Mark Zuckerberg may have been named Time magazine’s Person of the Year and had a critically acclaimed film made about him, but more and more evidence suggests that his youthful success is the exception rather than the rule. According to a recent study published by the Kauffman Foundation, the average founder of a successful start-up in “high-growth” industries was 40 years old, and entrepreneurs over 55 are almost twice as likely to have successful start-ups as those aged 20-34. What drives this “older is wiser” entrepreneurship trend? Some might argue that this is a product of a transitioning economy with few opportunities for older workers who have been laid off or need supplemental income. Yet, long-term research disputes this assertion: “In every single year from 1996-2007, Americans between the ages of 55 and 64 had a higher rate of entrepreneurial activity than those aged 20-34,” says Dana Stangler, a research manager at Kauffman. Better explanations might be education and business savvy – older entrepreneurs with terminal Ivy-League degrees had higher average sales and employment ($6.7 million and 55 workers) than tech founders with high school terminal degrees ($2.2 million and 18 workers). Further, older entrepreneurs often have experience – both in starting previous businesses (serial entrepreneurs) and in working within their new venture’s industry. Finally, on a practical level, older entrepreneurs have assets and credit histories that help them gain initial access to credit and/or capital. Interestingly, older entrepreneurs have more to lose than their younger counterparts. Since many entrepreneurs personally guarantee loans and invest personal wealth in their own ventures, older entrepreneurs with significant savings have assets that business creditors can target. This puts an increased premium on separating business and personal assets, observing corporate formalities, and maintaining proper business liability insurance to limit founder liability. This post was authored by Caitlin Vaughn.
February 25, 2011
Caitlin Vaughn