Entrepreneurship and Success: Does Age Matter?

By SBE Council at 1 May, 2019, 2:02 pm

by Raymond J. Keating-

I appreciate entrepreneurship practically in all forms and from all sources. As an economist who studies entrepreneurship and the economy, though, I want to know the details of entrepreneurship. And that includes the relationship between age and entrepreneurship.

The bias today tends to lean toward entrepreneurship, especially the most successful startups, being largely the domain of the young. We tend to think about Bill Gates, Jeff Bezos and Steve Jobs, who launched their successful companies in their twenties, as opposed to Ray Kroc, who joined the tiny McDonald’s company at the age of 52, purchased the company at 59, and led the firm to become the most successful restaurant chain in the world.

According to research published by the Harvard Business Review last year, the authors, Pierre Azoulay, Benjamin Jones,  J. Daniel Kim, and Javier Miranda, essentially found that, in terms of age, successful entrepreneurship is a bit more Ray Kroc than Steve Jobs.

Here are few key findings:

● The average age of entrepreneurs when founding their businesses is 42. And high-tech founders launch their firms in their early forties on average as well.

● “These averages, however, hide a large amount of variation across industries. In software startups, the average age is 40, and younger founders aren’t uncommon. However, young people are less common in other industries such as oil and gas or biotechnology, where the average age is closer to 47.”

Source: Harvard Business Review at hbr.org, “Research: The Average Age of a Successful Startup Founder Is 45”

● In terms of success rates among entrepreneurs, performance rises sharply with age. It was noted, “Overall, the empirical evidence shows that successful entrepreneurs tend to be middle-aged, not young… Among those who have started a firm, older entrepreneurs have a substantially higher success rate. Our evidence points to entrepreneurial performance rising sharply with age before cresting in the late fifties.”

Source: Harvard Business Review at hbr.org, “Research: The Average Age of a Successful Startup Founder Is 45”

● As for some of the big names thought of as supporting the “young entrepreneurs” emphasis, the authors point out, “Interestingly, however, when you study notable outliers such as Bill Gates, Steve Jobs, Jeff Bezos, or Sergey Brin and Larry Page, the growth rates of their businesses in terms of market capitalization peaked when these founders were middle-aged. Steve Jobs and Apple introduced the company’s most profitable innovation, the iPhone, when Jobs was 52. Jeff Bezos and Amazon have moved far beyond selling books online, and Amazon’s future market cap growth rate was highest when Bezos was 45. These prominent founders may not have peaked when very young. Extremely talented entrepreneurs may have unusual acumen — allowing them to succeed when they are very young — yet still see greater success as they age.”

So, why is this the case? Well, the answer is not exactly a surprise – experience. As the authors observed, “we found that work experience plays a critical role. Relative to founders with no relevant experience, those with at least three years of prior work experience in the same narrow industry as their startup were 85% more likely to launch a highly successful startup.”

The nation’s economy benefits when entrepreneurship is embraced across the population. At the same time, it’s important to understand the process of entrepreneurship, and these findings currently show that entrepreneurial success is more prevalent among the middle aged.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.