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 individuals or organizations that play a critical role in helping a founder build their business, but without receiving 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 might offer, with a lot less risk.
One of the earliest 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 capital firms and incubators even explicitly recommend 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. One report found that 80% of all billion-dollar companies launched since 2005 have had two or more founders — but of course, that means that a not-insignificant 20% of these successful firms were founded by just one founder. Google, Facebook, Airbnb, and countless other well-known companies were started by teams — but Amazon, Dell, eBay, Tumblr, and many others have achieved massive success with a solo founder. In our recent research, we explored the factors that enable solo-founded companies like these to succeed, and we discovered a critical nuance: Most successful “solo” founders are not actually solo.
Through a series of in-depth interviews as well as an analysis of quantitative data from more than 100 solo founders, we found that while these individuals didn’t have co-founders with equity and voting rights, they did have co-creators. Our study illustrated how individuals and organizations who aren’t official co-founders can still play a critical role in helping founders build their businesses (without forcing them to give up equity or risk co-founder drama). Specifically, we identified three common types of co-creators that can provide substantial support to solo founders:
For founders who already have some funding (from savings, a prior exit, etc.), it can often make sense for early employees to serve as co-creators. While these employees will typically expect some equity, the ability to pay a cash salary will enable founders to get access to the talent they need to start their business without giving up substantial equity stake (not to mention risking the tension and conflict that can sometimes come along with co-founders). For example, we interviewed one 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 rather than relying on co-founders who would work for equity without salary.
Similarly, 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 business to Microsoft. Those funds enabled him to hire Chris Agarpao and Jeff Skroll early on, both of whom played instrumental roles in the company’s success. Likewise, while many know Eric Yuan as the solo founder of Zoom, he in fact founded the company alongside 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 instance, 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 bringing on a co-founder to fill these gaps, but instead, he identified another firm that was already selling a portfolio of related products to multiple school districts. He arranged an alliance in which he gave the partner firm a cut of the profits in exchange for their support marketing his product to their existing customer base. This alliance gave the founder access to the sales and marketing resources he lacked on his own, without diluting his equity.
Other examples abound. Consider Sara Blakely, the founder of Spanx, which sells shapewear in more than 50 countries. Her idea might have never become a billion-dollar business if Sam Kaplan, the owner of the established manufacturing company Highland Mills, had not taken a chance on her and agreed to manufacture her product. With the help of alliances like this, Blakely was able to retain 100% ownership of Spanx while leading its meteoric rise.
Finally, many of the founders we talked to relied strongly on benefactors: individuals or organizations who provided these entrepreneurs with connections, money, and/or advice without any expectation of reciprocation or compensation. For example, one founder we talked to had limited resources and needed a lot of expensive equipment to start his company. At first, he assumed he would need to find a deep-pocketed co-founder or investor — but then he realized that a close friend of his owned 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 out, all free of charge. The arrangement continued until the founder earned enough revenue to make his own hires and purchase his own equipment.
To be sure, not all of us have such generous friends. But there is actually a long history of benefactors supporting the ambitions of solo founders. Henry Ford, for example, convinced several friends (including blacksmiths, engineers, and even his boss at the time, Thomas Edison) to donate their time, expertise, and resources to help him build his first prototype models. Similarly, Mint’s rapid early 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.
Early employees, alliances, and benefactors may not receive the same recognition as founders — but these co-creators can play a central role in the early growth of a company. Consider the history one of the world’s most valuable brands, Amazon.com. Yes, Jeff Bezos is the firm’s “solo” founder. But no, he did not build the company alone. He had several co-creators, including early employees such as Paul Davis, who oversaw the back-end development for Amazon.com and was “intimately involved with many aspects of getting [the] company started;” Tom Schonhoff, who built Amazon’s entire customer service department from the ground up; and Shel Kaphan, who Bezos has described as “the most important person ever in the history of Amazon.com.”
Co-creators like these can provide many of the same key resources, connections, and ideas as a formal co-founder might offer, without requiring the founder to give up control or deal with co-founder tensions. This can be a significant advantage — after all, it’s a lot easier to say goodbye to an unhappy co-creator with no ownership than to an unhappy co-owner with lots of it. For example, Mark Zuckerberg’s split from co-founder Eduardo Saverin led to a massive and messy lawsuit that ended with a multi-billion-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 rifts and power struggles. Of course, 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.