"Should I be a sole founder or a co-founder?"

For those founders at the beginning of their entrepreneurial journey, whether for the first time or as a serial founder, there is a question that I overhear time and time again and that question is ‘should I be a sole founder or a co-founder?’

As with every other question that you will have as a founder on your long and meandering journey from idea through to proof of concept, and from start up through to scale up, the correct answer will depend upon what you as a founder wants, together with what your business does and how you wish to go about it. But whilst this will be a personal decision, like with everything else there are accepted best practices, and these have evolved because they typically yield the best results in the majority of cases.

Some people are more loners than others, and some people are more of a control freak or micro manager than others, whilst yet others are better at delegating or sharing. Some businesses lend themselves to a requirement of more people with diverse talents, whilst others are fine with sole founders. All of these are important elements of the decision making process.

The simple answer to the question is that the more complex the business and the bigger your ambitions, the more likely you are to want at least one co-founder, both to share the responsibilities and to bring in expert and complimentary talent from the very first day. The downside of a co-founder is of course that you also share the equity from the outset. But the upsides will, in so many instances, more than compensate for that singular downside. 

The upsides include the following:

  • Spreading the burden of decision making
  • Spreading the financial risk and access to investment, either by bootstrapping or via friends and family
  • Improving company founders’ capabilities, experience, and expertise
  • The more founders and the more access to sweat equity that a business has, the more likely it is that it will scale more rapidly
  • The greater the number of founders, the less the need for external advisors – assuming that the founders experience is complimentary to each other

But whilst the benefits listed above might seem attractive, they might still not be right for you as an individual. Do not forget that you can still get a great Advisory Board in place that can help in many of the same ways as a co-founder, albeit on more of an arms length basis. Many people that will be happy to join an Advisory Board will do so for no ongoing payment but a very small equity stake in the business as this helps to tie their efforts to your interests and provides the expertise required but for no cash outlay. This arrangement will still be much cheaper in equity terms than having co-founders but whilst it gives higher level and, quite probably, wider support, that support will not be so close as having co-founders.

Lastly, it is of course possible to simply hire in the senior management and day to day support and assistance that you need to run the business. This option is the best way to preserve your equity but the flip side of that is that going this route will increase cash burn and potentially reduce the runway of your early stage business, so it is only businesses that either have sufficient sales and income, or sufficient funds raised by equity or other sources that can afford this alternative.

What is the right answer to the question about sole or co-founders can only ever be answered by you as a founder, and whilst to some extent that may depend upon how you came up with the business idea in the first place, it is much more likely to depend upon you as a personality and your approach to life.

One final note. If there are co-founders then it is imperative to ensure that any IP is owned by the business and not by any individuals, and that there are very clear, written, signed agreements in place that covers one or more of the founders leaving or the splitting of the business. Whilst nobody ever wants to think of the possibility of co-founders falling out with each other it is a very foolish founder indeed that leaves the ramifications of such a fall out to trust.