The Perils of Starting a Business On Your Own
Search for the words single founder on Google, and what you find might be disheartening: a blog posting by Y Combinator founder Paul Graham on the 18 mistakes that kill startups. Single Founder tops the list. Graham's take is that the absence of partners is akin to a vote of no confidence in the company, signaling that the entrepreneur couldn't talk any of his friends or colleagues into getting involved.
Yeah, well, maybe sometimes. In reality, the honor roll of entrepreneurship is full of companies launched by single founders. And not every investor agrees with Graham. PrivCo, a New York City-based financial research firm specializing in privately held companies, found in a recent study that 44 percent of startups that raised $25 million or more in funding were run by a single entrepreneur. "Solo founders do quite well at raising money," says PrivCo's CEO, Sam Hamadeh (who, incidentally, co-founded the career site Vault but launched PrivCo alone).
Still, if you go it alone, you do need to be aware of certain issues. Loneliness is a big one. "There can be a lot of negative thinking when you're in your basement, coding all day long," says Corey Post, founder of AgileLeverage.com, a content-marketing-strategy firm based in Durham, North Carolina. So, get up from the desk once in a while. Go to industry conferences and attend local meetups with other entrepreneurs.
Myopia is another hazard. Without constant reality checks from a co-founder, it's easy to fall in love with your own plans and waste resources on bad ideas. Setting up an active advisory board of startup veterans can help you avoid that trap, says Bruce Bachenheimer, a management professor who runs the Entrepreneurship Lab at Pace University. He's talking about the kind of people who will ask in-your-face questions that you--and, later, your employees--might be afraid to pose, such as: "Why are you putting all your time into this?" "How come we're not going after a different client?" "Shouldn't we be raising our prices and investing in infrastructure?"
When it comes time to recruit people to be on your advisory board, VC Mark Suster suggests asking potential advisers to put up a small investment in your company. As crazy as that sounds, he says that an adviser with some skin in the game will be more emotionally involved and add more value.
If you do want to raise angel or VC money, though, you probably will need to prove yourself more than you might as a member of a larger team. At Y Combinator, Graham's wife and business partner, Jessica Livingston, says, "I want to be clear that we definitely fund people who are solo founders." But given the rigors, and ups and downs, of running a startup, she says, "this person has to be super determined, a superhustler."
And you definitely need to show you can draw other talented people to your idea and get them to join you. "We're trying to back companies that can scale and grow," says Peggy Wallace, managing partner at Golden Seeds, a New York City-based early-stage investment firm. "That's going to take people. We want to see that other people believe in the idea of the company and believe in the leader."
Here are three quick tips to stay grounded while flying solo:
1. Be honest with yourself. Some entrepreneurs need a partner to avoid loneliness, depression, and inertia.
2. Set up a Board of outside advisers. You'll need a sounding board to talk through big decisions, and employees can't afford to be as candid as you'd like.
3. Be prepared to prove yourself. Many investors are skeptical of sole founders. To win them over, you'll need to show them you're superhuman.