April 3, 2015
It can seem like youth is a prerequisite for a successful entrepreneur. We’re more likely to think of a startup founder with “disruptive ideas” as a college dropout, rather than someone who graduated twenty years ago and is now starting a new venture. But research proves that youth is not the key to entrepreneurial success. And by investing resources only in the young, business culture is missing a huge opportunity.
In an analysis of billion-dollars startups (or “unicorns”) conducted by Aileen Lee of seed stage fund Cowboy Ventures, the average founder on the unicorn list was 34. The founders of LinkedIn, the second most valuable unicorn in their study, averaged 36; founders of the third most valuable, Workday, averaged 52.
Researchers at Duke and Harvard Universities looked at startups earning at least $1 million and discovered that founders’ median age was 39. Twice as many were older than 50 as were younger than 25. And twice as many were older than 60 as were younger than 20. According to Venture Beat, research by the Kauffman Foundation, found that in every year from 1996 to 2013, Americans in the 55-to-64 age group started new businesses at a higher rate than those in their twenties and thirties.
Despite the numbers, people assume that younger entrepreneurs are more likely to make a business grow. The result is that investors invest money in inexperienced executives, while the people with the most to contribute sometimes doubt they have anything left to offer. Sure, the younger founder is most likely know about coding and social media trends, but will he know about financial management and how to lead a team? As author and founder Michael Hyatt explains in this post, there are a few reasons why investors should start betting in older startups:
“Maturity and experience are major factors in decision-making, team-building, financial planning, and more. And there’s no substitute for time in developing them,” explains Hyatt.
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. Older entrepreneurs recognize problems and are more likely to find solutions to these problems.
Younger entrepreneurs may have large following on social media, but older entrepreneurs have stronger friendship and networks who can invest.
“Money matters, and middle-aged entrepreneurs are more likely to have the resources to back their own ventures,” says Hyatt. A 24 year old startup founder less likely to have some money to invest in the company in the beginning. Bootstrapping is a great alternative but so is having financial stability.
As suggested by Krisztina Holly this article published by Forbes, in order for the business community reach our entrepreneurial potential, there needs to be an environment that encourages experienced talent to recognize new business opportunities and start new ventures. Startup cultures need to be inclusive regardless of age.
Image Credit: Chrisada on Flickr
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