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The Co-Founder Myth: Why You Might Not Need One, Especially in NYC

Written By: Mariya 3 August 2010 Other Posts By: Mariya

At a recent networking event aimed to help entrepreneurs find co-founders, a VC and an angel investor were on panel discussing why they usually avoid single founder companies. One common argument they brought up is that the burdens of building a startup are more easily shared between people. Venture Hacks famously proposes that startups with “the power of two” founders, preferably a “builder” and a “seller”, have the best shot at success. Another concern is that if you’re a single founder, it may be because you weren’t able to convince another person to join in on your idea. If you can’t convince a fellow entrepreneur to take a risk on you, why should any investors?

Providing a counterexample to these arguments was Michelle Madhok, the third panelist at the event and a single-founder entrepreneur who bucked the trend and started SheFinds.com, a curated shopping site that helps busy working women find affordable fashion. Prior to building SheFinds, Michelle had tried to start a company with a friend as her technical partner but the relationship went sour and her co-founder sabotaged the business by shutting down their website. Picking herself up out of the wreckage, Michelle started anew, this time alone. Without the burdens of a tenuous partnership, she was able to make more agile decisions and gain traction faster. She now has a well-rounded staff helping run her business and recently launched MomFinds to help the Mommy demographic find fashion and toys for their children.

Michelle’s experience is not unusual. According to NYC-based research firm CB Insights, while two-founder companies are the status quo in California, entrepreneurs in New York and Boston are increasing starting companies on their own. This is particularly true of venture-backed startups in the internet sector. Of the 2010 Seed and Series A deals done in this space, 20% in California involved single-founder companies. Compare that with 56% in Massachusetts and 40% in New York. Interestingly, single founders in New York raised significantly more money with a median of $4.0 million compared to 2 and 3 founder companies, which raised medians of $1.5m and $2.1m, respectively.

There are a number of good reasons why a single founder company may have a better chance of success than those with multiple founders. Talented entrepreneurs who can forge new, sustainable businesses are rare. The ones who love your idea and can provide complementary partnerships are even rarer. You’re often better off without a co-founder than with one who lacks the requisite skills and commitment. When starting Art.sy out of his college dorm room, Carter Cleveland didn’t want to give up 50% of equity unless he had an absolutely stellar co-founder, but the technical talent he was looking for had already been snapped up by the likes of Google and Apple. Instead, he took 100% equity and responsibility, did as much as possible on his own, and brought on top-notch team members later with 10-30% equity when the company had gotten substantial buzz from winning awards at business plan competitions and TechCrunch Disrupt. As required of potentially disruptive startups, Carter did plenty of pivoting in Art.sy’s early stages and at various points changed the company’s name, design, technology, target market, and team. Not having co-founders to quibble over these decisions with meant that Art.sy could rapidly adjust to changing market realities.

In Carter’s case, his technical background made it possible for him to build out Art.sy’s technology himself, a luxury that many entrepreneurs with business backgrounds don’t have. While there’s been quite a bit of debate about the technical prowess of Silicon Alley vs Silicon Valley, most entrepreneurs and VCs agree that top technical talent in the NYC area is extremely scarce. This imbalance forces many business-oriented entrepreneurs to hire independent developers instead of taking on a technical co-founder.

While the scarcity of technical talent is one theory explaining why single founder companies are more popular in New York vs. California, another possibility is that the bulk of NYC-based startups may not even need a technical co-founder. Research from CB Insights found that, in California, 41% of VC-backed deals and 30% of VC funds went to internet startups in Q2 2010. The equivalent numbers for New York during the same time period are substantially higher, with 73% of deals and 70% of deal dollars funneled to internet startups. With advances in social media, cloud computing, and other technologies, the barriers to both building and marketing internet businesses have been substantially lowered in cost and effort, enabling entrepreneurs to build companies without having technical expertise on the founding team. This is especially true of consumer facing businesses that can be rapidly developed off of existing platforms. Thus, unless you’re trying to solve a tough engineering problem or build a disruptive platform, you can probably make do without a technical co-founder. After all, why give away 30-50% equity if all you need is a neat-looking website?

Given these trends in resources and funding, here are some key tips for would-be single founders:

1) Leverage Your Location – There are plenty of biases in favor of two founder companies and against single founder companies. Put the odds of getting funding in your favor by building a company in places like New York and Boston where VCs have demonstrated a willingness to bet on single founders.

2) Find a Defensible Business Edge – The ease of building internet companies these days means that your technology can be easily replicated or exceeded by competitors. Be sure that your edge is in your domain expertise, your business relationships, or your team.

3) Become an Expert at Recruiting Talent - Carter ‘s advice is to focus on finding people smarter and more competent than you to fill the holes in your expertise. Be sure to check references as you want people who can deliver excellent work, not just sell themselves in the interview process. If the references are anything less than stellar, move on. Mediocre teammates will sink your startup just as easily as a mediocre co-founder will.

Recommended Reading:

  1. Max Klein – My Co-Founder Took My Company and My Girlfriend
  2. Business Insider – You Don’t Need a Co-Founder Anymore
  3. Mark Suster, Both Sides of the TableHiring at a Startup
  4. CB Insights, VC Human Capital Report
  5. Venture Hacks - How to Find a Co-Founder
  6. Bob Cavezza, Founders BlockHow to Find a Co-Founder
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  • ME

    Investors push for multiple founders so they can divide & conquer more easily. Period.

  • http://twitter.com/pheathwa Paul Heath

    I was the CTO in my own startup of 5 years, but I do believe the single founder is possible if they are the business person (seller). The caveat being to find a really good tech partner to work with, and that business relationship is setup to align interests – hence avoiding the meltdown.

    As long as the seller is getting paying customers, any issues that do arise are more easily washed away. Getting funding in this scenario will most likely be based on a working product and paying customers, otherwise the founder will need to bootstrap: http://blog.submitmy.info/2010/03/web-startup-b...

  • mayava

    Thanks for your perspective, Paul. Most of the comments I've been getting from investors has been more in favor of technical single founders, perhaps because NYC is exploding with businesspeople with ideas and no one to build their technology. Seems to me that if a startup is consumer-facing and existing platforms exist, a seller would be an excellent single founder. If a startup is trying to build disruptive infrastructure and/or solve an engineering problem, that's where a technical co-founder is an absolute must.

  • http://giffconstable.com giffc

    I'm really down on this whole single founder meme, especially for tech heavy startups (of which SheFinds, while cool, is not). Entrepreneurship is really hard, and your odds are significantly better if you can share the workload with someone else, if you have someone trusted to deliberate and debate with, and if you have two people that can support each other during tough times.

    Yes it is better to start by yourself than sit around waiting, and yes it is better to go solo than work with someone you dont fully trust, but it would lead people down a bad path to glorify single-founder startups.

  • mayava

    Totally agreed. In the post, I state that businesses that can leverage existing platforms (i.e. consumer-facing web-based startups like SheFinds) probably shouldn't give up equity for a technical co-founder. Obviously, if you're trying to solve a tough engineering problem or build a platform, you will need technical talent. However, you might not necessarily need this guy right away. It may be possible to get a quick prototype built, either by hiring developers or hacking it together yourself, in order to gain some traction to attract talent. After all, the harder the engineering problem, the rarer the technical co-founder who can competently build it with you.

  • http://giffconstable.com giffc

    Well it works both ways – a technical genius benefits by being paired up with someone who can design products and drive customer development. I know some people get their start by outsourcing a prototype, but initial ideas are usually wrong and you need a team that can work together to iterate to success. The odds are very against that with outsourcing.

    Co-founder does not have to mean equal split, but it does mean a strong sense of ownership and a partner mentality where everyone leverages each other's strengths in the fight to beat the odds. 100% ownership of nothing is nothing.

  • http://twitter.com/samjackson Sam Jackson

    Awesome analysis and figures here – and a great site too, it looks like. (Discovered via HN).

    I am not starting a company (at the moment), but coming from my experiences dealing with school / home on the East Coast, and then summers out West, I can definitely see the difference and the difficulties that arise in trying to find technical talent. This said, I love my hometown (Boston) and would want to be there, instead of Silicon Valley. I think I would have some valuable business reasons for that, as well, above and beyond mere preference.

    Those factors aside – as someone who is business-oriented but is passionate about technology, and can speak fluently (or passably) on all manner of technical subjects, I think that I could get fairly far without needing someone on board from the start for technical reasons. It would definitely depend on what the project was, obviously. The next Google will probably call for more skill than my basic front-end fluency and ability to write super basic Python apps, no matter how much launching and iterating I do. I would love to have technical who shared my passions and with whom I could work to build something up. That's why I make lots of friends with engineers while I have these summer internships out in San Francisco : )

    Ultimately, people should try to follow their dreams and passions, and if they don't have a cofounder from the start wit the technical focus to make that happen, they should try to forge ahead!

  • http://twitter.com/bernardmoon Bernard Moon

    I believe you're seeding a destructive message here for startups and new entrepreneurs. Sort like teaching a minor league baseball player the wrong hitting stance as he's trying to make it to the bigs. Not's just about saving equity or making things easier in not looking for a co-founder, but trying to increase your chances of success.

    There are various studies that have tracked the probability of success of technology startups over the past decades, such as MIT's Edward Roberts. The success rate exponentially jumps from one person to two people, and then continues to increase to three and four people. It's been a while since I read these studies, but I believe it flatlines after 4 founders. How many tech titans do you know that were started by one person? Even mid-sized tech company started by one person?

    There is a reason why the recent trend of tech incubators prefer teams of at least two people and why prominent long-time VCs, such as John Doerr, focused on the “team”. Some random links related to this:

    John Doerr's Startup Manual
    http://www.fastcompany.com/magazine/07/082doerr...

    Why to Not Not Start a Startup
    http://www.paulgraham.com/notnot.html

    Ron Conway and Paul Graham startup success data
    http://www.tobeanentrepreneur.com/blog/ron-conw...

  • http://avishaiweiss.net Avishai

    Great article and in-depth analysis. Although it kind of sucks to have to do everything yourself, I am in favor of just starting anyway, even if you haven’t met a good cofounder yet. 

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