Ask an Investor: Do investors back companies with one founder?

Welcome to a new BetaKit weekly series designed to help startups and entrepreneurs. Each week, investors Roger Chabra and Katherine Hague tackle the tough questions facing founders today. Have a question you would like answered? Tweet them with the #askaninvestor hashtag, or email them here.

Yes, absolutely. I have had great success backing a solo founder.

In my post-mortem on Chango’s $147 million exit to Rubicon Project in April 2015, I wrote about how founder Chris Sukornyk broke the conventional mold that VC-backed startups need multiple founders. Sukornyk was the sole founder of Chango back in 2008.

It’s important to reiterate, off the bat, that Chris is the first person to say that he did not build and scale his company alone. Namely, he brought on some key hires within a couple of years (Former CTO Mazdak Rezwani and chief revenue officer/chief product officer/chief marketing officer Dax Hamman). In fact, Rezwani and Hamman became so valuable to the company that they were designated as co-founders – a title they absolutely earned and deserved.

Venture capital is an exercise in identifying and scaling outliers. This means that, despite all good VCs having biases, patterns, and playbooks, in order to truly find outsized returns, they must often throw out conventional wisdom.

There is a difference between a solo founder that is a solo founder simply because they happened to get the company off the ground alone, and a solo founder that is solo because they don’t work well with others.

Widely-held conventional wisdom for early-stage startups is that two to three founders are the ideal composition. Have a Google around on this topic and you will find scores of articles stating this. The Y Combinator application website states: “The ideal company would have two or three founders. We’ll consider those with four or five. We’re reluctant to accept one-person companies.” It does, however, go on to say “Though we have funded many of them now.” It’s important to note that this is a more recent update to this website. Previously, their language around this was less welcoming to solo founders. In their FAQ section they state that “one-person startups are tough and you’re more likely to succeed with a co-founder.”

However, this conventional wisdom has been challenged lately. In August of this year, TechCrunch posted an article entitled Breaking a myth: Data shows you don’t actually need a co-founder. It’s a good read and references a pile of CrunchBase data to makes its point.

I strongly subscribe to the notion that you can be successful as a solo founder. It’s my gut instinct and just part of the lens and bias that I have built up over my career.

To get a bit more scientific, I decided to look back through my investment history and data to compare to the TechCrunch article. The findings were eerily similar. In terms of startups that have raised more than $10 million in funding, my average number of founders was 1.86 (compared to 1.85 in the TechCrunch article) with 38 percent of these companies having a solo founder (46 percent in TC article).

In terms of startups that have successfully exited, my average number of founders was 1.67 (1.72 in TC article) with 50 percent of these companies having a solo founder (52 percent in the TechCrunch article).

So it looks like the data supports my gut view that solo founders can indeed build successful companies.

However, just because you can start a company by yourself does not mean that you should. That, my friends, might be a topic for another Ask An Investor article. Keep your questions coming in and thank you!

Katherine’s take:

Katherine Hague

I agree with Roger that solo founders can make it work.

I have personally invested in one company with a solo founder. Two years later, I am very happy with my decision to invest! The company was CareGuide, founded by John Philip Green. I didn’t give much thought at the time of the investment to the fact that John was a solo founder. I had known him for years, was impressed by the company’s early traction and long term vision, and had the added comfort of alongside friends and colleagues whose investment track records I respected. That was enough for me.

Related: Ask an Investor: Dissect my deck (CareGuide)

I’ve also invested in a couple of companies that were started by a solo founder, but that had co-founders by the time I invested. I’ve seen adding co-founders over time go both incredibly well and incredibly poorly. The worst mistakes seem to happen when founders rush into taking on new partners, either in an effort to lessen the short-term workload, or in an effort to satisfy investor demands for them to find a partner.

While many investor demands to find a co-founder are unmerited when you look at the numbers behind the success of solo-founded companies, there remains a fairly justifiable bias in the investment community against non-technical solo founders. If you are a non-technical solo founder trying to build a technical product, you have a lot of disadvantages. You won’t have a complete understanding of your product and you won’t have the knowledge or network a technical founder would have when trying to recruit top talent.

As a non-technical founder myself, I felt enormous pressure to find a technical co-founder when I was starting ShopLocket. Hiring developers to build an MVP was not enough to get investors to believe in my ability to execute and the investment community strongly advised I bring on a technical co-founder before trying to fundraise. Once I brought on my awesome technical co-founder Andrew Louis, we were able to raise the capital we needed to grow the business. I couldn’t have done it alone as a non-technical founder. The only non-technical founders that might be able to get away with not having a technical co-founder would be those starting a company that doesn’t require technical expertise, or those with extremely good track records for success.

(Note: How to recruit a technical co-founder is still the most frequent question I receive and we’ll tackle that question in next week’s post!)

If you do decide to go it alone, it’s incredibly important you be willing to accept help — and lots of it! There is a difference between a solo founder that is a solo founder simply because they happened to get the company off the ground alone, and a solo founder that is solo because they don’t work well with others or are unwilling to share equity. A founder that is unable to delegate will not be able to build a large sustainable business; the company will be beat by other companies that are able to build effective teams. And a founder that is unwilling to share equity will not be able to attract strong talent or the capital it needs to grown down the line. As the saying goes, do you want to own all of nothing or a piece of something big?

Got a question for the investors? Email them here.


Roger Chabra

Roger Chabra is the CIO at TribalScale, a global provider of digital products & companies for mobile & emerging technology platforms with offices in Toronto, Los Angeles, Dubai, San Francisco and New York City. You can follow Roger on Twitter at @rchabra

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