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For Startups Pitching VCs, Three Is a Magic Number

LightbulbHoping to get funding for your startup? You’ll have better luck if you aren’t going it alone.

“Two to three co-founders seems to be a sweet spot,” Y Combinator partner Paul Bucheit said on a panel session at Google I/O Developer Conference in San Francisco. The other panelists — Excite Co-founder and Google Ventures partner Joe Kraus and SCVNGR founder Seth Priebatsch — all agreed venture capitalists prefer to invest in companies headed by more than one founder.

Recent research from the MIT Sloan School of Management supports this idea. The study, led by the MIT Entrepreneurship Center’s Dr. Edward Roberts, indicated that each additional co-founder up to four increases a company’s odds of success. Research of companies with five or more cofounders was inconclusive because there weren’t enough of those companies to reliably include them in the study’s findings.

The panelists pointed to three main reasons companies with several co-founders seem to be a better bet than single-founder companies:

  1. Several-founder companies are more resilient once the company hits the inevitable rough patch.
    “It’s easier if you’re not all alone when things are awful,” Bucheit said. A single founder may be more likely to throw in the towel when times get hard.
  2. Companies with several co-founders are likely to be more than just a pipe dream.
    “The validation of an idea is when you can convince someone else to drop what they’re doing and join you,” said panel moderator, startup veteran and Google developer advocate Don Dodge, who has invested in startups in the past. “If you can’t do that, you should really think hard about what you’re doing.
  3. Co-founders could already have a tried-and true relationship.
    Companies headed by people who have worked together before receive extra bonus points from investors. “Have you gone to battle together before?” Kraus asked. “And do you like each other at the end of it?” VCs are even more keen to invest with several entrepreneurs who have proven that they can work successfully together in good times and bad.

Image courtesy of Flickr user Chuck “Caveman” Coker

4 Responses to “For Startups Pitching VCs, Three Is a Magic Number”

  1. Not sure if they all need to be co-founders, but you need three key roles done well and they are best done by separate people/departments in my view:

    – Someone to design the product (product management)
    – Someone to implement the design (Engineering)
    – Someone to get the commercial results (sales/marketing)

    Ideally, there is also a customer service focus, but that could be part of any of the three early on.

    Scott Maxwell
    OpenView Venture Partners

  2. Amitesh

    I believe this is BS study and makes no sense. It like “my girlfriend loves me more as I make love to 3 wives at the same time”. Instead of finding a co-founder if you do not have one, focus on building the product and making customers pay and your results would speak for themselves.

  3. Probably, this is true when VC invest into idea, but does it really matter how many co-founders does start-up have when there is good product or service already?

  4. “The validation of an idea is when you can convince someone else to drop what they’re doing and join you.” This is typical of the nonsense continually spouted around this topic. The validation of an idea is when people pay for the product. Anything prior to that is incidental. And by the way, the people paying for the product generally don’t care how many people founded the company.