Grey vs Green: Who makes bet­ter en­trepreneurs?

Finweek English Edition - - BUSINESS - Kelly Berold kelly­berold@gmail.com

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!”

Nick D’Aloisio

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