Starting a company alone is tough. The peaks and valleys of entrepreneurship are notoriously intense. Because of that, many founders team up with other entrepreneurs to start a business.
Often, this will be an old classmate or work colleague. Other times, it will simply be someone that is passionate about the industry they wish to enter. There is no “correct” method to this. Startups with solo founders can be just as successful as those with multiple founders. However, it is perhaps the most important decision an entrepreneur needs to make when starting a company.
In the spirit of Valentine’s Day, today’s Chart of the Week shows the breakdown of solo versus multi-founder companies among equity-based crowdfunding raises between 2020 and 2022.
An estimated 46.5% of equity crowdfunding raises were solo-founder-led companies, while 53.5% had multiple founders. Seeing a slight majority of companies with multiple founders isn’t totally surprising. Personally, I would prefer to have a business partner to help power through the 100-hour work weeks that are typical when starting a new business.
However, there are a number of pros and cons to starting a company by yourself versus bringing on a co-founder(s).
As a solo founder, you have full discretion and authority to make any decision you want. The only people you have to answer to are your shareholders. Additionally, you own all the founder equity if the company gets acquired or goes public (i.e. you carry all the upside). However, this is a double-edged sword. Especially at the beginning, you will have to do all the work yourself. There won’t be anyone to bounce ideas off or help with tasks when things get busy.
On the flip side, having a co-founder can bring a complementary skillset to the table. That could prove invaluable as your company goes through the early stages of establishing product-market fit or going through product development. However, you also have to make critical business decisions with someone else, which can be both a blessing and a curse (insert relationship joke here).
We also found that 52.7% of co-founders had prior shared experience with each other. This could mean that the founders worked together in the past, went to the same school, or are related or married. Clearly, the majority of multi-founder companies chose to start a company with someone that they have a personal experience with.
Having a co-founder is just like being in a relationship. You must get along, share similar values, and, most importantly, trust each other. That is the secret sauce for any partnership (business and otherwise) to be successful. You can often find this in an old classmate, coworker, or family member. Therefore, I am not surprised that the majority of co-founders share prior experience. (In fact, I would have expected it to be more.)
As you can see, there is no one-size-fits-all approach to starting a company — much like February 14th can be spent showing appreciation for someone else or yourself. Happy Valentine’s Day!
Note: All data on online startup investing used for the Chart of the Week comes from the KingsCrowd database and represents a snapshot of the US crowdfunding market.
Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
About: Teddy Lyons
Teddy comes to KingsCrowd with a background in venture capital and investment banking. He worked at Deutsche Bank as an Investment Banking Analyst in the Technology, Media, and Telecommunications group. Prior to that, he served as an Associate at Alchemi Capital, a venture capital firm in Boston that invests in early-stage technology companies. Teddy holds a degree in Economics and Psychology from Wesleyan University, where he was captain of the varsity soccer team. He is currently enrolled in the M.S. in Finance program at Boston College.