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The rule of thumb when seeking a new job or financing a startup says it is best to whitewash past mistakes and instead glowingly highlight and exaggerate your successes. But in today's rule-breaking New Economy, "serial entrepreneurs" are turning previous blemishes into beauty marks.

"A key thing I ask myself in choosing people to work with is: Do they have scar tissue?" says Lisa Gansky, an investor in several startups and herself a woman with scars: She was a co-founder and the head of Global Network Navigator, the Internet-access service that America Online acquired in 1995 and unplugged at the end of 1996. "Scar tissue is an important metric, along with vision, a sense of humor, and an understanding of where your limits are." Alumni of the school of hard knocks, she says, have an increased chance for "intellectual and emotional integrity."

Welcome to a new world where failure—although not exactly warmly embraced and encouraged—is more than tolerated. Deep-pocketed investors who scan hundreds of new business plans weekly confide that having failed in an entrepreneurial endeavor is not the kiss of death. On the contrary. Startups run by a vet who has launched a company, experienced the glory and pressures of becoming an industry darling, then suffered its death, or at least stagnation, are often among the most desirable picks.

"We prefer to back smart people who have stubbed their toes to backing smart people who have experienced nothing but smooth sailing," says Michael Moritz, a partner at Sequoia Capital in Menlo Park, Calif., and wise-eyed moneyman behind such successful startups as Yahoo!, Flextronics, and LinkExchange.

The gamble is worth it: While a failed startup might lose $3 million or so, a successful one can go public and make hundreds of times that for its early backers.

A failure is also better than most experience. Battle-hardened entrepreneurs say that wrestling with the agony of defeat has allowed them to more thoroughly know their strengths and weaknesses and how to let someone else fill the gaps.

Not that wound-enhanced wisdom and humility outweigh ambition, greed, ego, and sheer business acumen as ingredients for success. "With repeats, I ask 'Are they doing this for ego, for greed, or are they really passionate about the business?'" says George Zachary, a partner at Mohr Davidow Ventures in Menlo Park. "I count on all three components, but at the end of the day I like to back passion."

The following repeat entrepreneurs share a similar passion—for technology, for new business models, for dusting themselves off and having another go. In the New Economy, last year's failure is ancient history. And there's always the opportunity to try, try again.