Why are start-ups led by older founders far more likely to succeed & what can younger entrepreneurs do differently?
When we think of successful Startups we often think of young entrepreneurs in their 20's . Bill Gates, Steve Jobs, and Mark Zuckerberg were all in their early twenties when they launched what would become world-changing companies. 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 skeptical.”
However a recent study of 2.7 Million startups challenges this view and found that older entrepreneurs were more than twice as likely to succeed as founders in their 20’s. This was supported by another survey by the Kauffman Foundation which looked at 500 high growth businesses and found that “the typical successful founder was indeed 40 years old, with at least six-10 years of industry experience” and that “twice as many successful entrepreneurs are more than 50 as under 25”.[1]
This research is consistent with our findings at Selecture when supporting the founders of high growth technology firms on their growth and talent acquisition. In fact for the the last 4 team builds we have been involved in, the founders were all in their mid-40’s despite the fact that it was in “new technology” areas like AI, Digital banking, Machine Learning and Advanced Analytics. Each founder had managed to secure significant funding ( USD5M+ ), were expanding their operations & client base into new markets in APAC and were assembling great teams to drive this growth.
Older entrepreneurs often have distinct advantages, thanks to larger, more established networks, access to financial capital and with their considerable industry and commercial experience they have acquired leadership skills.
The success of any start up largely hinges on the founders ability to hire a great team. The Leadership skills of the founders along with their reputation and track record has a huge impact on the firm's ability to attract key talent . Of course the business model needs to be compelling, address a real need and have significant upside potential. However to entice the brightest talent from the likes of Google, Amazon, Mckinsey and Facebook often requires a very experienced leader to reach that tipping point. Will a top data scientist jeopardise their well paid job at Google to join a fresh graduate with a great idea but limited track record in their industry? Possibly not...
Sales and revenue are crucial and a lack of either can quickly cause the demise of a promising start up. There's no doubt that a founder with a long established networks can help the start up gain traction with key clients in those vital early months when cashflow is precarious. Interestingly, many founders I have met not only tapped their networks for sales opportunities, but prior to launching they invested significant time talking to their network and potential customers to fully understand their issues and needs, price points and timelines. This research allowed them to refine and road-test their idea to a degree which ensured the right product/service- market fit before pulling the trigger, so they could hit the floor running and realise some early wins.
Older entrepreneurs often leave well paid jobs to pursue their start-up and it seems reasonable to assume that they're only going to take this risk if they absolutely believe their idea is commercially viable and will succeed. An article in Forbes by Krisztina Holly cites studies that “have shown that for entrepreneurship, unlike typical markets, information networks are inefficient" and that founders often "identify different opportunities based on their unique prior knowledge”. [2]As a person gains more experience they also have more access to non-obvious insider knowledge about a high value problem that exists in the market.
SO what can young entrepreneurs do to make up for their lack of experience that comes with age? Obviously, if you encounter a big opportunity at the age of 22, you cannot wait until you turn 40, gain experience, and then start your business. One way to plug the gap is to supplement your passion and ideas and build a team with employees that have more industry experience and networks. Finding experienced entrepreneurs and investors who can act as Mentors is also very beneficial .Research by MicroMentor shows that mentored founders increased their revenue by an average of 106% whereas those are not, experienced a 14% increase only. Furthermore 13% achieved a higher than the average new business survival rate.
Sources:
The Kauffman Institute - Growth entrepreneurship National trends.
@Why Great Entrepreneurs are older than you think." By Krisztina Holly
David Lancefield is the founder of Selecture - a search & recruitment firm that focuses on key hiring & team builds in technology, consulting and digital.
Author: David Lancefield
