The image of startup founders in Silicon Valley (and other entrepreneurial hubs) as twenty-somethings armed with business plans, millions in venture funding, and a closet full of t-shirts has practically attained meme-like status.
The roster of unicorns and fast-growing firms led by youthful founders certainly feeds the belief in a direct correlation between youth and success as an entrepreneur.
But a new study by scholars at Northwestern, MIT, and the US Census Bureau overturns this notion. Based on their analysis of an expansive dataset, they found that, contrary to popular belief, the best entrepreneurs tend to be middle-aged.
According to their research, among the fastest growing new tech companies, the average founder was 45 at the time of founding. Furthermore, 50-year-old entrepreneurs are nearly twice as likely to have a “runaway success” as a 30-year-old.
By combining tax-filing data, US Census information, and other federal datasets, the researchers identified the fastest-growing 0.1 percent of companies -- those firms whose sales or number of employees increased the most in its first five years. Among this exclusive subset, the average founder age was 45.0.
The researchers also looked at firms that had successfully “exited” the market, either by getting acquired by another company or going public in an IPO. The average founder for that group was even older, at 46.7.
“While these results clearly indicate that middle-aged founders dominate among the highest-growth firms, it is also true that forty-somethings are much more likely to try to start a new company than twenty-somethings,” says an article in Kellogg Insight from the Kellogg School of Management.
To further test their results, the researchers looked at the probability of success among those who had founded a firm. They determined what they call “batting averages” -- the odds that founders of different ages make it into the top 0.1 percentile.
"The data revealed that a founder who is 50 years old is 1.8 times more likely to start a top company than a 30-year-old founder, and that a 20-year-old founder has the worst chance of all," reports Kellogg Insight.
“The longer you’ve been around, the better your odds,” says Benjamin Jones, a professor of strategy at Northwestern’s Kellogg School of Management and one of the co-authors of the research.
“These findings have serious implications -- not only for aspiring entrepreneurs, who might be over- or underestimating their odds of success based on their age, but for society at large,” reports Kellogg Insight. “After all, if venture capitalists are reluctant to bet on older entrepreneurs, then many potentially successful startups may never get off the ground.”
“If we’re not allocating dollars to the right people in entrepreneurship, we may be losing, in terms of the advances that best raise socioeconomic prosperity,” Jones says. “It’s actually a fairly high-stakes question.”