Founders of startups are stereotypically young (in their late 20s and early 30s). But are they more successful than seasoned entrepreneurs? A new study by the Harvard Business Review challenges the notion that youthful founders are more likely to prosper when starting companies.
Using data from the U.S. Census Bureau, HBR determined that the average age entrepreneurs launched a company was 42. However, many of these businesses were small, such as restaurants or shops, with no aspirations to grow. HBR then focused on factors related to a high-tech startup, such as if the business had a patent, received venture capital investment, and employed a large number of people with STEM experience. Researchers concluded that high-tech founders are typically in their early 40s.
There are some variations. Software startup founders are typically 40, yet there are also a lot of founders who are much younger. In the oil and gas or biotechnology industries, founders averaged age 47. The stereotype of young startup founders may be related to media exposure to IT industries such as social media versus business-to-business and heavy industry sectors, noted HBR.
Companies started by younger entrepreneurs are not necessarily more successful. In fact, researchers found that the top 0.1 percent of startups based on growth in their first five years had founders who launched their companies at age 45.
“When you look at most successful firms, the average founder age goes up, not down,” HBR reported. “Overall, the empirical evidence shows that successful entrepreneurs tend to be middle-aged, not young.”
This pattern reflects middle-aged people’s tendency to start a potentially risky undertaking. In sum, older entrepreneurs are more successful than younger entrepreneurs when starting a firm.
“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,” the researchers noted.
The main reason? Work experience. People with at least three years of prior work experience were 85 percent more likely to build a successful startup.
There are some exceptions. Steve Jobs, Bill Gates, Jeff Bezos, and others started their businesses at relatively young ages. However, the peak growth occurred when they were middle-aged. Jobs, for example, introduced the iPhone at age 52. Bezos’ Amazon success reached its height when he was 45. Men like this reached their career peak in middle age, not in their 20s or 30s. These “extremely talented entrepreneurs” succeeded at a young age yet achieved even more success when they got older.
Still, investors tend to favour young founders. The researchers suggest that venture capitalists assert that “youth is the elixir of successful entrepreneurship” when clearly it is not. Investors may miss businesses that have the highest growth potential and also choose younger investors because it’s cheaper to team up with them than with experienced founders.