The Grown-ups are Talking: The Rise of the Older Startup Founder
Introduction
The stereotype of the young, hoodie-clad, college dropout founder disrupting industries has long been a staple of the startup narrative. If you’ve seen The Social Network, you know the mould. But recent research published in Harvard Business Review would suggest that a seismic shift is underway. The average age of successful startup founders is steadily climbing, with a growing number of entrepreneurs in their forties and fifties proving that age is no barrier to innovation and success; quite the opposite, in fact, it’s these older founders who are thriving.
The myth of the young entrepreneur
For decades, the tech industry has been dominated by the image of youthful, energetic founders. High-profile success stories like Mark Zuckerberg and Evan Spiegel have perpetuated this stereotype. They found startling success young, grew huge profiles, and all of a sudden grey hairs were seen as a barrier to becoming a major player. Indeed, analysis of all founders who have won TechCrunch –– the annual conference hosted in San Francisco, New York, Berlin and London where new technology startups compete in front of venture capital investors and media –– found that the average age of the CEO at the time of founding the company was just 31. [1]
To further prove that youth was indeed the hottest ticket in town, research also shows that the founders of the fastest-growing startups in 2015 according to Inc. magazine had an average age of 29 at the time of founding [2]. Paul Graham, a cofounder of Y Combinator, once quipped that “the cutoff in investors’ heads is 32… After 32, they start to be a little sceptical.” [3]
For a while, then, it seemed that as well as obviously needing a good product and plugging a gap in the market, the most important Silicon Valley success factor was youth. Outside of Silicon Valley, it was a treasured commodity as well. But it shouldn’t be. At least, not anymore.
Older, wiser
Research by Pierre Azoulay, Benjamin F. Jones, J. Daniel Kim, and Javier Miranda, published in Harvard Business Review, shows that the average age of entrepreneurs at the time they founded their companies is 42. They arrived at that number by leveraging confidential administrative data sets from the US Census Bureau.
The sceptical amongst you may look at that number and spot a missing point –– that sure, the average age of founders may be 42, but that’s because most founders are starting small, independent businesses; it is not the same as a Zuckerberg; to be successful, youth is still the defining factor. Let’s address that idea.
The researchers were well aware that such a complaint could be lobbied against them, admitting that “the vast majority of these new businesses are likely small businesses with no intentions to grow large (for example, dry cleaners and restaurants).” As such, they honed their research to “focus on businesses that are closer in spirit to the prototypical high-tech startup” [4].To be considered for analysis, a company needed to have been granted a patent, received VC investment, or operated in an industry that employs a high fraction of STEM workers. They also factored in location, particularly whether the business was in an entrepreneurial hub such as Silicon Valley. The findings? Again, the average high-tech founder was found to be in their early forties.
Okay, so the age of high-tech startup founders matches the broader trend. But simply starting a tech company does not guarantee one success, far from it. These people could have been terrible founders who crashed and burned, proving that youth was still the answer, not middle-age. So the researchers refined their analysis again, this time examining the top 0.1% of startups based on employment growth in their first five years. This time, the average age of founders at the time they started their company was…forty-five.
Before anyone pushes back that employment growth is not the best way to measure success, the researchers add the following: “The age finding is similar using firms with the fastest sales growth instead, and founder age is similarly high for those startups that successfully exit through an IPO or acquisition. In other words, when you look at most successful firms, the average founder age goes up, not down. Overall, the empirical evidence shows that successful entrepreneurs tend to be middle-aged, not young.” [5]
The researchers go on to add that there is a slight misconception and over glorification of the young outliers of this trend such as Bill Gates, Steve Jobs, and Jeff Bezos. These iconic founders may have started their businesses while still supremely young, but, as the researchers point out, their success as CEOs did not come until much later in their lives.
“The growth rates of their businesses in terms of market capitalization peaked when these founders were middle-aged,” the researchers write. “Steve Jobs and Apple introduced the company’s most profitable innovation, the iPhone, when Jobs was 52. Jeff Bezos and Amazon have moved far beyond selling books online, and Amazon’s future market cap growth rate was highest when Bezos was 45.” [6]
So, since it is middle-aged founders thriving today, and since even the young founders tend to find their footing once they reach middle-age, what is it about this time of life that breeds success?
The experience factor
Let’s start with the obvious. Older entrepreneurs bring a wealth of experience to the table. They have often worked in established companies, gaining invaluable insights into business operations, management, and problem-solving. This knowledge equips them with a deeper understanding of market dynamics, customer needs, and the challenges of scaling a business.
Moreover, older entrepreneurs tend to possess stronger financial resources, allowing them to invest more capital into their startups. They are also less reliant on external funding, reducing the pressure to achieve rapid growth and enabling them to focus on building a sustainable business. There is an interesting question there that would require further research to answer: do middle-age founders thrive because their existing capital gives them freedom to pursue their ideas without being over concerned as to external stakeholders, in the same way that young upstarts like Zuckerberg enjoyed such success because they had the freedom of youth on their side –– they were beholden to their own ideas and no one else’s, at least at the start? In other words, is it creative freedom, born from either youth or capital, that is the true core to success?
Obviously another pivotal factor is the age-old truism: it’s about who you know, not what you know. Entrepreneurs with established careers often possess deep industry knowledge and extensive professional networks. This expertise can be invaluable in identifying market opportunities, securing partnerships, and building customer relationships. Their existing networks can also provide access to valuable resources, such as mentors, investors, and potential customers. Unlike their younger counterparts, older founders have the right numbers to dial.
It’s also possible that technological innovation and shifting societal attitudes have opened doors to older founders. It’s less common for workers to stay in a job for life anymore. Rather, when they feel they have the requisite industry knowledge, they think there’s no reason not to go out on their own. They are backed up by an endless supply of knowledge as to how to go about it thanks to online information. For many, they will also want more flexibility in the work life and see starting their own business as a good way to achieve it.
Challenges
Up until now we’ve made becoming a successful middle-aged founder sound like a breeze –– they experience all the success, have all the right contacts and financial freedom –– but of course there are a number of challenges that come with starting a company in your forties and fifties. One of the primary hurdles is the perception of being “too old” for the fast-paced startup world. This can impact access to funding, talent acquisition, and overall credibility.
As Azoulay, Jones, Kim, and Miranda write in their research, many VCs still prefer to bet on younger founders in spite of the proof that middle-aged ones are currently more likely to find success. They suggest two reasons for that, which are worth laying out in full.
“First, many VCs may operate under a mistaken belief that youth is the elixir of successful entrepreneurship — in other words, VCs are simply wrong. Though it is tempting to see age bias as the leading explanation for the divergence between our findings and investor behaviour, there is a more benign possibility: VCs are not simply looking to identify the firms with the highest growth potential. Rather, they may seek investments that will yield the highest returns, and it is possible that young founders are more financially constrained than more experienced ones, leading them to cede upside to investors at a lower price. In other words, younger entrepreneurs may be a better “deal” for investors than more experienced founders.” [7]
Going forwards
The trend towards older entrepreneurship is likely to continue as the population ages and the startup ecosystem matures. As technology becomes more accessible and the barriers to entry for starting a business decline, we can expect to see even more individuals from diverse age groups pursuing entrepreneurial ventures. Think about the potential Gen Z and Alpha have to be successful entrepreneurs in the future having grown up with computers and the internet, all fully fluent in the digital language from the off. The shift in demographics going forward will bring new perspectives, experiences, and approaches to problem-solving, which should enrich the startup landscape and drive innovation.
The grown-ups are talking
The conventional wisdom that young, tech-savvy individuals are the sole architects of startup success is increasingly outdated. A compelling body of evidence suggests that the entrepreneurial landscape is maturing, with middle-aged founders emerging as a formidable force. Possessing a wealth of experience, established networks, and often a more calculated approach to risk, these entrepreneurs are redefining the entrepreneurial archetype.
While challenges such as bridging the digital divide and overcoming age-related stereotypes exist, the potential rewards for both individuals and the broader economy are substantial. By leveraging their unique strengths and adapting to the evolving business environment, middle-aged entrepreneurs can significantly contribute to innovation and job creation. In fact, as the data shows, they already are.
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