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The effects may be due to irrelevant artifacts: 1.) Pairs or more of people working on a task may declare themselves to be an organization and call themselves

The effects may be due to irrelevant artifacts: 1.) Pairs or more of people working on a task may declare themselves to be an organization and call themselves founders earlier than an individual. An individual may be more likely to wait until they have a customer, are near profitability, etc to make that declaration. 2.) The summary says that "investors rarely, if ever, fund startups founded by a solo entrepreneur". So the observations are confounded with solo founders overcoming this prejudice. This quote also points to a survivor bias in play. IE, solo founders must have higher performance than teams before getting funded, and less of the weak solo founders survive to be observed by the study. I wouldn't be surprised if the article had a correct conclusion. Though it would be very hard to convincingly show causality short of convincing entrepreneurs to take part in a decades long experiment where they are randomly divided into solo founders and teams (which would be nearly impossible to get a representative sample of founders to agree to).

modi15 7y ago
3.) Solo founders might slap on an unemployed friend with marginal utility to overcome the bias of investors not funding solo entrepreneurs. 4.) Solo founders might hire an 'employee' and give him the label of a 'co-founder' as a performance appraisal.
HeyLaughingBoy 7y ago
"investors rarely, if ever, fund startups founded by a solo entrepreneur" I'll add another anecdote/datapoint to this: I was the stereotypical one-guy-in-the-basement when I got my first Fortune 500 customer. In order to be paid, I needed to be registered as a vendor with them and they needed an EIN (Employer ID Number). I was concerned that I would lose their business if they found out I was a Sole Proprietor, so I created an LLC and gave them that number the next day. I wouldn't be surprised to find out that there are many single-member LLC's and S-Corps who only have that business organization for similar reasons.
tlb 7y ago
Agreed. In fact, I think it's impossible to get useful evidence for any causal relationships between the founding team and success of a company, because there are feedback loops and confounds everywhere. Here's an example of feedback loops. Suppose investors are biased against young founders. When you look at outcomes, you'll see a higher success rate from the young founders that do get funded because they had a higher bar to overcome the bias. And, of course, investor biases are (mostly) the result of historical outcomes. So eventually investors will become biased in favor of young founders, and the bar for funding will be lower, and you'll have a lower success rate. The system creates a time-delayed (by a decade or so) negative feedback loop that maintains a rough homeostasis of success rate for every kind of company. Economists realized long ago that you can't predict stock market movements by looking at fundamentals, because all the other investors are looking at the same fundamentals, so the consensus is already priced in. This seems study has the same problem, in addition to a data set several orders of magnitude smaller. Don't change your plan based on any such study.
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modi15 7y ago

3.) Solo founders might slap on an unemployed friend with marginal utility to overcome the bias of investors not funding solo entrepreneurs. 4.) Solo founders might hire an 'employee' and give him the label of a 'co-founder' as a performance appraisal.

HeyLaughingBoy 7y ago

"investors rarely, if ever, fund startups founded by a solo entrepreneur" I'll add another anecdote/datapoint to this: I was the stereotypical one-guy-in-the-basement when I got my first Fortune 500 customer. In order to be paid, I needed to be registered as a vendor with them and they needed an EIN (Employer ID Number). I was concerned that I would lose their business if they found out I was a Sole Proprietor, so I created an LLC and gave them that number the next day. I wouldn't be surprised to find out that there are many single-member LLC's and S-Corps who only have that business organization for similar reasons.

tlb 7y ago

Agreed. In fact, I think it's impossible to get useful evidence for any causal relationships between the founding team and success of a company, because there are feedback loops and confounds everywhere. Here's an example of feedback loops. Suppose investors are biased against young founders. When you look at outcomes, you'll see a higher success rate from the young founders that do get funded because they had a higher bar to overcome the bias. And, of course, investor biases are (mostly) the result of historical outcomes. So eventually investors will become biased in favor of young founders, and the bar for funding will be lower, and you'll have a lower success rate. The system creates a time-delayed (by a decade or so) negative feedback loop that maintains a rough homeostasis of success rate for every kind of company. Economists realized long ago that you can't predict stock market movements by looking at fundamentals, because all the other investors are looking at the same fundamentals, so the consensus is already priced in. This seems study has the same problem, in addition to a data set several orders of magnitude smaller. Don't change your plan based on any such study.

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