Startup Woes: Co-founder or Fly Solo?

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There are many woes when starting a company but one of the most common and earliest is whether you should start the company yourself or bring in a co-founder. It is definitely not an easy question to answer, and there are many variables to consider, so let’s look at it piece by piece.

Prerequisites

Before we analyze the decision, let’s start by examining some of the factors that go into starting a business and see how each factor affects your choices of going solo or bringing on a cofounder.

Human Capital. When starting a company, you need to have a thorough knowledge of your product or service and the industry you are jumping into. If you are building the product yourself, such as in the tech industry, you should also have programming knowledge. In addition to that, you need to have all the necessary skills to build a company, including sales, marketing, business development and finance. All these skills come with years of experience in the industry you’re now trying to crack into. For a single person to have all this knowledge or human capital is quite extraordinary.

Social Capital. In addition to human capital, startups need social capital. You will be hiring employees, building partnerships, acquiring clients and meeting investors. These contacts can be very beneficial to a startup and a founder who possesses any amount of this social capital can really move the company forward.

Financial capital. The last piece of the startup puzzle is financial capital. You need money to start, build and grow your company.

When you start a company, your decision to start out on your own or bring in a founder depends on the percentage of these prerequisites you possess.

Going Solo vs Co-founding

If you, as a founder, posses all the necessary knowledge to build your product or service, finance its growth, market and sell it and expand the business – then you are better off as a lone founder. While it may seem like a long list of skills to have, a lot of it comes with experience in your industry. There are plenty of solo founders out there who have successfully executed all the aforementioned tasks to build great companies.

On the other hand, if you can’t sufficiently fulfill all the roles, then you have a need for a co-founder. Co-founders can help you add on these skills wherever you need them. Technical founders can bring in people with more sales and business development experience to help grow the company, and similarly founders who have mostly business experience can bring in a technical founder to build an actual product. They key is to understand where you have gaps in the necessary capital and find someone who can plug as many of those holes as possible.

Gaps in human capital don’t always mean a co-founder though. Here’s how you decide – if you have gaps in human capital, and you need those gaps filled right at the start because they are crucial to the company’s initial success – then you hire a co-founder(?). If not, then you can just hire someone down the road to fill that role. This way you still retain equity and control of decision making.

But that’s common sense. If you can’t do it, find someone who can help you. Right? Well, that’s not all there is to it.

Another thing to consider is the industry itself. Is it a slow industry or fast paced? Even if you have all the necessary skills to build your product and run your business, can you do it fast enough to match the pace of your industry? Two (or more) people can gather and process information faster than one, and can act on it faster as well. If you are in a slow paced industry, where time to market doesn’t matter that much, and you have the necessary skill set, founding a company alone can work out for you. But chances are if you are in a faster industry like technology, co-founders can help you build your product and grow your business in a timely manner.

Psychological Reasons

In addition to the logical reasons mentioned, there are other factors involved in the decision to go alone or recruit someone.

  • Do you want to make all the decisions?

While there are many things that can kill a startup, arguments between founders is one of the few things you can control. If you like making all the decisions on your own, then co-founders might not be a good idea.

  • Do you want to share the equity?

Equity and compensation discussions are awkward as it is. If you want to retain complete control of the company and have no skill gaps to fill during the early stages, then you are better off doing it on your own.

  • Do you like collaboration?

Some people work better in teams. They like bouncing ideas back and forth and getting feedback on actions taken. In such cases, even if the need for a co-founder on the skills side is very little, it can still be a good idea to bring someone else on board if they increase productivity and efficiency.

  • Do you need validation?

As strange as this sounds, certain people need validation. Building a startup is a very trying time and it can be easy to doubt yourself as things get more difficult. If you would do better if you had a teammate who could help and support you, then by all means, you should recruit someone to help you out.

Noam Wasserman, in his book The Founder's Dilemmas, provides a simple way to distinguish between the choice of a lone founder and a founding team.

If the founder has deep human and social capital, sufficient financial capital, a strong preference for maintaining full control of all decisions, no need for support or validation, and is in a small and slow moving industry, then he or she should start the company themselves.

By starting a company by themselves, the founder retains all the equity and decision making control and avoids all the confrontation and communication problems that could arise with co-founders.

But, if the founder has gaps in human, social or financial capital that need to be filled early on, prefers to work with others, has a strong desire for validation and is in a fast moving industry with first-mover advantages, then they should build a founding team around them.

While a founder does sacrifice equity by bringing in more people, the team has an increased ability to gather and process information. They can adapt to this information faster as a team and provide each other with the collaboration and support to keep going through the tough startup years.

So there you go, a rough guide to whether you should start alone or bring in a co-founder.

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Pasan Premaratne

Pasan Premaratne is an iOS development Teacher at Treehouse. Catch him on Twitter at @pasanpr.

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