The Most Underrated Entrepreneurs are Not the Most Undefeated
Entrepreneurship is not the NFL. Entrepreneurs don’t peak in their 20s and 30s. There’s more than one 43-year-old Tom Brady in the league, and they’re winning Super Bowls, too.
Entrepreneurship is wrongly stereotyped as a young person’s game.
Perhaps that’s because a young Bill Gates founding Microsoft is more romantic than a 65-year-old Colonel Sanders founding KFC. Or, perhaps investors believe young people are more innovative and resistant to failure. Society in general gives younger entrepreneurs a free pass, saying “they’re young and learning, they’ll bounce back.”
But, entrepreneurship is tough on even the most experienced founders. Entrepreneurs are hit with rejections and failures left, right, and center. When you consider mental health implications, younger founders, with their lack of life experience, are worryingly vulnerable.
And yet investors really want young founders. To them, an older founder pitching their company is like a 43-year-old Tom Brady entering the NFL draft for the first time. Sure, he may be Super Bowl quality, but “isn’t he a bit old to play the game?”
(Ok, we’ll stop with the football references. Super Bowl weekend is over.)
So why do investors think the ideal founder is 35 or younger? Who knows, because the data tells a different story altogether.
The mean founder age for the 1,000 fastest growing new ventures is 45. [Age and High-Growth Entrepreneurship]
Entrepreneurial success actually increases after the age of 40. A 50-year-old founder is 2x more likely to experience a successful exit than a 30-year-old one. In high-tech sectors, the average age of founders is 43. And, across all sectors of the market, the mean founder age of all founders never drops below 38.
By remaining biased against older founders, investors continue to underestimate their value. There are more largely underestimated groups in entrepreneurial success: female founders and founders of color. Put them together and you get…
Older female founders = super underestimated entrepreneurs.
Older women generate some serious capital. In 2018, 11.6 million female-owned businesses generated $1.7 trillion in revenue and employed 9 million workers. That same year, women over 55 in the US held a net worth of $19 trillion. Older female founders hold the keys to trillions of dollars.
How are they accessing those dollars? Let’s look at some vocabulary you may not have heard before: sidepreneur, which is defined as someone spending less than 20 hours per week on their startup. The growth rate in “sidepreneur businesses’’ is 32%. For minority women-owned businesses, that percentage jumps to 65%.
And, for black women-owned businesses, the growth rate is a staggering 99% [American Express]. There are many reasons why women favor sidepreneurship over leaving their full-time jobs to found businesses. It’s low-risk, flexible, and they can be their own bosses. Perhaps these women seek sidepreneurship opportunities because they feel undervalued at their full-time jobs, or feel overqualified and underpaid for their work.
Our bet? The pandemic will produce more older female founders. Whether that’s because women want to increase their net worth, were laid off, or are doubting the security of their current jobs, it’s good news for investors.
Zane recognizes the value of older founders, especially older female founders. For example, our team is intergenerational and spans from industry veterans all the way down to an 18-year-old.
We know diversity, including generational diversity, is a superpower.
Our own diverse experiences and backgrounds at Zane allow us to see untapped entrepreneurs and connect with their stories in ways traditional VCs do not. Our diverse team provides diverse teams with the support they need to grow and succeed.
Ageism in entrepreneurship? Not at Zane.
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Sources:
- In the U.S., women over 55 have a net worth of $19 trillion, suggests market research firm Pretty Little Head.
- In recent years Britain’s over 50s have held almost 70% of all household wealth.
- In an article in The Times last year, Jenni Russell quoted a report commissioned by Age UK that found “fewer than a fifth of over 50s had been given workplace training in the last month, but almost two-fifths of 35–49-year-olds had.”
[2] https://www.weforum.org/agenda/2015/09/why-its-important-to-tackle-ageism-in-start-ups/ [2015]
- Ultimately, one should strive for “trans-directional” relationships, whereby people can reach profound empathy when seeing the young in the old and the old in the young.
- In the renowned “Technology Entrepreneurship” MOOC in NovoEd, the over 40’s tended to dominate the start-up projects which were selected to pitch to real investors. I was part of a MITx Bootcamp for entrepreneurship education where a team with the highest average age won, thanks in part to the inter-generational composition of that team.
- At Y Combinator, a startup seed fund based in Mountain View, the average age of its 112 company founders in its 2013 class of entrepreneurs was 28, up from roughly 26 two years earlier.
- And at the Founders Institute, a Mountain View-based startup incubator, the average age of its 330 enrolled participants (2013) was 35; it was 29 when Founders Institute began in 2009.
- At TechStars, another incubator that operates across the US, the average age of its current crop of founders in 2013 was around 32, up from about 25 several years ago.
[4] https://techcrunch.com/2011/05/28/peak-age-entrepreneurship/ [2011]
- Older age has shown in the data to correlate with more successful entrepreneurs up to the age of 40, after which it has limited or no impact.
- Women are nearly twice as likely to believe that entrepreneurship in later life is viewed negatively by society — 24% of women, compared to 14% of men.
- There is an estimated $1.68 trillion investment gap between female and male led startups. Men, on average, are almost twice as likely to be self-employed, while female entrepreneurs are 63% less likely to receive funding than male entrepreneurs.
[6] https://www.guidantfinancial.com/learning-center/infographics/2019-small-business-trends/ [2019]
- 60% of people who start small businesses are between the ages of 40 and 60.
- This is based on the 2019 small business study by Guidant Financial which surveyed more than 2,700 small entrepreneurships in the US. Interestingly enough, 4% of entrepreneurs were actually over 70 years of age. Clearly, it’s never too late to start your own business.
- The fastest-growing segment of start-up companies are women-owned businesses, with businesses owned by black women have a larger share of black-owned businesses than white women have in white-owned businesses (Inman, 2016).
[8] https://www.nextavenue.org/most-successful-entrepreneurs-older/ [2018]
- The paper’s authors said: “Many observers, and many investors, believe that young people are especially likely to produce the most successful new firms. We use administrative data at the U.S. Census Bureau to study the ages of founders of growth-oriented start-ups in the past decade and find no evidence to suggest that founders in their 20s are especially likely to succeed. Rather, all evidence points to founders being especially successful when starting businesses in middle age or beyond, while young founders appear disadvantaged.” in reference to [9]
- For example, while 32 percent of startup owners under 45 said obtaining the necessary licenses to operate their business was difficult, only 23 percent of older ones did. And 21 percent of those under 45 said applying for loans was difficult, but a mere 14 percent of those 45+ did. In reference to The Kauffman Foundation 2018 State of Entrepreneurship survey
- The number of businesses owned by women in the U.S. has more than doubled in 20 years, and women are starting an average of 849 new businesses per day. There are now 11.6 million women-owned businesses, employing nearly 9 million and generating more than $1.7 trillion in revenue.
[9] MIT Sloan Article [2018]
- The mean founder age for the 1 in 1,000 fastest growing new ventures is 45
- Depending on the definition, mean founder age now ranges from 41.9 to 44.6, with founders in high-tech sectors (43.2) and founder of patenting firms (44.6) appearing somewhat older on average than founders in the U.S. overall.
- We see that the computing-oriented ventures as well as wireless telecom ventures appear to have the youngest founders. Yet even here the mean founder ages range from 38.5 to 40.8
- Yet there is no sector, including in computing, where the mean founder ages are below 38
- A founder at age 50 is approximately twice as likely to experience a successful exit compared to a founder at age 30
[10] https://www.nextavenue.org/sidepreneurship-trend-for-women/ [2019]
- The 2019 State of Women-Owned Business Report said the growth rate of sidepreneurship (<20 hrs per week) for women between 2014 and 2019 has been far greater than for all women-owned businesses: 39% vs. 21%.
- Reason could be that it’s low risk. They can work for themselves and make more $. Whatever the reason, it’s good for the economy when entrepreneurship is more accessible to older women.
- growth for all adult sidepreneurs = (32%).
- minority women-owned businesses growth = (65%).
- growth rate among African American women — triple that for all businesses
- Between 2014 and 2019, the number of women-owned businesses climbed 21%, to nearly 13 million; by contrast, the number of U.S. businesses overall increased just 9%. Firms owned by women of color grew even more, by 43%.
