Is it really that hard for “solo” entrepreneurs to succeed?

IMHO, whenever you hear "people say X" you have to think about who says that. Because in your case the question can be answered from two very distinct (and both valid) points of reference. The investor, and the entrepreneur.

As a solo founder (told all the time that I am doing all in reverse/wrong), I can tell you what are IMHO the good sides of being solo (assuming you already know the bad ones):

• decisions can be made much quicker, much more abrupt, much "braver", less political (which can be a good thing if used with some sense).

• in a special way your one guy "team" is much more resilient than a real team :). I observed many startup teams in local hackerspaces fall apart (for various interpersonal reasons that were mainly a proxy) for not holding together while going thru hard "Throught of Sorrow"(PG) period. One guy out of 3 left (or was scapegoated out), the other 2 persevered for a while and after a while stopped. If you are 1 guy you can't split from yourself, you can't (successfully) scapegoat yourself.

• if you want to bootstrap you can become profitable 1/N sooner.

About who from my opening sentence. Let's use somewhat inappropriate but very graphical comparison with dog racing.

You are either the one betting on dogs, or you are a dog. If you are betting on them you dilute your risk by 3 if you bet on INYO top 3 dogs instead of 1. If you are one of the dogs, your mathematics is different.

My point: it's clear why investors rather invest in teams of people, but given the appropriate scope (and other specifics) of project (and you), that doesn't mean at all you have much lesser chance of succeeding if you go solo.

One bad thing of going solo is that you have much smaller knowledge/brain/opinion span to work on you dilemmas/plans. That can be mitigated a lot by releasing early and asking for feedback a lot (hence whole world is your "cofounder") joining local comunities and finding advisers. I have very good experience with all 3 of these. In fact, because you don't have an enclosed team of people that tries to solve their dilemmas inside, your startup can be much more extrovert and prone to echo chamber effect!

Not saying there aren't bad sides too, but they have been pointed out many times already.

(My context: I am profitable, but I haven't succeeded yet so take my opinion with that in mind.)

I'm a solo entrepreneur myself, and I find it very encouraging to consider how many solo entrepreneurs have build successful companies:

• Giacomo ‘Peldi’ Guilizzonini (Balsamiq)
• Jane Wurwand (Dermatalogica)
• Jeff Bezos (Amazon)
• Dennis 'Chip' Wilson (Lululemon)
• Sam Walton (WalMart)
• Pierre Omidyar (eBay)
• Fred Smith (Fedex)

You can find a few more, along with their stories, in a blog post I wrote.

Jason's example is a great counterpoint; also remember that Y-Combinator, VCs, and (tech) Angel investors are typically looking for companies that can grow very big very fast. The level of success you need to achieve and the level of challenges you need to tackle to have the business you want may be nowhere near what they're looking for.

The obvious examples of solo "businesses" are really just someone's freelance work; they're good at something and they do it for hire. Because they're good people come to them, so they don't need a lot of high-end marketing and sales.

As an ISV you're maybe starting to rely more on other areas besides your native skill, but that doesn't mean you can't do it alone. If you're a developer building tools for developers (like Jason) then you have a good understanding of your audience and depending on your participation in communities you may have a market ready to buy. (but remember this is a crowded market)

Having co-founders helps when the business can't succeed without bringing together some very different areas; for example if you're building a technically challenging software product for fashion designers you probably don't know enough to design and sell it on your own (sorry). But if you can grow to a certain point on your own then you can hire to go further.

I would say the final test for needing a co-founder is if the business doesn't make sense without someone else. If you're not thinking of someone you know and trust already it might be a difficult business for you to get into, especially as your first business. On that note, having a co-founder with different skills and specialties (the best kind) can do more to lock you in a certain direction which may not be what you need at this point if you're exploring possibility and building contacts and visibility. Once you have a few more years of experience you may spot a great market opportunity and know the right person to work with. You'll also be better at spotting people who won't contribute so you're not giving away equity for nothing.

One last piece of invaluable advice on the solo question: In my particular industry, the single largest reason for failure has been expanding leadership and the employee-base too fast and too broad.

Whether you expand through partners, co-entrepreneurs, or simply additional employees, the Productivity Ratio may be your most important ratio in your business.

Let me explain:

Here is a tremendously useful experiment: The next time you attend a business conference, or have the opportunity to brainstorm with extremely successful start-up company executives, ask them for the most noteworthy success formulas they monitor in their businesses.

If you ask this question repeatedly, you are likely to get many different answers. Some of the most common ones will be ratios: Return on Equity, Return on Investment, Net Profit Rate, Gross Margin Rate, Current Rate, and other less obvious formulas.

One answer you are less likely to hear is the Productivity Ratio — sales divided by number of employees or other key players. The objective is to have a large sales number and a small number of employees. Admittedly, this is not a terribly sexy calculation. After all, if you are growing, should not your employee base be growing proportionately? Is not the number of individuals you employ a barometer of success? Is it not risky to leave your company vulnerable by under staffing it?

The answer to all of these questions is … “not necessarily.”

Inc.com, the online magazine with an enormous following of start-up entrepreneurs, recently published the following examples that argued this case eloquently:

COMPANY: Nature’s Cure, in Oakland, Calif. DESCRIPTION: Produces a line of acne medicine REVENUES: $6 million EMPLOYEES: 13 RATIO: $462,000 per employee PRODUCTIVITY STRATEGY: Outsource like crazy

The reason for the company’s low head count is simple: CEO Amy Baker deliberately built the company to function with few rank-and-file workers. The staff is incredibly top-heavy: 7 of the company’s 13 employees are executives.

Baker gets away with her unorthodox management structure by outsourcing nearly everything. For instance, whereas many consumer-products companies would employ rank-and-file workers in sales and marketing, Baker has farmed out most of those functions to brokers and outside strategists. The executives in sales and marketing operate more like relationship managers.

To be fair, Baker’s penchant for outsourcing artificially inflates her company’s productivity ratio. But Baker argues that the outsourcing makes it easier for her employees to maneuver or make changes without fixed overhead. Take, for example, her four sales executives. Three of them manage a regional group of sales brokers, and one serves as an inside sales coordinator. If the VP who’s in charge of the Atlanta region finds that sales are slow, then that VP can simply fire the broker and find another.

Strictly speaking, Nature’s Cure is a manufacturer of acne medicine. Yet the company even outsources the making and packaging of its product. The company also relegates its distribution to a warehouse-cum-shipping center in Chicago. One of Baker’s execs, based in Chicago, oversees the entire distribution process. Another VP, in the Oakland office, coordinates every aspect of manufacturing: quality standards, packaging, and inventory management.

Baker acknowledges the risks of building a manufacturing company this way: Nature’s Cure has few hard assets, such as equipment or real estate. A valuation of the company would involve only an appraisal of the soft stuff: the company’s medicine patents and the Nature’s Cure brand.

And because Baker’s exit strategy is to sell Nature’s Cure to another consumer-products company, she believes that she ought to spend her time and capital on building assets that her acquirers would covet — namely, a big-time brand.

COMPANY: Legacy South, in Atlanta DESCRIPTION: Provides wealth-management services REVENUES: $3 million EMPLOYEES: 5 RATIO: $600,000 per employee PRODUCTIVITY STRATEGY: Automate key functions with technology

Legacy South grosses an impressive $3 million a year with only five employees, but that feat is even more impressive given that two of those staffers are administrative. The other three, including CEO John Viani, do the actual wealth management, each handling about 35 clients. Some clients speak to Viani quarterly, while others talk to him a few times a week. And Viani’s two partners communicate with clients just as frequently.

The perpetual challenge for Legacy South is striking a communicative balance: maintaining high-quality personal interactions while preventing a daily deluge of calls from needy clients.

For Viani, the answer is technology. In addition to sending clients their quarterly statements from discount broker Charles Schwab, Legacy South sends its own statements, which are “in a more friendly format,” according to Viani. The company generates the statements through a software program called Advent, which automatically downloads information from the Schwab Web site, then rejiggers it to Legacy South’s easy-to-understand style. For daily access to the information, clients can log on to the password-protected Legacy South Web site (www.legacysouth.com).

For the most part, Viani and his partners communicate with their clients through phone calls and face-to-face meetings. But there are occasions when Legacy South feels the need to communicate with its clientele as a group. Say the Fed hikes interest rates, or the stock market plummets. Clients often want to know how such events will affect them. In such cases Legacy South relies on the relatively low-tech combination of a client database and E-mail to efficiently communicate en mass.

Although technology eases some of the communicative burden from Legacy South, customer selectivity and management decisions play a part as well. Viani says there have been “two or three instances” when the company has had to “fire” excessively high-maintenance clients. Viani and his partners have agreed that they will take on no more than 40 clients each. When the principal-to-client ratio surpasses 40, Legacy South will look to bring in its sixth portfolio manager.

COMPANY: U.S. Energy Services, in Wayzata, Minn. DESCRIPTION: Provides energy-management services REVENUES: $22 million EMPLOYEES: 22 RATIO: $1 million per employee PRODUCTIVITY STRATEGY: Use open-book management and profit sharing to instill efficiency

U.S. Energy Services makes $22 million a year from a client base of 150. The company examines every aspect of its clients’ utility bills, scouring them for cost savings. After diagnosing problems, U.S. Energy acts to solve them for its clients — for instance, by renegotiating rates with the utilities. U.S. Energy charges clients a percentage of the total bill, usually around 2%, and a fee ranging from $400 to $10,000, depending on how labor-intensive the solutions turn out to be.

But how does a paltry staff of 22 master the post-regulation-era billing intricacies of thousands of energy suppliers in 48 states? Over the years, employees gain an intimate knowledge about clients’ billing particulars. Generally speaking, the longer U.S. Energy has had a client, the less labor-intensive it becomes for the company to assess that client’s utility bill. That is why the company has been able to beef up revenues in recent years without adding legions of employees.

CEO Bill Bathe also credits the interplay of two management factors — open-book management and profit-sharing bonuses — for the high revenues-to-worker ratio at U.S. Energy Services. He and his partners share all the company’s financial information (except individual salaries) with their workers. The employees, in turn, have a clear understanding of how their productivity can affect the bottom line. In other words, the employees know they’ll receive larger bonuses if their individual revenue-generating efforts are fruitful. Conversely, the employees also understand the cost burden of any non-revenue-generating employees, which is why, as Bathe says, “there are no secretaries here.” Employees type their own letters and spreadsheets, but they also know better than to spend hours on such non lucrative tasks.

Bathe believes that the open-book system, which cultivates a culture of knowledge sharing, motivates greater group productivity. For example, say that an experienced U.S. Energy employee, while analyzing a corporate client’s utility bill, finds an error on the statement that he’s never seen before. The employee then shares his discovery to help his coworkers discover similar errors in the future. That information sharing saves money for U.S. Energy’s clients, increases the company’s total revenues (some of which come as a percentage of any savings the company secures for the client), and, by extension, boosts the size of the profit-sharing bonus.

There is, however, a downside to running such a tight ship. The company can’t easily take on new work since it lacks what Bathe, using a sports term, calls “bench strength” — high-quality backup performers whom it can enlist at times of increased demand. Also, he says, the company culture’s emphasis on efficiency at all costs often prevents workers from even casual socializing. “We’re so efficient, we spend almost no time together,” he laments.

Jericho Technology wholeheartedly embraces the Productivity Ratio as a key factor in success. In it’s fifteen year history, the company has never employed more than four individuals full time. It is a success formula that we consistently recommend to our clients.

Whatever the dominant thinking might be, I know many entrepreneurs that have succeeded alone, myself included. I have done so successfully for nearly twenty years. I believe that under the right circumstances it can be a major asset. If you are smart, nimble and dedicated, and if you resign yourself to a period of sustained effort, being alone allows for single-mindedness, rifle-shot focus, and deliberate effort without diverging opinions on how to proceed. Don't allow the fact that you're solo to impede your enthusiasm, just go for it!

I have been solo since 2001. It can be done. The hardest part is really knowing what to spend your time on to deliver the largest benefit, what should be assigned to outside vendors, and what to forget about. Staying flexible is also part of the experience. What I'm doing today (building a SaaS product) is quite different than the consulting business I started eight years ago. I never feel alone because I'm always talking with clients and outside partners who provide critical support for duties I elect to go outside for.

I like to think of it this way; its increasingly easy given the resources available online.

• Google Docs to manage your calendar and email
• LinkedIn and Freshbooks to network
• WordPress to set up an optimized website and blog
• oDesk or Guru to find contract support
• If I can throw in Outright.com - to automate your back office

Online resources are free and increasingly interconnected so you can easily get started and focus on what you need to be a success - finding customers, developing product, establishing your business.

I would like to have a different perspective to the thing. Dont choose your partners. Start on your own and let your work arise the need for more people. For example, if you start an internet business like a website, blog, e-commerce, you can very well deal with the whole thing single handedly. When your work area requires more physical work, I would suggest you do the mindwork and let your employees do the task. But here the question is about co-founders. First of all, if financial aid is the only thing you seek then there are better alternatives than having co-founders. Having co-founders means you have to take their ideas and suggesstions into consideration.In a very unlikely case you feel being under obligation which is not so good when you have just started a company. So as I said, you can hire employees if you think you are getting physically stressed out. Solo Entrepreneurs is not a myth. It is a strong reality.

Maybe it's an audience thing, where we are all in the same bucket and so give the same answer, but I haven't seen an adequate response (yet).

I think the problem is that Angels and VCs (like YC) have this view - and often the entrepreneur needs their funding (or thinks he/she does) to get to the next level. So, in that context, does one really need to build a management team in order to get funding?

If not, who are the Angels that might fund Ricardo without him getting a co-founder? (I'd like to know them too :)

I'm sure the management team can be built in any form... Actually that's a good separate question, so feel free to address it. But pre-employees, the founder gets these comments that suggest a need for a co-founder (like Microsoft had). Is that true?

You have to be realistic and understand that there are few people out there that are masters at everything. If you can objectively identify your needs/weaknesses and hire on appropriate contract/part time contributors then you can stay focused on the most important aspects of the business. For instance, I'm a software architect/developer but I'm not the one to tackle hardware/network matters. I paid someone on a contract basis to contribute where I needed help. That was the same with bookkeeping, taxes and legal matters.

Money and time are both invaluable when you are flying solo. If you can find that balance between what you do and what you pay others to do for you, then you'll increase your chances of success 10-fold. As the founder, your time is just too valuable to have it go to anything that's not imperative to the success of the company.

It sounds comforting to have a partner working with you but keep in mind that you will also have to share profits and deal with them accusing you of screwing them over.

There is probably a good chance that if the business does well, you'll end up in court with your partner over some deal that wasn't clearly discussed beforehand.

If you do it, I would be sure to do it with someone you dealt with financially in the past.

Getting a cofounder just because I had heard that solo entrepreneurs don't make it was a big mistake for me. I'm still doing all the solo work and now have someone else to deal with on top of it. If you find a cofounder who really excites you then pick them up - note, you don't have to start the business as partners, you can start by yourself and bring them on later at equity/founder level not employee level. But just go for it. Most entrepreneurs I know locally are solo and are doing great.

It is really hard for any entrepreneurs to succeed... Whether solo or a part of a team, it is hard. There are different difficulties to each.

Being solo means all the responsibility is on you. There is no one to share your load, no one to give you advice and no one to cover for you if you are having an off day. Also, it requires certain management skills that not everyone has, so you either need to hire the right people or find the right partners (there are many CTOs that are not suited to being CEOs, despite being great at what they do).

Being a part of a team first requires finding the right team. It means finding someone you get along with well, that compliments your skills and shares our vision for the company. It also means having an iron clad founders agreement, otherwise when things started changing and priorities change, the company will suffer. If you are solo and you want to change the companies focus or quit and shut the company down, its your right, but if you or a fellow founder want that, then things get messy.

My opinion is that going solo is more then possible for anyone that can handle it. Having said that, I also think you should always be open to getting a partner, if it is the right partner.

My opinion on this is to select your "solo" entrepreneur business in an area you have some good prior skills in that subject area. Then you can use as part of the proposal your years of past experience in that particular area.

Doing it yourself is hard, but if one of your goals with your startup is to learn what it takes, ALL that it takes, to make, sell, market, support etc. etc. software, being solo is a GREAT learning experience. The buck stops at you for EVERY SINGLE thing. It's both a daunting and empowering feeling. Either you roll up your sleeves and figure it out, or it won't get done. Period.

I also found that if you're alone, your startups' level of success is a direct reflection, a tangible representation of "the best you can do", there's no blaming anyone else for errors.

So as a learning and learning about yourself opportunity, I'd say there's nothing like it! :)

Solo ventures are the worst, except for partnerships... (with apologies to Winston Churchill or whoever...)

Solo is tough, but so are partnerships. The 50/50 split lacks a tie breaker, and 33/33/33 sounds good but can turn into constant shifting factions.

From my experience, your personality and determination is the main factor in whether it is harder or easier to be a One (Man|Woman) Entrepreneur. I have been a founder in both, and they each have a variety of upsides and downsides. The key is to determine what is best for your personality type. If you can stay focused through all adversity, down-turn, and "impossibilities" and still see the forest for the trees, then solo will most likely be ideal for you. If you thrive on other people's excitement and energy, then a team is probably a better proposition to keep you going through it all.

One thing I would recommend is to ensure you have an outsider that you can rely on. Someone to rely on to vent, brainstorm, and confide in, otherwise you will most likely go insane. It is key to have them not be connected to the company/idea that you have because they will help ground you during happy times and help you focus on whats right in other times.

Best ventures to you!