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Market-Based Solutions to Vital Economic Issues


Market-Based Solutions to Vital Economic Issues
News & Media
Jun 10, 2019

Institute Insights: Go Solo, or Find Co-founders?

By Kenan Institute Grant Recipient and UNC Kenan-Flagler Ph.D. Candidate Travis Howell

Many people dream of starting their own business. But before they can make their dream a reality, one of the first and most important decisions they must make is whether to go it alone or partner with someone they may, or may not, already know. Which approach is better?

Many believe that larger founding teams perform better. The logic seems to make sense – more founders equates to more resources (i.e., skills, connections, money) that should help the venture succeed. The demand for co-founders is high enough that online “matchmaking” services now exist to pair co-founders by skill, personality and entrepreneurial pursuit. This impression of strength in numbers is further reinforced by the fact that many “unicorns” – i.e., extremely high-performing new ventures such as Google, Facebook, Twitter, YouTube, and Skype – have been started by co-founders, not solo founders.

Yet while co-founders can provide key benefits, they also can cause problems. The long-term and high-stakes nature of co-founding relationships means that team members are highly likely to experience conflict at some point. If that conflict remains unchecked, it has the potential to destroy the business. Given the drama that often comes with co-founder relationships, it’s possible that being a solo founder is the better way to go under certain conditions. Amazon, Dell, eBay, Tumblr and RetailMeNot are all examples of highly successful solo-founded ventures.

So, on one hand, co-founders provide resources that entrepreneurs desperately need at the early stages of a startup. On the other hand, they can be a primary source of business failure. Which leads to the question: When is it best for founders to go solo, and when do they need to partner up?

This is the dilemma we addressed in our study. After performing more than 100 interviews with entrepreneurs, both solo founders and co-founders, we discovered something interesting: The successful “solo” founders we spoke with were not actually solo. While they didn’t have traditional co-founders with equity and voting rights, they did have co-creators that helped them build the business.

Co-creators came in many forms. For example, some founders had access to sufficient capital that they were able to hire employees from the outset. These employees provided many of the same benefits as co-founders (i.e., providing skills and extra bandwidth) but without a lot of the negatives (i.e., owners having to give up control/equity). Other founders formed alliances with other organizations, thus filling their knowledge and skills gaps through formal partnerships. Still others had benefactors, who provided founders with advice, connections and money, all without an expectation of reciprocation or compensation. These co-creators built the business alongside the founders, providing the vital resources the startups needed to survive and thrive.

So, if you’re thinking about starting a business, you might ask yourself where you can find a co-creator. For example, do you have enough capital to hire employees instead of co-founders? Do you have a relationship with organizations that would be good alliance partners, or with individuals who might be willing benefactors? If so, consider going solo. Such co-creators may end up providing all of the same resources as co-founders, but could help you avoid some drama and conflict, as well as retain more control and equity in your business.

This working paper will be published on the Kenan Institute’s research webpage soon.

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