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How many founders do successful tech companies have?

philosophically.com

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Re: How many founders do successful tech companies have?

#21
TL;DR -- The US census provides the wrong data to answer this question, but I can't think of a better way to spend a cold Sunday morning....:)

I did some digging on the US census site and found these numbers (for 2008):

- 22,614,000 returns were filed for non farm sole proprietorships. Of these, 16,434,000 indicated any type of income. Combined, these 16.4 million sole proprietorships reported a net income (less loss) of $265 billion.

- 3,146,000 returns were filed for partnerships. These returns showed a total of 19,300,000 partners. Of these, 1,609,000 returns indicated any type of income. Combined, the 1,609,000 partnerships reported a net income (less loss) of $458 billion.

Some numbers:

- 72.67% of sole proprietorships reported income.

- 51.14% of partnerships reported income.

- 22.614 million sole proprietorships generated $256b in net income (less loss). This is an average of $11,320.42 per proprietorship started.

- 3.146 million partnerships (covering 19.3 million people) generated $458 billion in net income (less loss). This is an average of $145,581.69 per partnership started. Or, this is a net income (less loss) of $23,730.57 per partner.

Using US census information on non incorporated businesses (in 2008) provides some interesting space for thought. A higher percentage of sole proprietorships report income, but on average partners in a non incorporated business report more income. This seems to indicate that it might be easier to get started if you go alone, but adding founders increases the magnitude of success (when it works out). Logically, this makes some sense, though I hesitate to make any conclusions based off of this data.

While this data is interesting, it is ultimately quite useless at answering the question. First off, this data is on all non incorporated businesses (other than farms). Therefore, this data may or may not be applicable to technology. The Deloitte report (and the writer's research) indicates that the top 100 technology companies have an average of 2.12 founders. The US census data gives an average of 1.62 founders per company. That difference could indicate differences in the two populations (ie - tech companies versus all companies) or sampling differences (Vibhu looks at 100 companies, I'm looking at data on 41 million).

Re: How many founders do successful tech companies have?

#22
post #19
post #15

Earlier quoted context omitted.

If a greater percentage of successful businesses are started with 2 people, there must be a good reason for it. If businesses were more likely to be successful with one person, wouldn't you see more people opting to go down that route in aggregate, irrespective of anything else? Businesses are units designed to succeed, they would not (in aggregate) do something to counter their own success, especially with something…

No, if the proportion of 2 people vs 1 person startup is skewed, which is very likely. Also, the amount of founders could be neutral to the success, in such case neither is countering their own success, and again just a matter of samples. Correlation is not...

Precisely. If 2-person and 1-person startups are equally likely to succeed but 2-person startups just happen to be more likely then they will be over-represented in the data.

What is really necessary is a statistically significant sampling of startups from their inception and tracking the percentage of success and failure depending on various factors. There is simply not enough data in the study at hand to say that 1-person startups are less likely to succeed than 2-person startups, in fact it's quite possible that they are more likely to succeed, we just don't know.

Re: How many founders do successful tech companies have?

#23
post #15

Earlier quoted context omitted.

Erm, ok, let's follow that through. I don't even need to look at the data to say that in the US most successful companies have at least one white, male founder. Does that mean that if you start a tech company and are non-white or non-male you should make sure to partner up with one to ensure success? Is it just a bias due to demographics? It it a real factor related to an intrinsic advantage of white males in making…

If a greater percentage of successful businesses are started with 2 people, there must be a good reason for it. If businesses were more likely to be successful with one person, wouldn't you see more people opting to go down that route in aggregate, irrespective of anything else? Businesses are units designed to succeed, they would not (in aggregate) do something to counter their own success, especially with something…

I'm wondering if you missed my argument entirely. Why aren't you saying "I'm sure that if a greater percentage of successful businesses are started by white dudes , there must be a good reason for it"? Looking at the demographics of success stories is actually not at all helpful. In fact it would only be helpful if an equal number of startups began as 1 founder vs 2. Otherwise this data tells us nothing.

Let's look at this from a different perspective. Assume that the data conclusively shows that 2-founder startups have a higher chance of success than 1-founder startups, by a huge margin (say 10x). Does that mean that you should seek a co-founder before launching your startup? Even then, it does not. Consider two different startup ideas, one is founded on a very solid plan with a good chance of success, the other is founded on a bad plan with a lot more risk. The good plan is going to have a much easier time of finding a co-founder, because the potential co-founder will look at the idea and see that it has a lot of merit and potential and they'll be enthusiastic about joining in, whereas the bad idea will have a much harder time finding co-founders. However, imagine if someone with a bad startup idea pushes much, much harder to get a co-founder because they have learned that startups with co-founders are more likely to be successful. Will that help the company's prospects any or will it just warp the equation and result in a bad company failing even with a co-founder?

I think it's more important to go about a startup with your head screwed on straight than to attempt to imitate the forms of previous success. If you find someone you trust who seems to be a valuable addition to your startup as a co-founder, then by all means make that partnership. But if you can't find a co-founder for whatever reason but you are still quite convinced of your business plan then I don't think you should wait. You should certainly be careful that you aren't deluding yourself and be sensitive to any criticism of your startup idea nonetheless, but a good plan is a good plan even if you go it alone.

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