A young entrepreneur recently told me: “For a first-time entrepreneur, his/ her identity is his/ her passport; for a second-time founder its the flow of term sheets even before the next venture has been announced.”

The role of experience in entrepreneurship is often underrated, particularly when it comes to the first fundraising.

Strange are the workings of what I call “the founders’ pecking order theory”. While from a distance it may appear that startups simply grab any money that comes their way, my conversations with entrepreneurs have revealed that there is a pecking order in which they choose between angel investors, seed investors and venture capital investors. Here’s what it is:

The first round

First-time founders are generally of two kinds:

Young college graduates with startup ambitions Experienced professionals who’ve spent years in corporate jobs before taking the startup route

The first category does not have the luxury of tapping into a network of friends and colleagues or the ease of banking on savings. They have to hustle their way to raise funds from the first day itself. For them, fundraising is a dual journey: they have to prove their business idea and their own merit.

In this case, approaching a large venture capitalist first may not be the most viable option. Their first options are mostly accelerators, angel networks or individual angels – who can be categorised as serial entrepreneurs or high net worth individuals.

“We were just out of college when we raised our first round from Angels in 2016,” said Shashank Murali, alumnus of BITS Pilani and co-founder of Tapchief, which raised its first funding from 21 angels, including serial entrepreneurs Mekin Maheshwari and Kunal Shah, Snapdeal’s Kunal Bahl, and Paytm’s Vijay Shekhar Sharma, among others. “We went after people who would back us as founders first and help us scale the business. It is now, in 2019, that the conversation has shifted to our business as we raise further rounds.”

We @TapChief announced today that we raised some $$$. This seems like a good time to share how we hustled to bring on 50+ amazing investors to back us. Hopefully it'll help other young founders not be as clueless as we were!

Please RT if you liked reading :) https://t.co/TCnDy3FXtF — Shashank Murali | TapChief (@shankmurali) June 26, 2019

For the four founders of Campus Sutra, the experience was slightly different. All of them had worked with corporates or large startups for an average of around five years before starting up in 2012. They first dipped into their own savings. Despite over 150 conversations with investors and more than Rs 200 crore in revenue, they continued to stay bootstrapped. “Money comes with all strings attached and we had to stay true to our business,” Campus Sutra co-founder Aditya Agarwal, told me. “What we are looking for is an investor who can share our vision for the company and help us grow.”

I’ve summed up my learnings from conversations with first-time entrepreneurs below:

What do first-time entrepreneurs want from early investors?

Advice to scale a business and active participation in the startup

Experience of having been there, done that

Work ethic blueprint

What are the mistakes that can be avoided?

Many first time founders pitch to large VC funds and then learn that they should start with an angel individual or network

It takes an average of 50 pitches to land the first seed round

Product-market-fit happens first and large funding round comes later

The second-timers

Things are not the same when a second-time entrepreneur – his past success or failure aside – looks to start up again.

For second-time entrepreneurs, the challenge is to keep valuations low and find new investors.

For serial entrepreneurs, raising money is perhaps the easier part. Many second-time founders told me that their pecking order is clear: individuals or angels followed by seed funds followed by VC funds. The VCs typically come in when they’re raising a fourth round.

What’s challenging for this lot is to keep valuations low and to go beyond the immediate network of investors. When it comes to picking angels, these entrepreneurs often prefer individuals who don’t know them already because they want the backing for the business and not for themselves.

An interesting category of second-time entrepreneurs is those who are angels themselves.

“Having been on both sides of the table, I am able to empathise with founders and invest in their idea and vision and help them scale,” Tabish Sangrar, a second-time entrepreneur, told me. The 33-year-old sold his first venture, an e-pharmacy startup, in 2015. In 2018, he co-founded a stealth mode machine learning focussed venture. In the interim, he also made some seed investments in early-stage companies in sectors such as sports tech and fintech.

Sangrar is currently in talks with several angels across the world who can help open doors for his startup across the globe. While running his own startup, he helps the companies he has invested in with devising their go-to-market strategy and build their technology stack.

Here are some key takeways from my conversations with second-time entrepreneurs :

What do second-time entrepreneurs want from early investors?

Patience

A potential value in building the business; preferably domain expertise

Network – both for raising the next round and for business expansion in India and overseas

What are the mistakes that can be avoided?

Giving away too much stake, too fast

Not having skin in the game – it is important to invest personal funds in the business

The first time around they thought that raising funds was the most exciting part of a startup. The next time around they realise that scaling the business is more important

From the experts

Back in 2000, when Deep Kalra first raised funds for his venture MakeMyTrip from Rupert Murdoch-backed eVentures, it was a pretty quick deal just based on a business plan. Within a year, the dot com bubble burst and the investors wanted their funds back. MakeMyTrip was then bootstrapped for five years before raising from SAIF Partners. “I would be less naïve and more aware,” Kalra told me when I asked him what would he have done differently if he knew then what he knows now. “If there were a follow-on, I should have baked that into the term sheet!”

Over the years, MakeMyTrip went on to raise funds from Helion Ventures and Tiger Global, among others, before going public in 2010.

Having been an entrepreneur for almost 20 years now, Kalra believes funding is actually the third-most important aspect of building a business: “the most important is the founding team and the second is the right advice or mentor.” He believes that an entrepreneur must not mix up investors and advisors, because “investors can become very biased once they have invested in you”.

Some believe that the angel investment ecosystem in India is now maturing like in the US where there are reportedly over 2,000 angels. “India is capital-starved and we need a humongous amount of money to fund ventures and angels will continue to gain prominence,” said Sanjay Anandaram, a mentor and advisor to funds, entrepreneurs and companies. “Angels participate not just for financial returns, but since their personal money is involved, they are involved in scaling the venture too.”

Angellist, with a throughput of one deal a week and a portfolio of 80 companies, has ridden the wave. Utsav Somani, partner at Angellist, says he has observed that second-time entrepreneurs mix up their rounds and have a combination of strategic angels and hedge funds on the cap table. In addition, he says founders are now looking to bring a new breed of marquee angels: CXOs of large startups who have experience in building the business.

“There will always be space for angels and the personal brand for an angel is going to matter more and more,” Somani said.

This article first appeared on Quartz.