There is no doubt about it, founding a company is hard. From tech billionaires like Amazon’s Jeff Bezos to consumer product builders like Sara Blakely from Spanx, every founder has a daunting startup story. But what these shining examples of success have in common is the fact that they both began with just one person.
Jeff Bezos built Amazon from the ground up (literally he was packing boxes on the ground for the first few years of the company) and Sara Blakely had to get turned down by an endless number of male investors before one would even hear out her idea (thanks to his two daughters who were incredibly supportive of it when he showed them the product).
Solo founders are just not taken seriously by the general startup sphere.
Most startup accelerators strongly encourage entrepreneurs who apply to find a co-founder. While none of them ban solo founders from their programs, they are vocal about their desire to work with teams.
The most well-known startup accelerator, Y-Combinator, was founded by Paul Grahm and in a 2006 essay entitled The 18 Mistakes That Kill Startups, he lists being a single founder as the first mistake a new entrepreneur can make. In the very first section, he writes, “What’s wrong with having one founder? To start with, it’s a vote of no confidence.”
This is not a unique mindset amongst the investors in Silicon Valley and beyond. There is a very clear bias toward multiple founder companies and logically it sounds like that makes sense but the data reveals that solo founder companies actually stay in business longer than multi-founder companies and they start out with substantially less money because venture capitalists won’t fund them as strongly.
Imagine what solopreneurs could do if they received the same consideration for funding as multi founder teams.
The truth of the matter is, the incentives for investors to fund multi-person teams are out of line with the incentives of the founder(s). If a soloprenuer raises capital and gives up 20% equity he or she is still 80% owner of that startup. However, if co-founders raise money and give up 20% equity they are each only left with 40% equity for themselves, meaning that neither party has a controlling stake in the company. Venture Capitalists secure their percentage regardless of how the founders have to split the remaining.
What do solo founders need
The same consideration as co-founders and teams.
We need to stop telling our single entrepreneurs that they can’t do it alone. We have data and a long list of successful solo founders that proves otherwise. Secondly, we need to stop telling our entrepreneurs that they have to find a co-founder before anyone will take their phone calls. Yes, starting a business might be easier with a co-founder but that shouldn’t mean we discourage our entrepreneurs to stop pursuing a vision and start focusing on recruiting a distant cousin or old family friend to venture on with.
We need our press and media to get just as excited to cover the launch of a single founder business as they are to write about the three men from Harvard who are beta testing a drone.
We need our venture capitalists and angels to check the data and erase the solo founder stigma from their psyches. In addition, startup accelerators and incubators should focus on asking more questions about the business model, revenue streams, and go to market strategy and less questions about titles and team roles. If VC’s want to find success in their investments they need to start trusting passionate founder to make the right moves for the company.
It’s bad enough that there is gender, race, and age-based discrimination in some parts of the startup ecosystem but we should all work to reduce this strong bias toward co-founders bias because there is no longitudinal evidence that teams are better than single entrepreneurs at running startups.
So, what do solo founders need?
In whichever position you find yourself, whether that be in a venture capacity or from a consumer perspective. Simply support solo founders and fill in where they need it. I believe that as investors and advisors we should help when asked and get out of the way otherwise.