Bill Gates, Steve Jobs, and Mark Zuckerberg are three of the biggest role models for entrepreneurs. They are all famous for starting their companies in their early 20s and in many ways set the benchmark for what a successful entrepreneur looks like.
And yet, there is reason to believe that we’d be better off investing in older entrepreneurs. They are actually far more successful than younger ones, according to new research, which analysed the age of all business founders in the US in recent years and how well they did.
Young entrepreneurs may have some advantages. They are often native users of the most modern technology, are more flexible and do not have family commitments (and therefore inclined to take more risks). But a recent publication in the National Bureau of Economic Research shows that middle-aged entrepreneurs are far more successful than younger ones.
The study reveals that entrepreneurs who are under 25 tend to perform poorly. The probability of success increases once people reach 25, then performance seems steady among people aged between 25 and 35. The success probability then starts to jump after the age of 35, jumping again at the age of 46 and remaining stead toward the age of 60.
Respect your elders
Success as an entrepreneur depends on your skill set, which includes education, experience, knowledge and skills. Economists call this human capital. It’s essential for exploring hidden opportunities and exploiting existing ones.
While young people may have an edge creatively and technologically, their lack of industry experience, as well as financial security, will also effect their business success. We gain knowledge and skills through both education and working experience. And, perhaps unsurprisingly, the research found that entrepreneurs with longer industry experience – particularly when it was industry specific – have higher success rates than those who have shorter experience.
This has serious implications for the way we teach business in higher education. The idea of the young entrepreneur has fuelled a huge number of courses in business schools, which are a very popular choice for young people.
In the UK alone, there are 64 entrepreneurship bachelor degrees and 106 entrepreneurship masters degrees. Universities invest in entrepreneurship support to students such as co-working spaces and entrepreneurship hubs, as well as helping students gain graduate entrepreneur visas.
But, the clear evidence that older, more experienced people make for better entrepreneurs suggests that MBA graduates without the requisite work experience should not be encouraged to start their own business right away. A lot of entrepreneurship education promises students that they will be ready to launch their own start-up as soon as they graduate. As a result, universities overemphasise start-ups among graduates as a key success indicator of their education programme.
Good things come to those who wait
Sure, there is potential for students to start something of their own after their graduation. But the question remains: will they become successful entrepreneurs? Would it be better to encourage them to start a career first, and consider entrepreneurship at a later stage, where the chance of success will be double?
Unlike science or engineering education where students are trained to work as scientists or engineers after they graduate, entrepreneurship graduate students may need to change their mindset that they have to start their own business right away. This is often accompanied by thinking that if they don’t, it will be too late or may be seen as a failure to launch their entrepreneurial career. Yet, although Jobs started his business at 21, arguably the peak of his success came with the iPhone, which was released when he was 52.
Entrepreneurial graduates have a lot to offer existing businesses, including bigger corporations. While some traits, such as risk taking may not align well with corporate culture, a lot of companies are in need of employees who will innovate and take their own initiative. Companies such as LinkedIn, Apple and Microsoft are constantly trying to encourage their employees to take time away from their regular duties to work on new, innovative ideas.
Business schools should also think about shifting their education toward more middle-aged, experienced candidates. The same goes for the numerous start-up grants and programmes, which target young people, often giving funding without a need for collateral. Older entrepreneurs, meanwhile, have to resort to using their savings or home as collateral – despite the fact they are clearly a much better potential return on investment.