Researchers say some entrepreneurs may start businesses and succeed while young, but achieve truly greater accomplishments later in life.
Today, with the development of the Internet, we readily encounter successful entrepreneurs who are still very young. Bill Gates, Steve Jobs and Mark Zuckerberg, for instance, were all in their twenties when they founded their companies. But do these famous examples accurately reflect the average age of the world’s most successful business founders?
A group of researchers, including Pierre Azoulay and J. Daniels Kim from the MIT Sloan School of Management; Bejamin Jones, a strategy professor in Kellogg University's Innovation and Entrepreneurship Program; and Javier Miranda, an economist at the US Census Bureau, believe that relying only on surface-level data or news supplied by venture capitalists or the press could lead one to believe this.
For example, analyzing the profiles of founders who had received awards from technology news site TechCrunch over the past 10 years, the research team found that their average age when starting a business was 31. Meanwhile, based on a list of founders of the fastest-growing startups compiled by the magazine Inc. selected, the average age is 29.
However, a recent analysis of confidential U.S. Census Bureau data found that entrepreneurs' average age when starting their businesses was… 42.
However, most of these startups were small businesses with no plans for major expansion, such as cleaning services or restaurants. To obtain a more precise answer, the team also studied startups operating in high technology, holding patents, receiving venture capital, employing many highly qualified workers, or based in “startup cradles” such as Silicon Valley.
And the research team reached the following conclusion: in software technology, founders typically start their businesses at an average age of 40. Starting young is also fairly common. However, young founders are relatively rare in oil and gas and biotechnology. In these fields, the average age for starting a business is 47.
So what about the most successful startups? Are companies founded by young entrepreneurs more likely to succeed? The research team found that among the top 0.1% of startups by growth rate in their first 5 years, founders' average age at launch was 45.
These companies were identified by growth in hiring. Similar results appeared among companies leading in revenue growth or having recently completed an M&A deal or IPO. In other words, among the most successful companies, founders’ average age rises rather than falls. Overall, the evidence suggests that the most successful entrepreneurs are generally middle-aged rather than very young.
The research team believes that while many factors explain why older age can be an entrepreneurial advantage, experience is decisive. Compared with inexperienced founders, those starting businesses in an industry where they have at least 3 years of experience have an 85% higher chance of building a successful startup. The researchers cited several examples.
For example, Steve Jobs and Apple introduced the iPhone—the company's most profitable product line—when Jobs was 52. Jeff Bezos and Amazon also moved far beyond selling books online to become a leading e-commerce retailer, achieving their highest rate of market-capitalization growth when Bezos reached 45. Researchers say that some entrepreneurs may start businesses and succeed while young, but achieve far greater accomplishments only when they are older.
So the question is: Why do venture investors still prefer to “bet” on young founders? The researchers say there is not yet enough data to draw a conclusion, but they can offer 2 main reasons.
First, venture capitalists often mistakenly believe that youth is a “magic potion” for entrepreneurial success. This may stem from a psychological bias.
Second, according to the research team, the larger reason may be that venture capitalists seek not only projects with the highest growth potential but also those with the highest returns. Meanwhile, young entrepreneurs tend to face greater financial difficulties than experienced entrepreneurs and are therefore more inclined to “sell their projects cheaply” to venture capitalists.
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