A MIT investigation destroys the myth that only young entrepreneurs are more successful
On many occasions, youth and fame often go hand in hand. Even more so when it comes to giant technological companies that have become an icon of the new economy and whose founders created them when they were in their twenties like Bill Gates, Steve Jobs or Mark Zuckerberg.
Cases like these have helped to reinforce the myth that to create a startup you have to be a young genius with a brilliant idea that will revolutionize the market and put Wall Street at your feet.
But an investigation carried out in the Technological Institute of Massachusetts (MIT), the United States, revealed that the average age of a successful entrepreneur who founded a company in the country is 45 years.
To reach that conclusion, a team of experts studied an extensive database with information from the US Census Bureau, separating into groups the different types of companies, their trajectory since they were created and the age of the pioneers.
Of all the companies, they selected those that approached a prototypical technology startup considering factors such as whether the firm received financing from investors with venture capital, if it registered patents and if a significant part of its workers were highly qualified in areas such as science, technology , engineering or mathematics. They also considered whether the company was located in an innovation center such as Silicon Valley.
Those that met those requirements were analyzed in detail and it turned out that, on average, the age of those responsible did not fall below 40 years.
The sparkling “elixir” of youth
However, the profile of the founders varies greatly depending on the type of industry. In the case of startups dedicated to software development, the average age is 40 years. But young entrepreneurs are also common.
However, young people are less common in markets such as oil, gas or biotechnology, where the average age is 47. Why then do we usually think that entrepreneurs are always young people? Researchers believe that it is because they have a greater exposure in social networks and media.
Because even when they analyzed 0.1% of the startups with the most growth in their first five years, they found again that the founders, on average, started their business venture at 45 years old.
More years, more success
“Older entrepreneurs have a substantially higher success rate,” the study’s authors, Pierre Azoulay, Benjamin Jones, J. Daniel Kim and Javier Miranda, wrote in an article in the Harvard Business Review.
Older entrepreneurs have a substantially higher success rate than the younger ones. “Our evidence suggests that entrepreneurial performance increases rapidly with age until it reaches its peak towards the end of the 50s.” Although there may be many factors that explain the advantage of having more years when starting a venture, they found that work experience plays a decisive role.
In general, those founders with at least three years of experience are 85% more likely to succeed than those who had no previous relevant jobs.
But … what about Steve Jobs?
The experts also analyzed those exceptional companies that had young founders in the style of Bill Gates, Steve Jobs, Jeff Bezos or Sergey Brin and Larry Page of Google.
In this segment, they found that the growth rate of their firms (in terms of market capitalization) peaked when their creators were of an intermediate age.
For example, Apple brought the iPhone to market when Jobs was 52 years old. And Amazon had a shocking growth rate when Bezos was already 45.
“These outstanding founders would not have reached their peak when they were very young,” the researchers say. Why does venture capital reach the youngest? Although some venture investors – who are dedicated to financing startups – may be influenced by the success stories of young tech geniuses, the most likely reason to explain their stakes is quite another.
Younger entrepreneurs can be a better business for investors
Experts believe that many venture capitalists put their money in those startups that can give them better returns and not necessarily in those projects that have a greater potential for growth.”It is possible that the young founders have more financial restrictions than the more experienced ones, and that this leads them to deliver greater advantages to investors with lower prices.”
That is to say, that “younger entrepreneurs can be a better business for investors,” the experts conclude.
Also published on Medium.