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 reveals that solo founders can actually be successful — if they have the support of co-creators. Co-creators are individuals or organizations that play a critical role in helping a founder grow their business, but without receiving control or equity from a formal co-founder. Based on more than 100 interviews with solo founders, the authors describe three common types of co-creators: employees, alliances, and benefactors. Of course, working with a co-founder can be the right decision in some cases. But the research illustrates how co-creators can provide many of the same key resources, connections, and ideas that a co-founder might provide, with far less risk.
One of the first and most important decisions that 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 capitalists and incubators even explicitly advise against funding solo founders. But are co-founders really the only path to entrepreneurial success?
There is plenty of data illustrating the benefits of working with a founding team. A report found that 80% of all billion dollar companies launched since 2005 had two or more founders – but of course that means that 20% of those successful companies were founded by a single founder. Google, Facebook, Airbnb and countless other well-known companies were created by teams – but Amazon, Dell, eBay, Tumblr and many more have had huge success with a solo founder. In our recent research, we explored the factors that make solo-founded companies like these successful, and we discovered a critical nuance: Most successful “solo” founders aren’t actually solo-founders.
Through a series of in-depth interviews as well as an analysis of quantitative data from more than 100 independent founders, we found that even if these people did not have co-founders with shares and voting rights, they had co-creators. Our study illustrated how individuals and organizations who are not formal co-founders can still play a vital role in helping founders grow their business (without forcing them to give up equity or risk co-drama). -founder). Specifically, we’ve identified three common types of co-creators who can provide substantial support to solo founders:
For founders who already have funding (from savings, previous exit, etc.), it can often make sense to have early employees serve as co-creators. While these employees typically expect some fairness, the ability to pay a cash salary will allow founders access to the talent they need to start their business without giving up a substantial equity stake (not to mention the risk of tension and conflict that can sometimes arise with the co-founders). For example, we interviewed a solo founder who had just sold another company for a modest payment. With the proceeds from that exit, he was able to hire employees for his next venture rather than relying on co-founders who would work for equity without pay.
Likewise, while 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 company to Microsoft. These funds enabled him to hire Chris Agarpao and Jeff Skroll early on, both of whom were instrumental in the company’s success. Likewise, while many know Eric Yuan as the solo founder of Zoom, he actually founded the company alongside 40 engineers who followed him from WebEx.
Of course, not all founders are able to hire employees right away. If paid support isn’t an option, founders can form win-win alliances with existing organizations. For example, we spoke with the founder of an EdTech startup who had a strong technical background, but no sales experience or connection to the school districts that were his target customers. He considered bringing in a co-founder to fill those gaps, but instead identified another company that was already selling a portfolio of related products to multiple school districts. He arranged an alliance in which he gave the partner company a share of the profits in return for their support in marketing his product to their existing customer base. This alliance allowed the founder to access the commercial and marketing resources that he alone lacked, without diluting his equity.
Other examples abound. Consider Sara Blakely, the founder of Spanx, which sells shapewear in over 50 countries. His idea might never have become a billion-dollar business if Sam Kaplan, the owner of established manufacturing company Highland Mills, hadn’t taken a chance and agreed to manufacture his product. With the help of alliances like this, Blakely was able to retain 100% ownership of Spanx while driving his meteoric rise.
Finally, many of the founders we spoke to relied heavily on benefactors: individuals 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 to had limited resources and needed a lot of expensive equipment to start his business. At first he assumed he would need to find a deep-pocketed co-founder or investor, but then realized that a close friend of his had a small business with the necessary equipment. This friend let the founder use the equipment, and even asked his own employees to help the founder, all for free. The arrangement continued until the founder had earned enough income to do his own hiring and buy his own equipment.
Of course, not all of us have such generous friends. But there is actually a long history of benefactors supporting the ambitions of the solo founders. Henry Ford, for example, convinced several friends (including blacksmiths, engineers, and even his then-boss, Thomas Edison) to donate their time, expertise, and resources to help him build his first prototype models. Similarly, Mint’s rapid early growth was greatly enhanced by solo founder Aaron Patzer’s ability to convince many well-known personal finance bloggers to advertise his company for free on their blogs.
Early employees, alliances, and benefactors may not receive the same recognition as founders, but these co-creators can play a pivotal 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 “solo” founder of the company. But no, he didn’t build the business alone. It had several co-creators, including early employees such as Paul Davis, who oversaw back-end development for Amazon.com and was “intimately involved in many aspects of getting [the] the business has started; Tom Schonhoff, who built Amazon’s entire customer service from the ground up; and Shel Kaphan, whom Bezos 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 could provide, without requiring the founder to relinquish control or manage tensions between co-founders. This can be a significant benefit – after all, it’s much easier to say goodbye to a disgruntled co-creator with no property than to a disgruntled co-owner with a lot. For example, Mark Zuckerberg’s split from co-founder Eduardo Saverin led to a massive and messy lawsuit that ended in a multi-billion dollar settlement for Saverin. And situations like these are more common than you might think, with a recent survey revealing that 43% of business founders are forced to buy out their co-founders due to conflicts and power struggles. Sure, co-founders can add a lot of value, and sometimes they’re definitely the best option, but they’re not the only way for entrepreneurs to get the support they need. With the right co-creators around, a “solo” founder can go a long way.