May 6, 2019
Surprising research findings from New York University and the The Wharton School indicate that entrepreneurs who start a business on their own are more likely to succeed than those who do so with one or more partners, Inc. magazine reports.
That’s pretty much the opposite of what most aspiring founders would guess. After all, you can’t be good at everything—-so you would assume that, by teaming up with a partner who is strong in areas in which you are weak, you would be more apt to prosper.
In fact, it’s such an ingrained belief that VCs and other investors routinely choose to fund companies founded by teams rather than those with a solo founder. But it’s also dead wrong.
In an intriguing research project, Jason Greenberg of the Stern School of Business at NYU and Ethan Mollick of Wharton sent surveys to more than 65,000 businesses that had launched on Kickstarter over a seven-year period.
More than 10,000 respondents completed the survey, according to the Inc. report. The researchers narrowed their focus to projects seeking a meaningful amount of funding—the kind that could be used to start a real business, and wound up with 3,526 businesses started with either a single founder or two or more partners.
Consistent with investors’ bias toward teams rather than solo founders (and perhaps the fact that most people have more than one friend or family member), they found that companies with multiple founders were able to raise more money than those headed by a solo entrepreneur.
But that still didn’t give them a leg up. Despite starting off with a smaller stake, companies with a single founder stayed in business longer than those with two or more at the helm—and also enjoyed higher revenues.
Why are companies with single founders more likely to survive? Two or more people cost more than one, especially if the founders are drawing salaries. Even if they aren’t, office space, phone service, travel, and so on cost more for two founders than they do for one.
The researchers also pointed to some truths about leadership dynamics. Starting a company with multiple founders may bring an advantage in terms of wider expertise—but a solo founder can also hire others to provide the expertise he or she lacks.
On the other hand, it’s much easier and quicker for a single founder to think things through and arrive at a decision than it is for two people to discuss a problem or opportunity and agree on a course of action. With three or more founders, decision-making can take even longer.
And then there’s risk, Inc. reports. Starting a company is a risky undertaking to begin with. But once they’ve made that leap, many founders prefer to be conservative and hedge their bets. Two or more people making decisions together are less likely to make bold moves and take chances than one person acting independently.
Research source: @Inc