Surprising new research from NYU and the Wharton School shows that entrepreneurs who start a business on their own are likelier to succeed than those who do so with one or more partners.

That's pretty much the opposite of what most aspiring founders would guess. After all, you can't be good at everything. You might be a marketing expert but not know how to manage cash flow. Or you might good at building great products but bad at setting prices for them. So you team up with someone who's strong in the areas where you're weak, and you start the business together.

This reasoning seems logical, and it's how most people--even experts--see entrepreneurship. 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 New York University and Ethan Mollick of the Wharton School sent surveys to more than 65,000 businesses launched on Kickstarter over a seven-year period. 

More than 10,000 completed the survey. 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 multiple people have more friends and family members than one), they found that companies with multiple founders were able to raise more money than those headed by a solo entrepreneur. You might think this would give founding teams an advantage over single founders, but you'd be wrong. Despite starting off with a smaller stake, companies with a single founder were more likely to still be in business than those with two or more. And though teams may have been able to raise more money initially than single entrepreneurs, companies with only one founder also saw higher revenue than those with two or more.

To see if these findings would hold true in the non-Kickstarter world, the researchers expanded their scope, looking at data from Crunchbase, the Panel Study of Entrepreneurial Dynamics from the University of Michigan, and a survey of Wharton graduates. Although that research has not yet been completed, Greenberg told the Wall Street Journal that preliminary findings are consistent with the Kickstarter study: Companies with a single founder do better over time than those with multiple founders.

Why One Founder Is Better

Why are companies with single founders more likely to survive? The results suggest one explanation. Revenue at companies with multiple founders is lower than that at companies with a single founder. Yet 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.

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 then make 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. 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. 

Of course, it can be hard to distinguish cause from effect in studies like these. For instance, it's certainly true that two or more people making a decision together are more likely to avoid risk than one person deciding alone. But it's equally true that a solo entrepreneur who decides to start a business on his own or her own is probably more of a risk-taker than someone who wants to start a business but craves the comfort of a second founder to share the burden of responsibility. And someone who cares enough about a new product or idea to be willing to start a business on her own may have more passion for the product or business concept than a team of founders. Founder teams may be as motivated by the idea of working together as they are by their new company or product.

Further research may better explain why solo entrepreneurs are more successful than teams. In the meantime, the message is clear. If you want your new business to succeed, you're better off starting it by yourself.

Published on: Apr 30, 2019
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