I’ve spent a not inconsiderable amount of time mentoring founders who wanted to find a partner and even advising solo founders that they might want to consider finding a founder to complement their skills. Having started virtually all my entrepreneurial ventures with a partner or partners, I’ve always assumed that taking on the task of founding and developing a startup as being too big for any single individual. Most of the successful companies I could think of – Microsoft with Bill Gates and Paul Allen; Apple with the two Steves, Jobs and Wozniak; Hewlett-Packard, with, who else? Hewlett and Packard; and Snapchat, with Even Siegel and another guy whose name I forget.
But today’s article in The Wall Street Journal by Cheryl Winokur Munk, knocked this assumption of mine to its knees: Entrepreneurs Are Better Off Going It Alone, Study Says, sub-titled Startups founded by a single person are more likely to survive and succeed than those founded by a team. The article is based on a working paper from the Stern School of Business. Among the conclusions of the seven-year study:
- … ventures were nearly 2.6 times more likely to remain in business than companies with
- … solo founders were 54% less likely than teams of three or more to dissolve or suspend business functions without actually closing, and about 41% less likely to do so than two-person teams.
- solo ventures generated more average revenue than ventures with two founders—and they brought in at least as much revenue, and often more, than those with three or more.
- solo-run companies, as a group, raised less money initially—even though they often went on to generate more revenue and last longer than their counterparts.
However, we do need to keep in mind that the dataset is small and more research needs to be done.
But what’s behind this seemingly counter-intuitive research finding? Decision-making! Startups need to move fast, much faster than their competition, and make thousands of decisions from their name and logo to how they compensate their employees. A single founder can make these decisions more quickly than two founders, who no matter how aligned they may be, will have differences of opinion about many decisions. As Jason Greenberg, one of the researchers says: The more cooks you put into the kitchen, the more likely there is to be disagreement about what ingredients you should use and so forth. John Bly, a member of the Board of the Entrepreneurs Organization concurs:
This [solo founder] works in the favor of small startups which can be nimble and grow rapidly without being distracted by the stresses and misalignment that can occur with partners. While teams might be great once a venture is established and off the ground, starting a company requires decision-making speed and the authority to take chances, which can be harder with a team.
The way I tried to solve the decision making problem in my startups was a strict division of labor between my partner and myself. Typically I handled building the product, he or she handled selling it. But obviously we both had thoughts about the other’s domain. And we didn’t always agree.
Solo founders, take heart! You may not need to spend time and energy in search of a complementary partner! And startups with existing partners, you need to give careful thought to how you make decisions and how to streamline the process in your venture. Solo founders can focus on hiring a team that complements their skills, rather than a searching for that elusive founder. Soloists should run big decisions, like shutting down a product line or acquiring a company, by their Boards of Directors.
I’ll be following the research work of professors Greenberg and Mollick very closely – I’m wondering how their partnership is working out! Do researchers need to make decisions quickly and take chances?