Are Older Entrepreneurs The Best Entrepreneurs?
When you think of entrepreneurs, you probably think of twenty something men, possibly who have dropped out of university to pursue their dream, and who are uninhibited by the scars of failure that prompt us to take a more cautious path.
It’s a trait that was highlighted in Warren Bennis’ exploration of the most creative teams in Organizing Genius. For instance, when Disney was blossoming in the late 1930’s, Bennis notes that most of the employees were in the twenties, with the median age just 26. Similar tales emerge from teams as diverse as Bill Clinton’s election team, the early Apple team and even the scientists that converged on Los Alamos to create the atomic bomb.
Bennis reveals that in the vast majority of the great teams he studied, 35 was considered old. He suggests that the virtues of youth are that you have often boundless energy, combined with a lack of weariness in knowing what is “not” possible.
Making the case for older entrepreneurs
Is it always the case however? Research from Penn State earlier this year suggests that older people are a valuable, untapped resource of entrepreneurial verve.
At the heart of their hypothesis is the notion that older adults have a variety of passions, and that these passions can feed into new ideas and innovations. What’s more, these innovations are often with the interests of the community at heart rather than any personal or commercial gain.
“A good example was the knitting group that met in the library and made a lot of scarves,” the researchers explain. “After they were done, they would put the scarves on the statues in front of the library for people to take in the winter. If people are cold, they can pick up a scarf, which I thought was pretty interesting and creative.”
One community that aims to tap into this creativity and wisdom is Senior Planet, a community that aims to help residents “age with attitude.” From the outside, it looks just like the kind of co-working spaces you see dotted around the world, with the only difference being that the young hipsters are replaced with old entrepreneurs.
Members get a range of tech-related classes, and support in putting their skills to good use in the labor market. Classes range from using social media to processing payments for their new website. Many open businesses aimed at the older market, with the shorter horizon acting as a key motivator behind their efforts.
Fear of missing out
Yet, despite all of this, research has clearly shown that we regard innovation as a young person’s game. Indeed, venture capitalist Paul Graham once quipped that he rarely backed any entrepreneur older than 32. Recent research from MIT and Northwestern University highlights how not only is this discriminatory, but is also foolish, as older entrepreneurs can often be more successful than their younger peers.
The research reveals that entrepreneurial success for the under 25s is as rare as a lesser spotted unicorn. Success rates then increase later in one’s 20s and doesn’t decrease even into one’s 50s. Indeed, the authors note that the average age of company founders in the United States is a veritable 41.9 years of age, with the highest-growth startups being founded by entrepreneurs with 45 years under their belt. What’s more, a 50 year old entrepreneur was 1.8 times more likely to achieve high growth than a founder in their 30s.
“Researchers, policymakers, investors, and entrepreneurs themselves all strive to understand entrepreneurial traits that predict the creation of successful new firms,” the researchers say. “This paper has focused on founder age, which is often thought to be a key predictor of entrepreneurial success. We find that age indeed predicts success, and sharply, but in the opposite way that many propose. The highest success rates in entrepreneurship come from founders in middle age and beyond.”
The wisdom of elders
While the authors concede that by looking at company founders in the main, they’re including a large number of small businesses that are neither particularly innovative or particularly likely to grow. But, crucially this trend held even when looking specifically at high-tech industries and companies that had registered patents and received VC funding. In this latter cohort, the average age of founders was 43.
So what makes older entrepreneurs so effective? The researchers argue a number of factors stack up in favor of the older entrepreneur, not least of which is the likelihood of having a richer social network to tap into for suppliers, co-founders, new hires and financial supporters. Indeed, they’re also more likely to have wealth of their own to pump into the new venture and a variety of experience from their career to date.
This prior experience was crucial as there was a clear link between the number of years someone had spent in the same industry as their startup, and the subsequent success of that business. They believe that high profile examples, such as Mark Zuckerberg and Bill Gates are therefore not representative of the entrepreneurial world as a whole.
“These findings are consistent with theories in which key entrepreneurial resources (such as human capital, financial capital, and social capital) accumulate with age,” the researchers explain. “Mechanisms by which young people are proposed to have advantages (such as energy or originality) may still be operating, but if so they appear to be overwhelmed by other forces.”
In a previous article I looked at how we can often discriminate against female entrepreneurs, and the damage doing so is causing to the economy. It seems that we’re also prone to do likewise when it comes to older entrepreneurs.