The Power of Solo Entrepreneurship: Surprising Insights from a Study of 3,526 CompaniesDiscover groundbreaking research from NYU and the Wharton School challenging conventional wisdom about entrepreneurship. Explore why solo entrepreneurs may have a higher likelihood of success than those with partners.
In a groundbreaking study conducted jointly by NYU and the Wharton School, conventional wisdom about entrepreneurship has been challenged, yielding a surprising revelation for aspiring business founders. Contrary to popular belief, solo entrepreneurs appear to have a higher likelihood of success compared to those who embark on their entrepreneurial journey with one or more partners.
The prevailing notion suggests that teaming up with complementary skills is a recipe for success in the business world. It seems intuitive: you bring your marketing expertise, while your partner handles cash flow management, or perhaps you excel in product development while they are skilled at pricing strategies. This belief is so deeply ingrained that venture capitalists and investors often prioritize funding startups with founding teams over solo entrepreneurs.
However, this long-standing belief has been debunked by a thought-provoking research project led by Jason Greenberg of NYU and Ethan Mollick of the Wharton School. Their research involved sending surveys to over 65,000 businesses launched on Kickstarter over seven years, with more than 10,000 entrepreneurs participating. The focus was on projects seeking substantial funding to kickstart real businesses, resulting in a sample of 3,526 businesses, categorized as either single-founder or multi-founder ventures.
Surprisingly, despite the conventional bias favoring teams and the fact that multiple founders typically have a broader network of contacts, businesses led by solo entrepreneurs outperformed their multi-founder counterparts. While companies with multiple founders initially raised more capital, single-founder businesses were more likely to remain operational over time and achieved higher revenue figures.
To validate these findings beyond the Kickstarter platform, the researchers expanded their scope to encompass data from Crunchbase, the University of Michigan's Panel Study of Entrepreneurial Dynamics, and a survey of Wharton graduates. While this research is ongoing, preliminary results align with the Kickstarter study, suggesting that single-founder companies tend to perform better over the long term than those with multiple founders.
These unexpected findings challenge the conventional wisdom surrounding entrepreneurship and encourage a reconsideration of the advantages of solo entrepreneurship. Perhaps the key to success lies in the ability of a single founder to maintain focus, make agile decisions, and fully commit to their business vision, ultimately leading to a higher likelihood of thriving in the competitive world of startups.
Why do companies led by single founders tend to thrive? The results of this study suggest a compelling explanation. It appears that the revenue generated by companies with multiple founders is lower compared to those led by a lone entrepreneur. This discrepancy can be attributed to the fact that two or more individuals entail higher costs, particularly when founders are drawing salaries. Even in the absence of salaries, expenses such as office space, phone services, and travel are inevitably higher for businesses with multiple founders.
Additionally, the dynamics of leadership play a crucial role in this phenomenon. While launching a business with multiple founders can provide access to a broader spectrum of expertise, a solo founder possesses the flexibility to hire experts to compensate for their own knowledge gaps. Moreover, the decision-making process tends to be more streamlined for a single founder, as they can swiftly analyze and act upon opportunities and challenges. In contrast, collaborative decision-making with two or more founders can often be time-consuming.
The element of risk also comes into play. Founding a company is inherently risky, but once entrepreneurs take that leap, many prefer to adopt a cautious approach. When multiple individuals are involved in decision-making, they tend to be less inclined to take bold risks and seize opportunities compared to a solo entrepreneur who can act independently.
However, it's essential to acknowledge the challenge of distinguishing causation from correlation in studies of this nature. While it's true that joint decision-making tends to mitigate risk, it's equally valid that solo entrepreneurs who embark on their entrepreneurial journey alone are inherently more inclined to take risks. These individuals may possess a higher degree of passion for their product or business concept, driving them to assume full responsibility. In contrast, founder teams may prioritize the collaborative aspect of their venture over the product or business itself.
Further research may shed more light on the reasons behind the success of solo entrepreneurs versus teams. Nevertheless, the current message is crystal clear: if you aspire to ensure your new business thrives, embarking on the journey solo may be the key to success.