Silicon Valley may favor the young, but technology's romantic idea of the youthful, enterprising entrepreneur may be off by about 20 years.
A new study found the average founder of the fastest growing tech startups was about 45-years-old — and 50-year-old entrepreneurs were about twice as likely to have a runaway business success as their 30-year-old counterparts.The findings have implications for both older and younger entrepreneurs, who may gauge future success on industry biases, as well as for venture capitalists, whose propensity to invest younger may be having adverse affects on their returns.
"Young people are just smarter,” Facebook CEO Mark Zuckerberg once said.
Zuckerberg's bias is not uncommon in Silicon Valley. Young people are digital natives, thought to be cognitively sharper, less distracted by family and less beholden to current industry paradigms, according to the study. And famous instances of wildly successful 20-somethings, like Bill Gates, Steve Jobs and Zuckerberg, who never shies from bragging about founding Facebook in his Harvard dorm room, only reinforce that bias.
"People like unusual stories, and the fact that a very young person could be very successful is not the norm, as we show in our analysis, and therefore, perhaps, attracts outsized attention," said Benjamin Jones, Northwestern University professor and researcher on the study.
The new study by Jones, Javier Miranda of the U.S. Census Bureau and MIT's Pierre Azoulay and J. Daniel Kim, looked at an expansive dataset and found the most successful entrepreneurs are middle-aged.
Take David Duffield, who founded Workday in 2005 at the ripe age of 65. Workday went public in 2012 and today has a $26.47 billion market cap. Whereas younger founders may benefit from their creative thinking and lesser degree of entrenchment in an industry, the exact opposite qualities work to the benefit of their older counterparts.
Older entrepreneurs have had years to build their business, leadership, and problem-solving skills, as well as to accumulate the social and financial capital needed to get a startup off the ground. Jones also points out that even companies like Apple and Microsoft that were founded by exceptional young entrepreneurs didn't achieve their most rapid market capitalization growth until later, when their founders were older. The iPhone entered the market when Steve Jobs was in his 50s.
"Some people have higher or lower batting averages throughout their lives, but whoever you are, your probability of hitting it out of the park is going to be going up as you head toward middle age," Jones said.
Despite these findings, venture capitalists tend to disproportionately invest in younger entrepreneurs. This could be due to misconceptions about the success of younger founders, or it may have more to do with investors wanting a greater stake in the companies in which they invest. Whatever the reasoning, Jones said, investors are reducing the probability of a successful investment by consistently favoring younger entrepreneurs, and could be subtly influencing the direction of growth.
"If you think people innovate more successfully around products they deeply understand or know, young people are much more likely to see ideas that are consumer facing, and consumer facing for their own generation," Jones said. "What we might not be doing is getting the kind of innovations that someone with depth in a field has."
As for the research, Jones says he doesn't know if it will change Silicon Valley's biases, but he does hope it encourages older entrepreneurs who may be experiencing doubt because of their ages. "It could help unlock more innovative potential from the many many people in the economy that are middle aged and beyond," Jones said.