<p>The evolution of budding in metazoans is not well understood on a mechanistic level, but is an important developmental process. We examine the evolution of coloniality in ascidians, contrasting the life histories of solitary and colonial forms with a focus on the cellular and developmental basis of the evolution of budding. Tunicates are an excellent group to study colonial transitions, as all solitary larvae develop with determinant and invariant cleavage patterns, but colonial species show robust developmental flexibility during larval development. We propose that acquiring new stem cell lineages in the larvae may be a preadaptation necessary for the evolution of budding. Brooding in colonial ascidians allows increased egg size, which in turn allows greater flexibility in the specification of cells and cell numbers in late embryonic and pre-metamorphic larval stages. We review hypotheses for changes in stem cell lineages in colonial species, describe what the current data suggest about the evolution of budding, and discuss where we believe further studies will be most fruitful.</p>