Study Finds That The Average Age Of A Successful Startup Founder Is 45

Study Finds That The Average Age Of A Successful Startup Founder Is 45

Startup Founder average age

They say the most successful entrepreneurs are young. Bill Gates, Steve Jobs, and Mark Zuckerberg were in their early twenties when they launched their world-changing companies. That is true. But do these famous cases reflect a generalizable pattern? VC and media accounts seem to suggest so. A study by the Harvard Business Review debunked the myth of the ‘young entrepreneur’. Do you know what is the average age of a startup founder?

Harvard Business Review team analyzed the age of business founders in the US by leveraging confidential administrative data sets from the US Census Bureau. And, it found that the average age of a startup founder and entrepreneurs at the time they founded their companies is 42.

startup founder
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But the vast majority of these new businesses are likely small businesses with no intentions to grow large. These included dry cleaners and restaurants. To focus on businesses that are closer in spirit to the prototypical high-tech startup, the team used many indicators. For instance, whether the firm had a patent; received VC investment, or operated in an industry that employs a high fraction of STEM workers. It also focused on the location of the firm. In particular, whether it was in an entrepreneurial hub such as Silicon Valley. In general, these finer-grained analyses do not modify the main conclusion. The average age of high-tech founders falls in the early forties.

Debunking the myth of the young entrepreneur

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.

But what about the most successful startups? Is it possible that companies with younger entrepreneurs are particularly successful? Among the top 0.1% of startups based on growth in their first five years, Harvard Business Review found that the founders started their companies, on average, when they were 45 years old. These highest-performing firms were identified as per employment growth. The age finding is similar using firms with the fastest sales growth instead. Founder age is similarly high for those startups that successfully exit through an IPO or acquisition. In other words, when you look at most successful firms, the average founder age goes up, not down. The evidence shows that successful entrepreneurs are usually mature, not young.

average age startup

In part, the dominance of middle-aged founders in starting the highest-growth companies reflects the propensity of middle-aged people to start ventures. Middle-aged people take many more bites at the apple. However, when you look at success rates conditional on actually starting a company, the evidence against youthful entrepreneurial success becomes even sharper. 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. If you were faced with two entrepreneurs and knew nothing about them besides their age, you would do better, on average, betting on the older one.

Why might this be? There are many other factors that may explain the age advantage in entrepreneurship. The team found that work experience plays a critical role. Founder with at least three years of prior work experience in the same industry as their startup were 85% more likely to launch a highly successful startup.

But what about Steve Jobs?

Harvard Business Review also looked at extraordinarily successful firms. It included top 0.1% by growth and the rare outcome of successful acquisition or IPO. One might still wonder if even more extreme outlier firms had young founders. However, take the example of 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 mature.

Steve Jobs and Apple introduced the company’s most profitable innovation, the iPhone when Jobs was 52. Bezos and Amazon have moved far beyond selling books online. 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 yet still see greater success as they age.

Why do VC investors tend to bet on young founders?

In light of this evidence, why do some VCs persist in betting on young founders? We cannot definitively answer this question with the data at our disposal, but we believe that two mechanisms could be at play. First, many VCs may operate under a mistaken belief that youth is the elixir of successful entrepreneurship — in other words, VCs are simply wrong. Though it is tempting to see age bias as the leading explanation for the divergence between our findings and investor behavior, there is a more benign possibility: VCs are not simply looking to identify the firms with the highest growth potential. Rather, they may seek investments that will yield the highest returns, and it is possible that young founders are more financially constrained than more experienced ones, leading them to cede upside to investors at a lower price. In other words, younger innovative entrepreneurs may be a better “deal” for investors than more experienced founders.

average age startup founder

The next step for researchers is to explore what exactly explains the advantage of middle-aged founders. For example, is it due to greater access to financial resources, deeper social networks, or certain forms of experience?

In the meantime, it appears that advancing age is a powerful feature, not a bug, for starting the most successful firms.

Story Credits: This 2018 report was conducted by Harvard Business Review

Also Read: First Pakistani Startup Receives Funding From Gates Foundation!

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