How old do you think someone should be for the best chance at entrepreneurial success?
If you said 20, or 22, or 25, you are not alone.
It wasn’t that long ago that age signified wisdom. But in the last decade Silicon Valley routinely, even systematically, has overlooked the old in search of the youthful. A couple of years ago, entrepreneur and TechCrunch founder Michael Arrington wrote a blog post called, “Internet Entrepreneurs Are Like Professional Athletes, They Peak Around 25.” The average age of a Y-Combinator founder is only 26.
Today’s digital natives are as adept at consuming new technologies as they are unencumbered by old ways of thinking. My friend Tom Chi, a former Yahoo! executive and prototyping guru for Google X Labs, likes to say, “Knowing is the enemy of learning.” Certainly being young and inexperienced is one way to approach new ideas with a beginner’s mind.
But research debunks the myth that youth is the key to entrepreneurial success. And by investing our resources only in the young, our society is missing a huge opportunity.
Youth superiority is a myth
My colleagues and I did a study, funded by the Kauffman Foundation, that surveyed 500 successful high growth founders. Against all stereotypes, we found that the typical successful founder was 40 years old, with at least 6-10 years of industry experience. Twice as many successful entrepreneurs are more than 50 as under 25.
You may say, “Ok, but when it comes to disruptive, billion dollar Internet ideas like Facebook, surely the young must have a leg up on founders with gray hair!”
Let’s take a look at some recent analysis by Aileen Lee of seed stage fund Cowboy Ventures. She studied U.S. software start-ups that sold for billions of dollars over the last decade, which she called “unicorns.”
“Inexperienced, twentysomething founders were an outlier,” explains Lee. “Companies with well-educated, thirtysomething co-founders who have history together have built the most successes.”
The founders of LinkedIn, the second most valuable unicorn in their study, averaged 36; founders of the third most valuable, Workday, averaged 52. The average founder on the unicorn list was 34. So even the biggest hits, on average, have emerged from experience.
Why are older entrepreneurs more likely to succeed?
Studies have shown that for entrepreneurship, unlike typical markets, information networks are inefficient; this means founders identify different opportunities based on their unique prior knowledge.
While a 20-year old may have little more experience than going to classes, using their mobile apps, and pursuing their hobbies, a manager from a manufacturing company might recognize the need for new logistical software, or a technician in the energy industry might see the opportunity for a better ceramic filter. These opportunities are not sexy nor obvious to someone fresh out of college, but they can make a unique and compelling value proposition and the basis of a successful company.
And of course, ideas are only ideas until you execute. More experienced leaders tend to have deeper networks, experience managing teams, and better business savvy and skills for delivering on their vision.
Some investors are catching on; for example, German entrepreneur Rolf Herken is tapping into experienced talent with his two new organizations, Mine Innovation Engineering and Reality Ventures. But in the meantime, the rest of us are worshipping at the altar of youth entrepreneurship.
The cheated generation
I constantly meet millennials whose only ambition is to start a company. They say they don’t want to work for The Man; they want to pursue their own dreams. They have been drinking the Kool-Aid of entrepreneurship.
In response to the demand, universities are falling over themselves to provide new courses and programs in entrepreneurship. And students are spending a lot of energy coming up with startup ideas
and entering business plan competitions. Billionaire Peter Thiel took things a step further when in 2011 he started enticing students to skip college for his 2-year, $100,000 Thiel Fellowships.
But are we cheating this next generation out of viable careers? Not everyone can be a successful founder. Given that most startups fail, in five to ten years will we have a generation of self-employed 30-somethings that were chasing their dreams, but were left with not much more than a few failures under their belts?
Don’t get me wrong; students do need to take charge of their careers, and entrepreneurial skills will be critical for success. But whenever a student without a startup idea asks me for advice with that panicked look in their eyes, I tell them not to worry. If they
want to explore the startup world, they can join another startup founded by someone with real industry experience. They should pursue their curiosity and build up their own unique series of experiences to draw from in the future. I assure them that they can always start a company when they have a compelling idea worth focusing on.
The key to entrepreneurship and success
So what does this mean for policymakers and the business community? If we want to solve youth unemployment or to stimulate economic growth, we need to ask ourselves, “Where will these companies come from, and who will have the skills to work for them?”
To really reach our entrepreneurial potential, we must create an environment that encourages experienced talent to recognize new business opportunities and spin out new ventures from their existing corporations when it makes sense. For example, my colleagues and I just release a new study that shows health insurance availability is an important factor for fostering entrepreneurship, and this is especially true for those who are older, married, and have children. Startup programs should cultivate entrepreneurs in older industries ripe for disruption, from transportation to manufacturing and beyond.
Older entrepreneurs can be role models for the next generation, who should first learn real technical and creative skills that are in short supply in the real world. Although it’s commendable for young innovators to try their hand at a start-up if they have a compelling idea, they shouldn’t be enticed away from developing a foundation that they can build on later.
No matter where he or she ends up – as a founder, a policymaker, or an employee at a big company – someone with a strong set of entrepreneurial skills plus a set of unique knowledge and experiences will be primed for a career of making impact and positively contributing to society. And it’ll never be too late to start that company one day.