Conventional logic supports that the most attractive startups should have specific pieces of the puzzle in place. A great idea, a competitive edge, seed funding, and, notably, a strong, core team who’ll drive the startup toward success. These criteria are the well-established checklist of business success factors that most venture capitalists seek when looking to invest. But have each of these been tested and proven beyond doubt as part of successful business strategies? Recent research is now questioning these perspectives. Specifically, it is less clear that having a startup team of founders is actually better than a solo entrepreneur. In fact, the evidence is now suggesting exactly the opposite. Successful business strategies have always touted a team-based mentality. But it just may be a lone wolf at the helm is among the more important keys to entrepreneurial success.
Entrepreneurial Success Factors
An interesting study recently published examined a number of startup companies between 2009 and 2015. Each was launched via crowdfunding sources, and the businesses were assessed for revenues, business survival, and overall performance. Of these companies, 28% were founded by solo entrepreneurs with the remainder founded by teams of various sizes. Much to their surprise, the researchers found that solo entrepreneurs were more than twice as likely to succeed than team startups. Likewise, solo startups generated more revenues and received less funding overall.
The published work comes from two well-respected researchers from two reputable business schools. Jason Greenberg, PhD., represents NYU’s Stern School of Business. Ethan Mollick, PhD., is affiliated with UPenn’s Wharton School of Business. Based on traditional teachings, both expected successful business strategies to include team leadership. But this was not among key business success factors. Instead, solo leaderships for startups clearly demonstrated the much greater potential for business survival and success.
Keys to Entrepreneurial Success – Is the Lone Wolf Startup the Best?
Though the sample was small in the study, the aggregate revenues among the startups totaled over $358 million. This and the quality of the research demands attention as a result. With this in mind, there might be a couple of keys to entrepreneurial success in terms of management size. First, solo entrepreneurs as startup founders are able to make decisions more efficiently than teams and groups. For startups, successful business strategies require agility and speed in decision-making. Unfortunately, this may be hindered when there are several cooks in the kitchen.
Secondly, the other reason solo founders may be preferred involves resource availability and productivity. Startups typically lack an abundance of resources, and making the most of the resources at hand is essential for success. Thus, as one of the most important business success factors, being highly productive with one’s resources is key. Startups with solo founders spend less time resolving conflicts and debating options than those led by teams. This might also explain why solo leadership may be an integral part of successful business strategies for startups.
Are Startups with Team Founders Necessarily a Bad Thing?
While research suggests startups are better off with lone wolf founders, that does not necessarily mean team leadership is bad. Having partners as founders offers many benefits as well. Cofounders provide an opportunity to add complimentary skill sets and competencies that one person may not have. Likewise, teams provide more resources and have greater capabilities in executing a vision and plan. These are also key business success factors for startups.
One additional benefit for team-led startups also involves access to funding. Among all business success factors for startups, access to venture capital is often a priority. It’s no secret that most venture capitalists prefer startups that have a strong, core team to guide its course. While this logic may be supported through habit more than objective evidence, it remains a reality nonetheless. Thus, having team leadership can be considered among the top successful business strategies a startup might need.
A Need for Clarity – Defining Successful Business Strategies for Startups
When it comes to successful business strategies, defining the best success factors can be challenging. Entrepreneurial environments are notably complex, and different markets require different approaches. Certainly, solo founders for startups offer some advantages that appear to be preferred in some settings. But likewise, team leadership also offers some benefits for success. Venture capitalists should, therefore, take heed and expand their criteria in determining what best predicts future startup business success. Until additional research better clarifies the issue, shying away from the lone wolf startup might be a huge mistake.