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Modest first exits make hungrier founders
The hungry second-timer
A first outcome that is merely okay is still life-changing, because the first million dollars changes everything. Those founders come back hungry, with lessons learned and one or two people ready to join the next journey, and they are in a hurry.
The bored founder
Founders who had great outcomes and decided to go again are the ones who got bored. The new company feels not big enough and not fast enough to them.
Founder abandonment
Abandonment does happen, as when a founder brings in a CEO, becomes executive chair, and trades on brand power. It shows up the vast minority of the time, and most founders want to make it work.
Why do successful founders hire outside CEOs?
Founders often bring in an experienced operator when growth outpaces their management experience. Google hired Eric Schmidt as CEO in 2001 while Larry Page and Sergey Brin stayed deeply involved in the company. The founder in such an arrangement commonly becomes executive chair, a board chair who stays active day to day. Schmidt became Google's executive chairman in 2011.
Why does a big payout change risk-taking?
Financial security lowers the cost of risk, since a failed second attempt no longer threatens basic needs. Economists describe this with the idea of decreasing absolute risk aversion, which holds that people take larger absolute risks as their wealth grows. Kenneth Arrow and John Pratt formalized measures of risk aversion in the 1960s.
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