Entrepreneurs who slug it out alone appear to have the upper hand in running startups that survive than their counterparts who run startups as teams.
Jason Greenberg, assistant professor of management and organizations at 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 in their recent working paper, once again brought to light a strongly debated question among academics and entrepreneurs over which approach is more suited for long-term success. Solo-founded companies or team-led ventures?
The Research Took Seven Years To Arrive At This Conclusion
Jason Greenberg and Ethan Mollick found over the course of seven years during which the study lasted, that solo-founded ventures were more than 2.6 times more likely to remain in business than companies with three or more founders.
The researchers also found that 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.
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The study also 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.
Key Highlights of The Findings
- The researchers 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.
Reasons For Reaching This Conclusion
Although the findings needed more testing, according to Dr. Greenberg. The data shows that:
“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,”
“It’s too early to form conclusions about the extended data. 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.
Single entrepreneurs remain the ultimate decision makers and bring in help only when they need it. By contrast, with team-led companies, decision-making holds the possibility of becoming contentious.’’ Dr Greengberg says.
Consequently, the research 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, according to Dr. Greenberg.
The Disagreement And The Argument
A case would be made for why a high number of highly successful companies that started out as teams, such as Microsoft ,Apple , Google, eBay , Netflix , and Facebook
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But Alden Zecha, executive in residence at the Center for the Advancement of Social Entrepreneurship at Duke University’s Fuqua School of Business, was quick to point out that the reason may not be far-fetched: these team-founded startups survived and ended up more successful because there was the presence of that single dominant team member.
However, critics say 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
- The dynamics of the founding team, if there is one.
The Research Is Already Changing The Way Things Are Done.
It seems Dr. Greenberg is not readily buying into any further tests, even if there has to be one. He has, consequently, adjusted his classroom approach. Instead of allowing students to work in groups to develop business concepts, he has shifted to teaching 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,
Indeed, for some entrepreneurs, the solo approach may be prudent,” he says.
“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.
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.