PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Three Lessons for Entrepreneurs: Age Matters, But Maybe Not Like You Think

By at 3 March, 2015, 3:28 pm

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by Raymond J. Keating-

In a recent undergraduate business class, I assigned each student a notable business leader to research and write a paper on and then to present their findings. The person assigned McDonald’s effective founder Ray Kroc was amazed that Kroc launched the business at the age of 52. I believe the student said, in a bewildered tone, “I mean, my dad is like in his fifties.”

I chuckled, but many people, including various high-tech investors, assume that entrepreneurship is an endeavor for the young, that is, the very young. For example, writing for VentureBeat, Vivek Wadhwa, a researcher and professor at Stanford University, Duke and elsewhere, quoted investor Vinod Khosla, “People under 35 are the people who make change happen; people over 45 basically die in terms of new ideas.” Yikes.

Is that in any way the real story? Actually, no. Consider a few quick lessons on age and entrepreneurship.

Lesson 1: Age and Levels of Entrepreneurship.

Data from the Kauffman Foundation provides interesting information on entrepreneurship rates by age group. In 2013, the entrepreneurship rate for those 35 to 44 years old was 0.31 percent; for those 45 to 54, it was 0.36 percent; and for those 55 to 64, the rate registered 0.31 percent.

Compare the above rates to the 0.18 percent rate for those between 20 and 34. That’s a marked step down in the entrepreneurship rate among younger people. The trend in the rate of entrepreneurship has been quite different for young vs. older individuals. For example, the 20-34 age group saw its rate drop from 0.28 percent in 1996 (first year of data) to 0.25 percent in 2007 (before the recent recession) to 0.18 percent in 2013.

Meanwhile, the rate among the other three age groups did not really budge. For example, among 55-64 year olds, the rate came in at 0.32 percent in 1996, 0.31 percent in 2007, and once again, 0.31 percent in 2013.

Lesson 2: Age and Entrepreneurial Success.

According to his own research on successful technology firms, Wadhwa noted that among companies generating at least $1 million in revenue, “the average and median age of their founders was 39,” and “twice as many were older than 50 as were younger than 25,” as well as “twice as many being older than 60 as were younger than 20.”

Lesson 3: Why Higher Rates and Notable Success? 

If you toss aside baseless, preconceived biases that older individuals are somehow less creative in the marketplace than the young, the reasons for these higher rates of entrepreneurship and notable levels of success among older entrepreneurs are not surprising. After all, older individuals have gained valuable work, industry and management experience. They also have a significantly larger prior knowledge base to build from, as well as significant professional networks and experience working with teams, for example. Plus, experience should allow them to better gauge risk, understand financing needs, and weather storms.

From an investor standpoint, there’s the basic rule that one invests in the idea and in the people. Rather than blindly ruling out certain ideas due to the age of the creators, as again some Silicon Valley investors apparently have been guilty of in the past, the trends, history, and a clear understanding of the potential benefits of experience should warrant equal consideration, or perhaps even some added attention, for ventures started by – let us say – more mature entrepreneurs.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council, an adjunct professor in the business school at Dowling College, and the author of numerous books, including Unleashing Small Business Through IP: Protecting Intellectual Property, Driving Entrepreneurship.

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