Wait, What? Solo Founders are More Successful

Data shows that startups founded by solo entrepreneurs are more successful that those founded by entrepreneurs with one or more partners. So says an April 30, 2019 article in Inc. written by Minda Zetlin. Ms. Zetlin’s article surveys research conducted by Jason Greenberg of NYU and Ethan Mollick of the Wharton School that looked at 3,526 startup companies. The researchers found that companies with solo founders were more likely to remain in business than those with multiple founders. Companies with founder teams were able to raise more money out of the gate than solo founders, but solo-headed firms had higher revenue overall than their team-founded counterparts.

For any of you who have been around the startup world for a while, you will know that the result found by Mssrs. Greenberg and Mollick is directly contrary to the conventional wisdom spouted from all corners. Founders are encouraged to build a founder team if they want to be taken seriously. Y Combinator is very open about the fact that companies with solo founders have a much lesser chance of being accepted into the accelerator program than those with founder teams. This bias toward founder teams is also an open secret among startup investors.

Greenberg and Mollick initially looked at Kickstarter companies when doing their research. Since then, the researchers have expanded their survey to include non-Kickstarter companies. That research is ongoing, but Greenberg apparently told The Wall Street Journal that the preliminary findings from the expanded survey are consistent with the Kickstarter results.

Ms. Zetlin briefly examines in the article why companies with solo founders might do better over the long term. Lower salaries and costs, quicker decision-making, the ability to hire needed expertise and a greater tolerance for risk are all cited as reasons. The author also posits that a solo founder who makes the leap to found a startup may simply be more passionate about the product or business concept.

I found the Inc. article to be both surprising and not surprising. Most founder teams I see have one principal leader, or, at most, two strongly-committed individuals. The lead founder is, more often than not, the person who originally came up with the idea for the product or business concept. The lead founder is also the person who took the step of actually starting the company. In many team-founded startups, there often seems to be a category of “second-tier” founders who contribute to the business but who are not as instrumental as the lead founder in pushing the business forward. Could these second-tier founders be equally effective in employee roles? Possibly.

Observation seems to indicate that the solo founder model can be just as present in a team of founders. If only one of the founders is responsible for the momentum, direction and major decision-making about the company, the dynamic looks much like a solo-founder-led company. Recognizing that this dynamic exists in many team-led companies would seem to support the researchers’ conclusions that solo founders are more effective. As the researchers continue to gather data, it would be interesting to expand the study to look at the relative success of founder teams led by a dominant founder and whether these “teams” mirror the outcomes of sole-founder companies. If this is the case, the data outcomes may not be as startling on second look.

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

Anne T.

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