Remember in the “old days” when people who started businesses were called “owners” and most always did it on their own, the printer, the baker, the brewer? They were solo entrepreneurs and if they took on a valued friend or associate as co-owner of the company he was a ‘partner’ not a cofounder.
The solo entrepreneur was usually that way because he was the lone wolf and he liked to call all the shots himself. It’s somewhat rare for the lone wolf to do it alone these days. He does it with cofounders. What changed? Did the style of business change, or did mindsets? Did entrepreneurs finally come to the realization that cofounders or partners were good to mitigate risk?
I’m wondering if the risk thing is getting in the way, and founders simply think they need to have someone in leadership to help steer the ship. Risk mitigation is certainly a huge problem to solve. Quite often, endowing that trusted person you work well with as a cofounder solves it. Startups are a risky business, and as many entrepreneurs are forming the business as a disruptive technology, it is not surprising that people want to take as little risk as they can by spreading it around.
Wikipedia defines a startup as “an entrepreneurial venture which is typically a newly emerged, fast-growing business that aims to meet a marketplace need by developing or offering an innovative product, process or service.” But a startup is much more than that. Startups are, by nature, fast moving enterprises designed to mark a change in the way people see their product. The startup is quick to find money to grow and scale the operation so they can capture the market quickly and adroitly. The thing about scalability is that the goal is defined from the start – fast growth and exiting with lots of money.
Many founders may not say it that way, but they want to get in and get out fast. The exit can be a liquidity event, i.e. a merger or acquisition, a sale of the company or a huge infusion of capital. This takes the startup to the next level, where founders suddenly find themselves above their competency or as minority shareholders unable to retain control of the business. What little control they had is now gone with someone else in the driver’s seat.
So let’s go back to risk. Having someone to share the risk – someone you trust – while being able to work well together can be a great way to navigate the rollercoaster of the startup.
Another reason for having a partner/cofounder is the aspect of complementary skillsets. I was always good at closing deals but hated the initial sales process, so I sometimes found it easier to have a partner who loved the whole sales procedure and who could do it better. Likewise, the founder with a vision and tech background who needs a skilled communicator to express it to the investors and the consumer is a more than viable combination. I see this scenario play out every day, and the great thing is that both founders in the tech/communication roles love it that way. Let the nerd stay in the lab and the communicator schmooze for money!
Each cofounder also comes with baggage of a sort – call it luggage. Luggage can be good baggage not so good. They each have networks, maybe investors from previous deals, people they have worked with like suppliers or even employees that they can now merge into the new enterprise. If you are like me an extra set of eyes can be a godsend and can literally save your company from ruin by sharing the way you look at scenarios from different perspectives.
A lone wolf type relishes the control aspect of being the founder, and may find it hard to give up any sort of control. A company I started a couple of years ago failed because my partner and I had different management styles and a different perspective on how the company needed to be operated – oops! One of the toughest milestones is when the business does grow fast and money pours in. In those cases, it’s tough to decide when or if the company needs to sell out. It’s usually all or nothing guys, and when the opportunity arises for a big payday, the lone wolf will have an easy decision. Add partner(s) and it’s not so easy.
It’s harder to get investors interested in your company if you are a solo founder. After all, if you leave, there is no company without the hands-on leader, and after all, it was your vision. When my partners and I look at new businesses to invest in, or for that matter, to even work with, we look at the management team as one of the criteria we use to determine if the company is a good investment and ready to go places. In fact, it is our first consideration, followed by the viability of the product and the global demand.
Stability is important, and unless the dynamic lone wolf has surrounded himself with equally amazing employees (who have shares or options in the company) the investment strategy is tough to complete a deal. The employees need that buy-in or they will head to the next best thing.
Some may say that as things happen in a startup, like product changes or a new marketing approach, the solo entrepreneur can pivot easier. Like a dance move, the pivot often needs to be quick and determined. Often, with one or more partners, things need to be discussed in interminable meetings and decisions are made by consensus. This part drives me crazy, and is the cause of a lot of internal strife in a startup, because everyone has his or her opinion.
So, having given my perception from both sides, you might feel a bit overwhelmed if you are planning a startup. You’re in good company. Most people, including myself, are serial entrepreneurs. Often, we roll into a startup as a cofounder and other times we take them on ourselves. There’s no line drawn in the sand on which way to go and what works for you is the non-rule to the equation.
As a mentor, I work with a lot of startups who need counsel and, believe me, they are everything from the lone wolf to the multiple partners scenario. You all will face the same challenges but with friends and family support behind you, you might just pull off the next Apple (AAPL).