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Being single founder vs having co-founders in a startup

Posted at — May 29, 2019 by Abishek Muthian

When we assume that we have all the necessary skills to start a startup company, we would want to question the need to have a 'co-founder' in the company. Is having a co-founder over-rated in the startup ecosystem? Can a single founder create a successful startup? I have been a single founder, so I will try to address some of those questions.

Founder

Founder is the person who is involved in the initial launch of the startup. When there are more than one founder, they all become co-founders. Typically the co-founders take an executive position like CEO, CTO, CFO, CMO etc.

When it is a single founder,  it is common for the founder to take on the role of a CEO (Chief Executive Officer) and if there are no other executives in the company a c ollective title such as CxO is also held albeit not well-recognised.

But a title is just a title when the company is just launched, we need to look at objective reasons where a single founder (or) co-founder can make a difference in the startup.

Validation

Starting a startup as a single founder might deter us from validating our startup idea. Having co-founders itself is one of the ways to ensure that the startup idea has at-least been validated by more than one person.

It has been established time and again that successful startups are the ones which solved the problems which the founders themselves faced. A single founder is no exception to this and should take precautions to validate the startup idea to avoid falling prey to the confirmation-bias .

Operations

If co-founders in a startup do end up taking on the executive roles for strategy, engineering, marketing etc. then the operations responsibilities for them are effectively distributed. As a single founder, one has to take responsibilities for all the operations until the executives are recruited as an employee.

When a person has to take on all the executive roles in a startup, time-management, scheduling between operations becomes cumbersome especially when all the operations are of equal importance for the success of a startup.

The single founder ends up with severe time-crunch until he/she/other is able to off-load some of the tasks to their employees and automation(which will not be practical in all cases); even then if the founder is the single executive of the startup then there are greater probability for diminished quality of operations just because a person cannot be the best at everything.

Co-founder as executive vs Employee as executive

Having co-founders as executives is a straight forward way to delegate responsibilities to someone who has ownership in the company i.e. assuming the co-founder hold stake in the company as it is typically.

Recruiting employees as executives when being a single founder is a high intensity effort.  It requires more considerations than selecting a regular employee as they have to manage entire operations under their domain. Expecting a sense of ownership from the employee-executive without them having a stake in the startup is not rational and awarding ownership stake to the employee-executive is tedious and takes huge leap of faith.

Freedom for strategy

Single founder has more freedom to devise and implement strategies in a startup as there are lesser chances of conflicting opinions in the company. This can be especially useful in the startup philosophy of 'move fast and break things'.

But being able to implement strategies faster doesn't necessarily mean that the strategies were good for our startup. How do we know we have come up with a good decision? Putting it up for discussion with co-founder(s) is how companies with co-founders do it.

It is technically possible to discuss the strategy with employees when being a single founder, but getting a honest feedback from an employee is rare as they usually don't have the freedom to oppose a top-level decision and neither do they have access to all data regarding the company such as its financials, growth etc. to consider overall company's welfare.

Cost-benefit

Being a single founder is definitely cheaper to launch a startup. When I launched my startup as a single founder, I had limited funds which I decided to spend on developers and infrastructure instead of getting a co-founder. Getting a co-founder who could match my experience and balance with skills in the areas where I lacked would have been prohibitively expensive. This is a key reason for one to be a single founder.

Although a sensible thing to do would have been to hire an executive(s) when the startup was stable, I didn't do it. I got used to being a single founder/executive with employees whom I had personally trained, that I didn't realize the need to have other dedicated executives in my startup.

When not having a co-founder creates negative impact (operations, strategy) in the startup, it over weighs the cost-benefit of not having a co-founder.

Health

Running a startup as such is stressful on both mental and physical health, running it as a single founder is a recipe for health issues. After running my startup successfully for 5 years, I had to shut it down as my health deteriorated to the point of life-risk and since I had no other executives to take care of my company.

Burnouts are quite common in an ambitious startup even with co-founders and several employees, but being a single founder/executive guarantees burnouts. Burnouts diminish focus and leads us to make irrational choices which can lead to the failure of a startup.

Valuations

There's a reason why single founder startups aren't trending on startup investment news, investors would like to minimize risk, a single founder startup especially without other executives is a high risk investment.

When I put my company for sale, my promising products generated interested among buyers and the best among them wanted me to work for them which is logical from their perspective but was not possible for me as I was recovering from the surgery.

A startup with a promising product, developers is valued less if it doesn't have a leader. Having more than one leader, by having co-founders/executives is a practical approach to mitigate this risk.

Knowledge

Being single founder gives unprecedented access to business strategy knowledge and being single executive gives access to technology, marketing, human resources etc. More importantly since the probability of taking correct decisions in all these domains when being single founder/executive is low, we'll learn more ways to fail than succeed which can be an elusive knowledge.

Is the risk of being single founder worth the knowledge? I think it is an individual decision but a startup is rarely just an individual's problem.

Being a single founder has its merits, but then our startups becomes a high risk venture. Even when being a single founder, it is advisable to recruit the executives as early as possible. But for all practical reasons, launching a startup with co-founder(s) should be the priority.

Bus factor

Bus factor is a term used in the industry for measuring the risk resulting from loosing information, capabilities because it was not shared and people who held it get hit by a bus.

Of-course bus is just used as an example in the above phrase, people who have worked in the highest echelons of the corporate world would have witnessed bus factor mitigations in their travel plans by not flying together with other key people in the company on the same flight.

If we get past the macabre nature of it, as business is a rational process we'll understand the significance of minimising the bus factor in a company.

As a solopreneur, the bus factor is very high for a startup. If there are others such as employees who stand to loose if we are unable to continue running the company, it's wise to have contingency plans . Even if there are no other employee, there will be at-least customers who stand to get affected if the startup is unable to function without us.

A Co-founder is one of the simplest way to mitigate the bus factor to a great extent if we see our startup as an entity beyond ourself.

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Change log

January 2020 : Added Bus factor.

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