Common wisdom suggests that when it comes to launching a startup, you need co-founders. But a new study finds that solo founders can actually be successful — if they have the support of co-creators. Co-creators are individuals or organizations that play a vital role in helping a founder build their business, but without gaining the control or equity of 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 as a co-founder, with far less risk.
One of the earliest 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 advise against funding solo founders. But are co-founders really the only path to entrepreneurial success?
There is plenty of data that illustrates the benefits of working with a founding team. A report found that 80% of all billion-dollar companies founded since 2005 have had two or more founders – but that means, of course, that a significant 20% of these successful companies were founded by just one founder. Google, Facebook, Airbnb and countless other well-known companies were founded by teams – but Amazon, Dell, eBay, Tumblr and many others have achieved enormous success with a solo founder. In our recent research, we examined the factors that enable solo-founding companies like this one to succeed, and we discovered a critical nuance: Most successful “solo” founders aren’t actually solo.
Through a series of in-depth interviews and an analysis of quantitative data from more than 100 solo founders, we found that while these individuals did not have co-founders with stock and voting rights, they did have co-creators. Our research illustrated how individuals and organizations that are not official co-founders can still play a vital role in helping founders build their businesses (without forcing them to give up stock or risk co-founder drama). In particular, we identified three common types of co-creators who can provide substantial support to solo founders:
For founders who already have some funding (from savings, a previous exit, etc.), it can often make sense for early employees to serve as co-creators. While these employees typically expect some equity, the ability to pay a cash salary will allow founders to access the talent they need to start their business without giving up a significant equity stake (to say the least). not to mention the tension and conflict that can sometimes arise with co-founders). For example, we interviewed a solo founder who had just sold another company for a modest payout. With his earnings from that exit, he was able to hire employees for his next venture instead of relying on co-founders who would work for stocks with no paychecks.
Likewise, while eBay founder Pierre Omidyar is generally credited as a solo founder, he launched the company with the benefit of a $1 million payout after selling another company to Microsoft. Those funds enabled him to hire Chris Agarpao and Jeff Skroll early on, both of whom played key roles in the company’s success. Likewise, although many know Eric Yuan as the solo founder of Zoom, he actually founded the company along with 40 engineers who followed him from WebEx.
Of course, not every founder is 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 to the founder of an EdTech startup who had a strong technical background, but no 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 multiple school districts. He formed an alliance in which he gave the partner company a share of the profits in exchange for their support to sell his product to their existing customer base. This alliance gave the founder access to sales and marketing resources he didn’t have, without watering down his equity.
There are plenty of other examples. Think Sara Blakely, the founder of Spanx, which sells shapewear in more than 50 countries. Her idea would never have become a multi-billion dollar business if Sam Kaplan, the owner of established manufacturing company Highland Mills, hadn’t taken the risk and agreed to manufacture her product. With the help of alliances like this, Blakely was able to retain 100% ownership of Spanx while spearheading its meteoric rise.
Finally, many of the founders we spoke to relied heavily on benefactors: individuals or organizations who gave these entrepreneurs connections, money, and/or advice without any expectation of reciprocity or compensation. For example, a founder we spoke to had limited resources and needed a lot of expensive equipment to start his business. At first he assumed he would have to find a co-founder or investor with deep pockets – but then he realized a good 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 for free. The arrangement continued until the founder earned enough income to hire his own staff 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 aspirations of 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. Likewise, Mint’s rapid early growth was greatly 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.
Early employees, alliances and benefactors may not receive the same recognition as founders, but these co-creators can play a pivotal role in the early growth of a company. Consider the history 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 company alone. He had several co-creators, including early employees such as Paul Davis, who oversaw back-end development for Amazon.com and was “closely involved in many aspects of getting [the] company started;” Tom Schonhoff, who built Amazon’s entire customer service from scratch; and Shel Kaphan, who has described Bezos as “the most important person ever in Amazon.com history.”
Co-creators like these can provide many of the same key resources, connections, and ideas as a formal co-founder, without the founder having to relinquish control or deal with tensions between the co-founders. This can be a significant benefit – after all, it’s a lot easier to say goodbye to an unlucky co-creator with no property than to an hapless co-owner with a lot of property. For example, Mark Zuckerberg’s split from co-founder Eduardo Saverin sparked a massive and messy lawsuit that ended with a multi-billion dollar settlement for Saverin. And situations like this are more common than you might think, with a recent survey showing that 43% of company founders are forced to buy out their co-founders because of rifts and infighting. 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 in their corner, a “solo” founder can go a long way.
This post Don’t buy the myth that every startup needs a co-founder
was original published at “https://hbr.org/2022/04/dont-buy-the-myth-that-every-startup-needs-a-co-founder”