April 30, 2019

Entrepreneurs Are Better Off Going It Alone?

Came across this today: https://www.wsj.com/articles/entrepreneurs-are-better-off-going-it-alone-study-says-11556503320

It looks like the paper they're citing is this one, from 2018: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3107898 . I'm not sure how academically useful it is, especially since their entire data set was Kickstarter projects. But it's still an interesting counterpoint to the dogmatic idea that you need founding teams.

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    I can't read the article (it's asking me to pay, obviously been reading too many articles there recently!) however, I wouldn't be surprised. I only say this from my experience - I tried several times to work with others and it just didn't work out. When I did it on my own, then the business survived.

    No one size fits all, obviously, but it would be interesting to survey the indie hacking community on this.

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      I think I'm more in favor of partnerships than teams, myself. I'm generally quite happy to temporarily ally with others to get things done, but hitching my cart to a horse I can only half-control sounds risky.

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    Text (article is paywalled)

    =====================

    Entrepreneurs who go it alone stand a lot better chance of surviving—and succeeding—than those who team up.

    That is according to a recent working paper by Jason Greenberg, assistant professor of management and organizations at New York New York University’s Leonard N. Stern School of Business, and Ethan Mollick, associate professor of management at the Wharton School at the University of Pennsylvania.

    The study brings to the forefront a heavily debated question among academics and entrepreneurs over which approach is more geared for long-term success: solo-founded companies or team-led ventures.

    Over the seven-year period of the study, ventures founded by solo entrepreneurs had a better chance of survival than companies with two or more founders.

    Most notably, solo ventures were nearly 2.6 times more likely to remain in business than companies with three or more founders.

    What’s more, solo founders were 54% less likely than teams of three or more to dissolve or suspend business functions without actually closing, and about 41% less likely to do so than two-person teams.

    In addition, the study found that the solo ventures generated more average revenue than ventures with two founders—and they brought in at least as much revenue, and often more, than those with three or more.

    Broadening the field

    The research team focused on a group of 3,526 companies that crowdfunded using the Kickstarter platform. Collectively, these companies raised $151 million in crowdfunding cash and generated about $358 million in total revenue between 2009 and 2015.

    Dr. Greenberg notes that the solo-run companies, as a group, raised less money initially—even though they often went on to generate more revenue and last longer than their counterparts.

    The data set is small and more testing is needed, Dr. Greenberg says. So, to further test their findings, the team has expanded its research to include a variety of sources, including the Crunchbase business database, the Panel Study of Entrepreneurial Dynamics II startup survey and a proprietary survey of more than 1,500 high-potential Wharton graduates, Dr. Greenberg says.

    It’s too early to form conclusions about the extended data, Dr. Greenberg says. But preliminary analyses suggest that the solo ventures in this group are also more successful in terms of revenue and long-term survival than team-built businesses.

    So, why might solo ventures have an advantage over teams? Single entrepreneurs remain the ultimate decision makers and bring in help only when they need it, says Dr. Greenberg. By contrast, with team-led companies, decision-making holds the possibility of becoming contentious.

    “The more cooks you put into the kitchen, the more likely there is to be disagreement about what ingredients you should use and so forth,” Dr. Greenberg says.

    Different factors

    To be sure, there is significant disagreement among academics and seasoned entrepreneurs about which approach to founding is better. Some say that both methods have their respective pros and cons, and that there’s no easy answer to the question. Rather, they say, the long-term success of a business can depend on factors such as the size of the venture, the industry, founder experience, the number of collaborators and the dynamics of the founding team, if there is one.

    It’s also worth noting that a number of highly successful companies—including Microsoft , Apple , Google, eBay , Netflix , and Facebook —that started out as team-led ended up with a single dominant team member, says Alden Zecha, executive in residence at the Center for the Advancement of Social Entrepreneurship at Duke University’s Fuqua School of Business.

    Changing methods?

    In response to the findings, Dr. Greenberg has shifted his classroom approach; he no longer requires students to work in groups to develop business concepts. Instead, he teaches them the skills they need to be successful on their own, such as how to hire the right people to balance their skill set and hire quickly, if necessary. Given the choice, many students are opting to go the solo route, he says.

    Indeed, for some entrepreneurs, the solo approach may be prudent. While teams might be great once a venture is established and off the ground, starting a company requires decision-making speed and the authority to take chances, which can be harder with a team, says John Bly, chief executive officer of LBA Haynes Strand, a provider of accounting, audit and advisory services.

    “This works in the favor of small startups which can be nimble and grow rapidly without being distracted by the stresses and misalignment that can occur with partners,” says Mr. Bly, who is also a member of the board of directors of the Entrepreneurs’ Organization, a global business network of more than 13,000 entrepreneurs.

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    Interesting. Thanks for sharing. Bookmarking to read later

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    I think it is rare to find a well-matching co-founder, just like in science you can rarely find duos of scientists. I don't think it should be a dogma at all that you need co-founders. The main problem with solo founders is the lack of feedback and the lack of an echo chamber. Sites like indiehackers can replace that pretty well, providing a space to have some exchanges and some communication and idea validation.

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