Grey vs Green: Who makes better entrepreneurs?
Ea rl i er t his month, Yahoo signed a reported $30m deal with British-Australian computer pr o g r a mmer Nic k D’Aloisio to purchase his latest coveted creation, a news-aggregating mobile app called Summly. The momentous sale is not an entirely unprecedented undertaking given the nature of the tech industry today, but then you need to take into consideration t hat, at 17-years- old, D’Aloisio is now the youngest employee in the tech giant’s recent history, not to mention the youngest person ever to receive a round of venture funding from an organisation of this magnitude.
The link between youth and entrepreneurship has always been the hallmark of the digital age. Larry Page and Sergey Brin were both 25-year-old Stanford grads when they founded Google in 1998, while Steve Jobs, Bill Gates, Richard Branson and Mark Zuckerberg all launched their famous empires before t he age of 23. At Y- Combinator, a prominent US seed accelerator t hat helped kickstart AirBnB and Reddit, the average applicant is around 26, an age at which most Silicon Valley denizens would consider employees to be be over the hill, according to academic Vivek Wadhwa: “Silicon Valley VCs [venture capitalists] talk openly about their bias toward young entrepreneurs,” says the Duke University researcher and former senior research associate at Harvard. “Some argue that Internet entre- preneurs peak at the age of 25.”
The endless debate over age – and ageism – in the field of entrepreneurship has raged on for years, and for the most part the consensus is that the nothingto-lose edge that comes with being footloose and fancy-free makes for the ideal modern entrepreneurial candidate. It’s a belief echoed by governments across the world, which are consistently marshalling entrepreneurial initiatives as a key avenues for job growth and youth employment. Slate ’s Annie Lowrie explains that the United States actually “relies on young businesses – not small businesses, as previously thought – to create new jobs. Therefore, for the good of the economy, the United States should encourage smart, sav v y kids to work for themselves rather than to join establ i shed businesses.”
“Part of the appeal of the not i on of ‘young entrepreneurship’ is that it is counterintuitive,” writes Rob Salkowitz of Fast Company. “It f lies in the face of the very sensible idea that, in business, experience and seniority are key.” Indeed, there is always a great case to be made for young entrepreneurs: The favourable combination of minimal financial obligation, unfettered idealism, higher energy levels, fewer personal hindrances and the added benefit of generally having less to lose often makes the young a more exciting prospect than their older and more cautious counterparts.
Yet in the past four years the argument that entrepreneurship is predominantly a t wenty-something sport has been contested by a variety of revea l i ng st udies. I n 2009, Vivek Wadhwa led a st udy on behalf of t he Kauffman Foundation in which he a nd his t eam analysed the c a r e er s of 549 company founde r s a c r os s 1 2 high-growth industries. Surpr i s i ngly, t he team found the average age of successful entrepreneurs to be around 40, and that the majority had approximate-
ly six to ten years’ worth of experience to their names. A study conducted by The Founder Institute in the US, in which 1 000 entrepreneurs and 350 graduates were monitored, heeded similar results: Entrepreneurial success was more evident in those closing in on the 40-year age bracket, and that “strong f luid intelligence, high openness, and moderate agreeableness” proved to be the most dominant characteristics of high-achievers.
“The young may have good ideas, but there is no substitute for experience,” Wadhwa wrote in The Washing Post last year. “You aren’t born with the management, marketing and f inance skills necessar y to t urn ideas i nto successful ventures. VCs are doing themselves a big disservice by ignoring the real innovators: old, experienced people.”
Even observations in South Africa echo the same sentiments. According to the 2011 Global Entrepreneurship Monitor report (GEM), the l argest total entrepreneurship activity (TEA) contribution in SA was found in the 35-44 age bracket, whereas the 25-34 age group showed a significant 12% decrease from the previous year. Although entrepreneurship in general is a sensitive issue in modern SA (we have the f ifth lowest entrepreneurial intent amongst all efficiency-driven economies in the world), it is our youth entrepreneurship that suffers most. Last year the Government allegedly spent over R30m on a youth entrepreneurship initiative called the Y-Age Project, which failed dismally because, according to The Times, “the mistake made by the Gauteng Department of Economic Development was assuming that everyone is able to take risks and become an entrepreneur.”
The proof isn’t just in the statistics. “I was speaking to several entrepreneurs and VCs at an event recently, and we all made the same observation that older entrepreneurs are ever y where t hese days”, says Jess Green, Perk founder and head of investor relations at the Silicon Cape Initiative. “I think we’re seeing a change because investors are realising that young guns lack world experience.”
At AngelHub, a Cape Town-based angel investment group, the average age of those submitting start-up proposals is around 28, although the deals that usually go through typically “involve older and more experienced ” i ndividuals, according to the company’s investment expert, Keet van Zyl. Across the pond at venture capital fund Invenfin, it ’s the same story: “The best-quality business proposals that we tend to get are from people who have, on average, ten years’ business experience behind them,” says head of business development, Alexandra Fraser. “And this isn’t just in one f ield, we’re seeing it across the board.”
Indeed, some of the most successful startup acquisitions in South Africa’s recent history have involved older entrepreneurs. In 2011, Hannes van Rensburg (54) sold his mobile banking start-up Fundamo to Visa for a reported $110m. Before launching the mobile f inancial services provider in 2000, Van Rensburg was involved in one or two start-ups, but for the most part held various executive positions in large f inance corporations.
Earlier this year, Old Mutual clamoured to get its hands on 22seven, the personal f inance management start-up founded not by young hotshot varsity grads, but by industry veteran Christo Davel, who helped introduce the concept of Internet banking over a decade ago with his f irst online banking vent ure 20t wenty. Old Mutual bought 22seven for an undisclosed amount in January 2013.
So why don’t more experienced entrepreneurs get as much love in the media?
Much of it has to do with the fact that younger people play, and excel in, highlyvisible and highly-accessible industries, which is why Internet start-ups are teaming with twenty and thirty-somethings, and why Silicon Valley is often on the hunt for young blood.
“It all depends on what industry you’re in,” notes Fraser. “Silicon Valley is very tech-orientated, and the tech industry is notoriously fast- paced. It’s also an extremely accessible and low-cost place to build up your skills if you’re young, so there is a lower barrier to entry compared to, say, the f ield of science, which often requires years of study and huge grants.”
The advances of the Internet have accelerated the process of building real life experience far beyond what it was 15 years ago: Those in their late teens and early t wenties can now access online resources and tap into networks on social media that can offset many years’ traditional study, work experience and face-to-face relationship building. Another misleading aspect of the Internet start-up craze is that often, young entrepreneurs are getting attention for developing trendy new web apps and one-off features, rather than sustainable companies. “It’s very easy to build a feat ure and call yourself a CEO,” says Wadhwa. “It’s much harder to actually grow a company.”
What most experts do agree on is that, while older entrepreneurs enjoy significantly better odds of success due to a solid experience and track record, it is always a good idea to test your entrepreneurial skills earlier on in your career. “Earlier is often better because of your lower ‘ fixed cost’ of living, says Van Zyl. “You don’t need to raise funding to sustain your own lifestyle, and the implications of failure are less severe.”
“Older ent r epreneurs are often plagued by the greying of that ‘anything is possible and ‘I’m going to conquer the world’ mentality,” says tech entrepreneur and angel investor Eric Edelstein. “It’s always good to be equipped with some experience and contacts, so join a startup or tech company for a couple years, and once you’ve seen what it’s all about, then you can decide whether to go off and attempt to do it yourself.”
While the argument for or against younger entrepreneurs remains open in most readers’ books, it is probably best not to underestimate the power of greyhaired entrepreneurs: “Can young guys start and run good companies? Absolutely,” says Wadhwa. “But a sheepskin that’s still wet is hardly any indication of superior leadership capabilities. Word to the wise: discount the old guys at your own peril!”