Don’t buy the myth that every startup needs a co-founder

Common wisdom suggests that when it comes to launching a startup, you need co-founders. But a new study finds that solo founders can, in fact, be successful, if they have the support of co-creators. Co-creators are people or organizations that play a critical role in helping a founder build her business, but without receiving control or capital from a formal co-founder. Based on more than 100 interviews with independent founders, the authors describe three common types of co-creators: employees, alliances, and benefactors. Of course, working with a co-founder may be the right move in some cases. But the research illustrates how co-creators can provide many of the same key resources, connections, and insights that a co-founder might, with much less risk.

One of the first and most important decisions startup founders face is whether to go it alone or find a co-founder. Many industry veterans argue that being a solo founder is a recipe for disaster, and some venture capital firms and incubators even explicitly recommend against funding solo founders. But are co-founders really the only path to business success?

There is plenty of data that illustrates the benefits of working with a founding team. One report found that 80% of all billion-dollar companies launched since 2005 have had two or more founders, but of course that means a not insignificant 20% of these successful companies were founded by a single founder. . Google, Facebook, Airbnb, and many other well-known companies were started by teams, but Amazon, Dell, eBay, Tumblr, and many others have achieved massive success with a single founder. In our recent research, we explored the factors that enable solo-founded companies like these to succeed, and uncovered a critical nuance: the most successful “solo” founders aren’t really independent.

Through a series of in-depth interviews, as well as an analysis of quantitative data from over 100 independent founders, we found that while these individuals did not have co-founders with participation and voting rights, they did. co-creators. Our study illustrated how people and organizations that are not official co-founders can still play a critical role in helping founders build their businesses (without forcing them to give up their capital or risk co-founder drama). Specifically, we identified three common types of co-creators who can provide substantial support to independent founders:

Employees

For founders who already have some funds (from savings, a previous exit, etc.), it can often make sense for early employees to act as co-creators. While these employees will generally expect some capital, the ability to pay a cash salary will allow founders to gain access to the talent they need to start their business without giving up a substantial equity stake (not to mention the risk of stress and the conflict that can sometimes arise together with the co-founders). For example, we interviewed a solo founder who had just sold another company for a modest fee. With the proceeds from that exit, he was able to hire employees for his next company instead of relying on co-founders who would work for equity without salary.

Similarly, although eBay founder Pierre Omidyar is generally credited with being a solo founder, he launched the company with the benefit of a $1 million payout after selling another business to Microsoft. Those funds allowed him to hire Chris Agarpao and Jeff Skroll early on, who played a critical role in the company’s success. Also, although many know Eric Yuan as the sole founder of Zoom, he actually founded the company along with 40 engineers who followed him from WebEx.

alliances

Of course, not all founders can immediately hire employees. If paid support isn’t an option, founders can form win-win partnerships with existing organizations. For example, we spoke with the founder of an EdTech startup who had a strong technical background, but zero sales experience or connections to the school districts that were his target customers. He considered hiring a co-founder to fill these gaps, but instead identified another company that was already selling a portfolio of related products to various school districts. He arranged an alliance in which he gave the associated company a portion of the profits in exchange for their support in marketing their product to their existing customer base. This alliance gave the founder access to sales and marketing resources that he lacked on his own, without diluting his assets.

Other examples abound. Consider Sara Blakely, the founder of Spanx, which sells girdles in more than 50 countries. Her idea may never have grown into a billion-dollar business if Sam Kaplan, the owner of the established manufacturing company Highland Mills, hadn’t taken a chance on her and agreed to make her product. With the help of partnerships like this, Blakely was able to retain 100% ownership of Spanx as she led her meteoric rise.

benefactors

Finally, many of the founders we spoke with relied heavily on benefactors: people or organizations that provided these entrepreneurs with connections, money, and/or advice without any expectation of reciprocity or compensation. For example, one founder we spoke with had limited resources and needed a lot of expensive equipment to start his business. At first, he assumed he would need to find a wealthy co-founder or investor, but then he realized a close friend had a small business with the necessary equipment. This friend allowed the founder to use the equipment and even asked his own employees to help the founder, all free of charge. The arrangement continued until the founder earned enough income to do his own hiring and buy his own team.

To be sure, not all of us have such generous friends. But in reality there is a long history of benefactors supporting the ambitions of single founders. Henry Ford, for example, convinced several friends (including blacksmiths, engineers, and even his boss at the time, Thomas Edison) to donate his time, expertise, and resources to help him build his first prototype models. Similarly, Mint’s initial rapid growth was substantially bolstered by solo founder Aaron Patzer’s ability to convince many well-known personal finance bloggers to advertise his company on their blogs for free.

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Early employees, alliances, and benefactors may not receive the same recognition as founders, but these co-creators can play a central role in a company’s early growth. Consider the story of one of the world’s most valuable brands, Amazon.com. Yes, Jeff Bezos is the “lone” founder of the firm. But no, he didn’t build the company alone. He had several co-creators, including early employees like Paul Davis, who oversaw Amazon.com’s back-end development and was “intimately involved in many aspects of getting [the] started the company; Tom Schonhoff, who built Amazon’s entire customer service department from scratch; and Shel Kaphan, whom Bezos has described as “the most important person in the history of Amazon.com.”

Co-creators like these can provide many of the same key resources, connections, and insights that a formal co-founder might offer, without requiring the founder to relinquish control or deal with co-founder tensions. This can be a significant advantage; After all, it’s much easier to say goodbye to an unhappy co-creator with no property than it is to say goodbye to an unhappy co-owner with a lot of property. For example, Mark Zuckerberg’s split from co-founder Eduardo Saverin led to a massive and complicated lawsuit that ended in a multi-million dollar settlement for Saverin. And situations like these are more common than one might think, with a recent survey finding that 43% of company founders are forced to buy out their co-founders due to divisions and power struggles. Sure, co-founders can add a lot of value, and sometimes they’re definitely the best fit, but they’re not the only way entrepreneurs get the support they need. With the right co-creators on their side, a solo founder can go a long way.

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