Solo Founders or Teams: Who Has More Success?

None of us is as smart as all of us. Right?  Teams are smarter and more effective than individuals at challenging tasks, right?  Not so fast.  New research by Jason Greenberg and Ethan Mollick examines new ventures.  They found that solo founders tend to achieve better results, at least in terms of certain metrics, than entrepreneurial ventures founded by a team of people.  Here's an excerpt from an NYU summary of the research:  

Common wisdom has assumed that the value of having a team is additive or even synergistic, based primarily on the theory that starting a business requires a portfolio of skills and resources that few individuals possess. However, in “Sole Survivors: Solo Ventures versus Founding Teams,” Professor Greenberg and his co-author, Wharton’s Ethan Mollick, showed that companies started by solo founders survive longer and generate more revenue than those started by teams, while not performing significantly differently across various operating categories.

The authors’ unique dataset was comprised of companies that were crowdfunded via the Kickstarter site between 2009 and 2015, were eventually established formally, and whose performance could be followed for several years. For-profit and nonprofit companies were analyzed separately, and collectively they raised $151 million in crowdfunding and generated approximately $358 million in revenue.

Of course, these results do not suggest that teamwork is not essential for a new venture.  It speaks to the possible frictions and dysfunctional conflict that can occur when you have multiple founders though.  Moreover, it may speak to the speed of decisions in situations where multiple founders must come to an agreement on key strategic choices.  Still, one should not conclude that a solo founder does not need  a strong team around them.   Collaboration is essential in many aspects of a startup, regardless of the structure at the very top.  

Busting Myths about Successful Tech Entrepreneurs

The typical successful startup founder in Silicon Valley is in his or her twenties, right? Millennials have the creativity and fresh thinking required to disrupt entrenched incumbents in industry after industry, right? A comprehensive new study debunks this popular myth.  Kellogg Insight describes new research by strategy professor Benjamin Jones and his co-authors.   Here's a quick summary of their findings:

In a new study, Jones, along with Javier Miranda of the U.S. Census Bureau and MIT's Pierre Azoulay and J. Daniel Kim, use an expansive dataset to tackle that question. The researchers find that, contrary to popular thinking, the best entrepreneurs tend to be middle-aged. Among the very fastest-growing new tech companies, the average founder was 45 at the time of founding. Furthermore, a given 50-year-old entrepreneur is nearly twice as likely to have a runaway success as a 30-year-old.

Here are a couple more intriguing statistics from their research:

• The average age of the founder of one of the fastest-growing tech companies in their massive sample was 45 years old.
• The average age of the founder of firms that achieved successful exits either through IPO or acquisition was 46.7 years old.  

Why is it important to debunk the popular myth about millennials and successful tech startups?  First, we have to consider the biases that might shape investor decisions.  Might some be inclined to think that the best ideas come from founders in their 20's and perhaps find themselves biased against older entrepreneurs?  Second, we have to consider how the myth might discourage older individuals from taking the risk to launch a startup.  I applaud the authors for such an extensive study that shines a light on the actual experience of successful tech startups and their founders.  

The Advantages & Disadvantages Incumbents Have Relative to Startups

In this brief video, Stanford Professor Jesper Sorensen explores the advantages and disadvantages that incumbents have as they compete against startups.  It's a good recap for any entrepreneur.

Entrepreneurs: Are They Truly Different Than Others?

Conventional wisdom about entrepreneurs tends to focus on their mental make-up.  They are risk-seekers.  They are creative.  They are daring.  They are ambitious.   They are not afraid to make mistakes or to fail.   Perhaps we should take a step back and question this conventional wisdom..   Laura Huang and Peter Cappelli of Wharton have a terrific article in the Wall Street Journal today that challenges these prevailing view about entrepreneurs.  They write, "There’s only one problem with the conventional wisdom: There is no direct evidence to support it and some solid research to suggest it isn’t true."  I suggest reading their article for more details about their review of the academic literature. 

Why has this conventional wisdom dominated our thinking about entrepreneurs for so long?  Why do we believe that entrepreneurs have a different make-up than the rest of us?   Huang and Cappelli explain that the fundamental attribution error plays a key role:

"Why are we so inclined to believe that entrepreneurs are different and better people than the average? The answer is something known in social psychology as the fundamental attribution error: We tend to assume that behaviors are caused by someone’s disposition, even when circumstances are the real factor, such as assuming that the driver of the speeding car must be an irresponsible person rather than thinking he might be going to an emergency."