Yeah, I love that. I was speaking to— this was a few years ago now, but it just resonated with me and stood— it stuck with me. It's the co-founder of FanDuel, Nigel Ecclese. I was talking to him, and when I was speaking with him, he was in the process of running 4 businesses. He was the CEO of 4 businesses. And I'm like, you're out of your mind. How are you doing this? Do you have any life with your family or are you just running your businesses 24/7? And he basically was like, Alex, I realized in my first business that 80% of my time I spent it horribly. It was completely wasted. And so now with my businesses, I just spend my time on the 20% that actually matters. And so I think to your point, there's so much wisdom you get in building that first business and everyone— it's also one of those lessons in life. You have to kind of experience it and feel it because people can say these things to you. until you're blue in the face, but a lot of this stuff you just have to go through and realize what's worth your time and not. So if it's cool with you, I'd love to hop into these and just get your perspective on kind of why they came up for you.

Sure. And I'll just mention the other thing that I got a benefit from is, as now a second-time founder, is the benefit of hindsight on the first startup. And so I agree completely with Nigel's point of view. The hard part is knowing what that 20% is. If I look back at the things that I did at Optimizely, my last company, The vast majority of my time and effort was wasted. What really mattered was like getting 2 or 3 things right that ultimately led to our success. And that's the challenge is like figuring out what is the main thing? What are the 2 or 3 things you need to focus on? Um, and we can get to some of the tweets. I think I mentioned that there.

I, I love that. And yeah, I think to your point, that's why reflection is so important to be able to kind of pull out those nuggets to, to actually understand what's worth your time. So I didn't pull these up in any particular order. I just pulled one up and this one happens to have a response from Paul Graham, uh, 2 days ago. And it was first-time founders makes up for lack of focus by putting in more hours. Sounds a lot like me. Uh, second-time founders recognizes the main thing is the, is that the main thing should stay the main thing. Break this down for me.

Yeah, this is totally a reflection of the learning I had in hindsight from my first company, which is that many of the things I spent my time on ultimately didn't contribute to the success of our company. And it, it's also recognizing that, you know, I did put in a lot of hours. Uh, you know, I, back my last company, the, the office was in my apartment. My commute was from the walk from my bedroom to my house. At the stage of life I am right now, I've got 3 young kids. Uh, I'm at home for dinner every night at 5, and just that constraint alone has forced me to really focus. There's so many things I just say no to today, 'cause I know that the chances of that thing actually moving the needle are pretty low. And I think my, a younger version of myself would've just done it, not, not having the wisdom to Really decide, is this really going to move the needle? And a whole class of these things include things like networking and spending time at happy hours and any version of this, or even doing your email, frankly. I think a lot of people feel that their job as a founder is to be really responsive to every single person who reaches out to them, but you'll realize if you're successful that at some point it just becomes impossible. And so you just got to accept that you're never going to be able to do everything, You got to let a couple balls drop so that you can really focus on the balls that matter.

And out of curiosity, just to give people a sense of today, because listeners may be like, okay, but Dan, what's the punchline? What should I actually spend my time on? What are the balls that matter today when you think about how you spend your time on your current business?

Yeah, it depends on the stage of the business. I mean, certainly if you're pre-product market fit, all that matters is getting to product market fit. And there's a lot of things that get there. Obviously you want to hire a team and do recruiting, There's a lot of things that won't matter. So one of the most important things is talk to users, talk to customers. That is the main thing for many people, is getting out of the building, talk to users. They can convince themselves that they're actually meaningfully moving toward product-market fit by just sitting in the room and coding all day. Most of the time, that time is wasted. It's not getting you any closer to the insights you need to building a business and building a product people love. So that's just one class of things. As a company gets bigger, the main thing may become hiring, recruiting. You've got product-market fit. Now it's about how do you hire people So that, you know, you can, you, you don't have to be in every decision and, and, and you can empower people around you to be successful. And then the next stage of evolution is how do you get the culture right? That's the main thing. So the main thing changes and you need kind of some discretion to, to adapt and learn. But if you use the lens that most of the things you spend your time on don't matter, yeah, then, then that forces you to, to focus on things that you think might.

Yeah, it sounds like it's a combination of both acknowledgement of what the main thing is at any given period of time as it changes, and then the discipline to actually honor that that main thing is the main thing.

Yeah. And you also just, even if you're wrong, it's better to be decisive and just say, this is my main thing right now, and just focus on that. That approach, and most of those decisions are two-way doors. Maybe you say for a while, my main thing right now is recruiting. I just really need an engineer who can do this one skill, and I'm just going to ignore everything else until I get that one thing done. That is a much better approach, frankly, than not even deciding. Like, I'm not so sure what's important. Should I go talk to investors? Should I go— just focusing on that main thing, getting it done and moving on is probably a better approach than having perfect Uh, ability to predict that main thing.

Totally. Okay, let's go to the second. Second one is first-time founder tries to react to and address every piece of feedback from everyone. Second-time founder recognizes feedback is just one data point from one perspective, and the most important thing is people feel heard.

This is a lesson I had to learn over and over again because I, I wanna be liked. You know, I don't have, uh, some of this, uh, personalities that other CEOs you can read about who, who don't seem to care what other people think. I have this character flaw where I actually care what people think, and so I have to overcome that knowing that at the end of the day, most of the people I interact with, my teammates, my investors, we all want the same thing. We want the company to succeed. And even my investors, I realized after a while, don't have all the answers. They know they don't even have the answers. They actually wouldn't want me to just blindly follow their point of view. They want to be heard. They want to know that their point of view matters, that I'm hearing it, but more than anything, they want to make sure that I'm following my gut, I'm making the best decision I think is for the company. And not let the— for me, a common mistake is recency bias. I'll hear a great idea for somebody and just because it's new in my mind, I get excited about it. But if you let a few days go past, you realize actually maybe that's not— they haven't thought about this consideration or this intuition. So it's recognizing that you carry the bag as the founder of the company. The success or failure is on your shoulders and your investors, your teammates, they're trusting you to ultimately make that call. So don't just be easily swayed by the last person you spoke with.

Love that. And I too, uh, suffer from the desire to be liked. Uh, it's both, uh, I guess, uh, a, a troublesome thing at times, but it's also a beautiful thing because it means you really care about building relationships with the people that you work with. Um, and I totally agree, by the way, of separation of time is the best way to kind of separate emotion from rationale. Uh, it's like the, uh, the Seinfeld rule, which was always Jerry Seinfeld would write his jokes in a given day and then wait 24 hours to actually read the jokes that he wrote in order to evaluate if he thought they were good or not.

Yeah. And I'll give you a bonus one that I didn't tweet yet, but this is one that's also, I think, related to this idea. And it's the idea that first-time founders think that the best way to get their team to follow them is to be liked. But really, second-time founders recognize that the best way to get their team to follow them is to win. So that's more important than being liked in the moment. And the people who you disagree with and you ultimately end up proving that your point of view is right are the ones who will be the most loyal and the most enthusiastic to want to work for you and to follow your lead because they know that at the end of the day, it's a tough job and you need somebody to sort of take in all that, synthesize it, and chart the path forward.

I love that. And also, oftentimes if you're doing things to be liked, it's, you're making a short-term trade-off for being liked for a long-term trade-off of a world of pain because oftentimes that leads to missetting expectations in a way that over the long term, you're going to have to unravel those expectations. But now you have a lot of time of the wrong expectation being set. So I think that's spot on. Next one is first-time founders proud to share how many employees they have. Second-time founders proud to share how few employees they have. I love this one.

Yeah, I made this mistake so much when I was running Optimizely. I was always so excited to show we're at 120 employees or 200 employees or 300, you know, and And I always liked, and I had this, it was part of my ego that I now look back at, it was just so pernicious because it led us, A, to hire way more people than we needed. Not directly, but I think I was never as focused and willing to say no to my head of marketing or my head of X department who say, yeah, I think we can do more with this one person. If I had had that sort of discipline to say no, then I think we wouldn't have hired so much. And I do think subconsciously a big part of that was just like, my ego and pride of like, we're, we're out talking about startups. Like, yeah, we're 400 people. Like, that felt really good. I still do that. You know, I still, when I talk about Optimizely, I like to say, oh, we reached $120 million in ARR and 450 employees. And that feeds a certain part of me that shows that like, I'm not a bozo. But I also think that that can be really easily get you down a path of burning too quickly. A lot of the people you hire are likely not gonna be as productive or as efficient as, uh, as if you'd stayed smaller. And, and I see that now today we're a team of 20 at Rewind. And we're more productive. We, we ship faster than we ever did when I had a team of 400, uh, at my last company. So I'm just so proud now of how few employees we have knowing, I think it, you know, that, that, that damage that it did to hire too quickly and to burn too fast.

Yeah, I love that. I, I remember when I would tell people that Morning Brew post-acquisition, we scaled from 50 employees in October of 2020 to 300 employees in a year and a half. People were like, oh my God, that is the most amazing thing. And then when I give them the punchline that we completely overhired, we had to do 2 rounds of layoffs. It led to a lot of pain. And hitting 300 employees is actually like— that was the start of all of that pain. And actually, probably if we stayed around, I don't know, 150, 200 people, something that was way more within kind of our comfort zone and also being able to get more out of every person versus more people providing a little bit less. I think to your point, Um, it's just a way healthier way to be.

Oh, absolutely. And it's a cultural thing too. Once you have that, if you start with that culture of sort of frugality and efficiency and prioritization, it, it goes back to the main thing. You know, you focus on the main thing as a company, you focus on the main thing as a CEO, your team will. But if you sort of hire, you know, willy-nilly and you just, every time you have a problem, you hire somebody to solve it as opposed to trying to figure out a more scalable way to solve it, that then percolates through the whole organization. That's really hard to undo.

Yeah, totally. And I think honestly, uh, I could end up doing this as another episode at some point, which is like, The benefit you have as a bootstrap founder is you're forced into thinking of frugality from day one. But actually the hardest transition you have to make as you hit scale is an openness to spending money, because spending money can be a very valuable thing in growing once you know what works. But the flip side is, you know, when you raise venture money, if you're not careful and you don't have the right mindset, and I'm sure you have like acute awareness of this, is it's so easy to just spend it. And so I think to have A bootstrap mentality as a venture-backed founder is a really careful balance to have.

Yeah. And that's why we have 6 years of runway. And I hope to increase that, not decrease that over time, is I've learned that mistake. And it's great to raise money when you can. You should get the money, raise as much as you can. But the bigger mistake is to spend it. Don't spend it just because you have it. It's great sitting there. Interest rates are high. Buy some T-bills. Don't go off and Spend it willy-nilly.

Totally. Next one is first-time founder care what investors and other founders think. Second-time founder care what users think.

This is another example of a mistake I made where I had the world's best investors at my last company. I cared. I had all these other peers that had been there, done that, and I just valued more of what— at some point, the company got bigger, I got further away from the user, and I was surrounded more by people like that. And it just sort of made it so that the decisions I was making wasn't rooted in what's ultimately the main thing, which is making users so damn happy and building a product so damn great that they go off and tell other people about it. So that was just a mistake that I think happened over time. Again, a good reason why bootstrap founders probably are successful is they're not surrounded by these people. You're forced to talk to users because you probably haven't hired that customer support person and you hear the pain from the customer support. And so you go build that feature. So it's one of those lessons, if you do have a venture-backed company, that you should be careful of. And it's the other thing I learned is the investors, they're investing in you. They don't want you to just follow their advice blindly. They want you to really focus on what matters. And users are, at the end of the day, the thing that matters most.

Yeah, totally. Before we hop into the last 2, I want to run one by you that I've read a number of times and I have thoughts on as well in kind of this First-time founder, second-time founder paradigm. Uh, I think I last saw Justin Kan say this where he said first-time founders care about the product, second-time founders care about distribution. What are your thoughts on this notion of, uh, what's more important, product or distribution?

It's, uh, and I'd say third-time founders care about both. I've seen.

Yeah, exactly.

Well, I think I'll tell you a story on this. So the very first startup I worked on, it's not even on my LinkedIn. is called Carrot Sticks. It was an online math game for kids. This was back in 2009. I wasn't a parent, I wasn't a teacher, I wasn't a kid. I joined up with another fellow Googler, and at Google you never learn about distribution. I remember my very first venture capital meeting, the investor says, okay, so how are you going to get distribution? I didn't even understand the question. I didn't know what he meant. I was just sort of stuttering. So you learn that, I think this is the thing, that the reason that meme exists is so many technical founders, especially people who've worked at big companies, end up making the mistake of thinking that the value that they're creating is in the sophistication of their technology, not the problem it's solving. And that's where I think if you make that mistake, you end up not even thinking about distribution. You just think, oh, I'll just make this cool big technical edifice and the users will come. Today, as I reflect on that, I do think the best products are the ones that have that characteristic that wow people, that surprise and delight in a way that they do tell people about it. So in that sense, I do think the best products get distribution through word of mouth, and that's the bar we hold ourselves to. We try to build a product that is so damn good people tell other people about it, but that's hard. The bar for that is so much higher than some SaaS product to solve some business process. So that's why I like, by the way, building more of a consumer or prosumer product than a B2B product, because that's the best way to grow, is to get somebody to love your product, pay for it, and then tell other people about it.

Totally. So long story short, be a third-time founder and have both product and distribution. Exactly. Yeah. Last 2. This one is from the 26th. First-time founders spend months building a big, technologically sophisticated product and write the demo script for launch. Sounds like kind of what you were saying a minute ago. Second-time founders write the demo script for launch and then decide whether the product is worth building.

Yeah. And I took this one from Amazon. I heard this much later in my career. I wish I'd learned this early, but Jeff Bezos was famous for having people write the press release before they start building the product. And that was, in his mind, the best way to be user-centric and user-obsessed, because you talk about it in the language that a user cares about. If it's a good press release, it's not about the sophistication of the technology. And so I think that's the opposite lesson of what I learned at Google when I was there early on. A lot of people valued— you got promoted by the sophistication of your technology, not by the problem it actually solves for a customer. So that's why I wrote that tweet, is I think people have been trained by big tech to not get that order right. And you end up actually building a better product. If you're forced to write that demo script before you start building, it makes you think about the use cases, the demos that would demo nicely. And I think that clarifies, that focuses you back to the main thing. It focuses you on what actually matters in the product, which actually makes you descope it. It actually becomes easier to build that product When you know, when you have the end in mind, you have the demo that you'd love to give at the end.

Yeah, I love that. And again, it's just writing the demo script is more of a force function to putting something in a language that really is user-centric. Whereas like the big technologically, uh, advanced product, like it makes you, again, I'm not technical, but I would assume if I was an engineer, it'd make me feel really excited about building something super, super technologically advanced. But Then it becomes about me and not about the user.

And the bigger thing then is you have a huge sunk cost. The sunk cost fallacy is real. If you started building that way, the chances that you change your mind 6 months later when you're actually ready to launch are very small. So starting with the press release first changes, it gives you more nimbleness. You end up saying, okay, well, maybe that's the right direction. Maybe it's not. Maybe I'll change the technology. And that, I think, is also a really powerful part of that mantra.

Love that. Last one. First-time founders share ideas with my team and investors when they are 95% baked. Second-time founders share ideas when they are 51% baked to get candid early feedback when you have no sunk cost. And the one thing I'll just say to this is I was always so self-conscious about sharing ideas in the early days of Morning Brew because I'm someone who— I share ideas not when they're fully baked, but I share them as I'm thinking through them because actually talking through them with people is the way that I work through ideas. But I was always very self-conscious of it because I was worried it would make me come off as a sloppy thinker or as someone who hasn't been fully thoughtful about what they're working on. So it's interesting to see you put it this way.

Yeah. And even after I wrote it, I sometimes think maybe I should have said 60% baked because you want it to be good enough that there's a kernel of truth in what you're saying that feels and resonates. You don't want it to be so wishy-washy and sloppy that it ends up losing credibility. But what I found is if the goal you have is to have the best possible output, whatever the plan is, maybe you're writing a strategy doc for your company and you want the best possible strategy for your company, you need to recognize your own biases. You need to recognize that people want to be bought in on that strategy. And that's where actually soliciting that input early in the process is way better than coming down from Mount Sinai with these golden tablets of, this is what we're going to do. Because both your own psychology is going to is going to be a hindrance. And the people just won't be as bought in. You want to be surrounded by people who are excited to co-author that journey with you and know that— and also, if you set expectations that that's what your plan is, it also changes the tenor of the conversation. They know that, okay, yeah, you brought me in early on this. This is great. It's not fully fleshed, but that's fine. He's brought me in. He wants my input. Again, it goes back to what I said earlier about feeling heard. It makes people feel heard and included. And if you come in with sort of this polished, perfect solution, it kind of feels less like they're part of co-authoring the final product.

Yeah, I love it. Dan, I have thoroughly enjoyed these first-time founder, second-time founder posts, tweets, post-tweets, and I really hope you keep them going because I know my audience and entrepreneurs in general find them super valuable. So thanks so much for writing them, and thanks for coming onto the podcast.

I hope you enjoyed this episode of Founders Journal. If you like this format where I curate world-class entrepreneurs and investors to answer the most important questions for early-stage entrepreneurs, shoot me an email to alex@morningbrew.com to suggest a future question or challenge that you want answered, or a specific expert that you would love to see come on the podcast. As, as always, thank you so much for listening, and I'll catch you next episode.