Venture Capitalists are always on the lookout for dynamic young blood, experienced middle-aged entrepreneurs are more likely to create successful business ventures.
Contrary to popular belief, we all DO come with a red carpet in life. It’s just we must find it, before walking its magical welcome. This is a life’s search – indeed, a hunt – best done via trial and error. Trying new bends. Daring new trials. Falling short of expectations. Copping full-on failures.Deepak Kaistha | CEO, DKODING Media
Since the technology boom gripped the world in 1980s, there has been an unrelenting aura around genius entrepreneurs that make it big in the early years of their career.
Names like Bill Gates, Steve Jobs, Mark Zuckerberg, and Jack Dorsey instilled a strange romance around the rapid rise of fledgling business founders.
A young and successful start-up founder perhaps forms the alpha of the capitalistic dream world and such early achievers are celebrated by investors, analysts and media alike as heroes in modern folklore.
The storification and wide attraction around the young and dynamic entrepreneurs surged consistently in the IT age as many more came to the fore. Young entrepreneurs are publicized and lauded for birthing a successful venture so early in their professional careers.
But the perceived high probability is nothing but an urban myth. While you would be able to count at least a score of such names on your fingertips, it is by no means a general pattern.
‘Young and successful entrepreneurs’ is such a solidified myth that even Venture Capitalists, Angel Investors and journalists endorse them and tend to flock towards one on the first inkling. Even awards and honours seem to suggest the same with the annual age of startup icons recognized at such events being around 31. But a research from Harvard Business Review brought forth a clearer picture, respectfully begging to differ from the narrative.
Not 20s or 30s, but most entrepreneurs achieve success in their 40s
As per the research, which collated stats from the US Census Bureau, the average age of an entrepreneur when founding a business came out to be early 40s for tech startups which have patents and venture funding – parameters of a startups performance. The averages differ across industries but mostly stays above the 40-year mark. For software startups, average age is 40 for the successful ones. In more high intensity sectors like oil and gas, biotechnology and heavy engineering, it stretches further to 47.
So, where do most young entrepreneurs achieve success? The sectors where young startups founders are more likely to succeed are B2C retail companies, facility aggregators, social media and communication-related services in comparison to the bigger sectors like heavy industry or B2B domains.
Does the trend remain of consequence among Unicorns?
If you leave all the romance aside, the founders of the top 0.1% of the world which made it big in the first five years, the average age of the founders was 45. A similar number is seen in those founders who made successful businesses but exited through an IPO or acquisition. As per the HBR review, “Overall, the empirical evidence shows that successful entrepreneurs tend to be middle-aged, not young.”
From the top 0.1% of startups of the world which made it big in the first five years, the average age of the founders was 45.
India, which is the world’s second largest startup ecosystem has a slightly younger trajectory that the other giant ecosystems. Youth leads India’s start-up ecosystem where founder-entrepreneurs average in early 30s. A number of these are from highly successful entities which eventually became unicorns. But this stat aligns with the observations of the Harvard study where most of the successful ones were into consumer products and services.
The reasons behind the trajectory
Most professionals mature in their business approach and achieve clarity about a sustainable business model in their late 30s or early 40s. Also, a middle-aged founder would be more willing to take risks and have a more worldly approach due to her or his experience. This is proved when one observes the success rate of entrepreneurs. Older founders have a substantially higher success rate. As per the HBR, “entrepreneurial performance rises sharply with age before cresting in the late fifties. If you were faced with two entrepreneurs and knew nothing about them besides their age, you would do better, on average, betting on the older one.”
As per the HBR, “entrepreneurial performance rises sharply with age before cresting in the late fifties.”
Another factor that counts is the amount of professional experience which normally equates to a more balanced and carefully drawn approach. Also, years in the corporate world give middle-aged entrepreneurs management skills to keep a team efficient and get the best results from resources. As per the HBR research, in comparison to founders with no or little professional or domain experience, those having a minimum of three years of work experience in a similar domain were 85% more likely to emerge successful in their startup venture.
Most geniuses entrepreneurs that start young are no different
The likes of Bill Gates, Steve Jobs, Jeff Bezos, Sergey Brin and Larry Page, saw their ventures peak around the time when they hit middle-age. For Apple, the breakthrough innovation in terms of profits was the iPhone which was launched when Jobs was 52. For Amazon, the future market growth rate peaked when Bezos was 45 years old.
Thus, even the youngest geniuses reach the heights of their careers and achieve much more success in the middle ages. The HBR opines, “there is no fundamental tension between the existence of great young entrepreneurs and a general tendency for founders to reach their peak entrepreneurial potential later in life.”
What makes Investors think otherwise?
There is an undeniable general trend of Venture Capitalists to have an inclination towards endorsing younger entrepreneurs. There are various factors that drive the thinking of investors, apart from their individual strategies and investment patterns. In fact, a number of Venture Capital firms base themselves on the false belief that youth is at the core of the surging entrepreneurship ecosystem.
When looking to ensure sure shot success for the investment, a VC should look at ventures by more experienced and mature founders.
Age factors in when startups are endorsed. Apart from popular narrative of the genius young entrepreneur that everybody is on the lookout for, the approach of investors is also ruled by the possibility of better return-making deals with greater leverage for VCs.
Such investments have a greater chance of better returns for founders. Middle-aged mature founders are not financially constrained and have more worldly experienced. They also do not easily seed stake to investors at a price disadvantage. Younger entrepreneurs may be more profitable for investors on short term deals, but when looking to ensure sure shot success for the investment, a VC should look at ventures by more experienced and mature founders.
What some of the world’s entrepreneurs say about the Age factor in becoming a successful entrepreneurs:
“It’s not about how many years of experience you have. It’s about the quality of your years of experience.” – Jacob Cass, Logo of the Day
“the combination of successful project completion skills with real-world experience helps older entrepreneurs identify and address more realistic business opportunities.” – Adeo Ressi, founder of the Founder Institute
“In theory, we know that with age a lot of benefits accumulate. You get a lot of human capital from experience, you also get more financial resources as you age, as well as social connections, all of which will likely boost your odds of success as an entrepreneur.” – Daniel Kim, MIT
“No, age in itself does not matter in trying to forecast entrepreneurial success. But, experience does, and often times, that comes with age.” – George Deeb, Managing Partner, Red Rocket Ventures