HOW TO START UP AFTER 50
Pedego is taking profitable advantage of two converging trends: aging customers looking for an easier bike ride and aging founders who want a second (or third or fourth) act
OVER THE decades he spent in law enforcement, Frank Muscato talked to lots of his fellow cops about starting a business. Escaping into entrepreneurship is a common daydream in the profession, he says, when “the things that happen to you and the things that you see catch up to you.” Still, Muscato never thought he’d actually launch something. So he is both surprised and tickled to find himself, at age 74, the owner of an electric-bicycle store.
In September, Muscato spent $70,000 to open a Bloomington, Indiana, location for the company that makes the bikes, Pedego. On the second day of the annual Pedego dealers meeting in early December, he is among a throng of store owners— almost all in their 50s, 60s, and 70s—touring the company’s blocky, white new headquarters in Fountain Valley, California. It is 8 a.m., and already Muscato has been on the phone to his electrician back in Indiana, discussing upgrades inspired by presentations from other dealers the previous day.
“We’ve got to put new lighting in. I’ve got some new ideas on presenting the bikes on the floor, hanging one in the window,” says Muscato, who wears shorts, tube socks, and his glasses on a cord around his neck. “Last night, I had trouble sleeping, thinking about all the things we could do.”
Pedego, a $15 million company, is the nation’s leading brand of electric bike, according to Navigant Research. (Electric bicycles, which can be powered by a motor or pedaled, are a $15.7 billion global market, which is growing fast.) Primarily a designer and manufacturer, the company, profitable since 2012, relies on independently owned branded stores for 85 percent of its distribution. Currently, it has close to 60 branded stores in the United States. All but a handful were launched by people in their 50s and older, a demographic that—not coincidentally—also makes up Pedego’s primary market.
The public obsesses over tech whiz kids in hoodies. But a more dynamic entrepreneurial species is the silver fox. Among entrepreneurs who start businesses between the ages of 20 and 64, almost a quarter are 55 or older, compared with 15 percent in 1996, according to the Kauffman Foundation. The rate of entrepreneurship has grown faster in this demographic over the past 20 years than in any other. Boomers are living longer, staying healthier, and gaining more experience and education
than any previous generation. A study by Merrill Lynch found that more than seven of 10 pre-retirees want to keep working.
Gallup reports that 80 percent of Boomer startups are built as lifestyle choices meant to supplement retirement income and keep the mind engaged. But some are far more ambitious. Pedego, co-founded in 2008 by Don DiCostanzo and Terry Sherry when both were in their early 50s, is an unusual hybrid. It marries the experience of serial entrepreneurs in their 50s— whose companies have the highest survival rate of any age group, according to Carmen Cotei and Joseph Farhat, finance professors at the University of Hartford and Central Connecticut State University respectively—with the enthusiasm of neophytes. The majority of those driving Pedego’s three-year 154 percent growth are retired or semiretired people starting businesses for the first time. They encountered the bikes as consumers and came to corporate Pedego’s rescue in the early days, when it was struggling for lack of distribution.
Of course, later-in-life entrepreneurship has its drawbacks. Just as DiCostanzo and Sherry have built their bikes to accommodate older bodies, they have also built Pedego to accommodate skill deficits— chiefly in technology and social media—among some of their dealers. And the business model intentionally minimizes risk for a demographic that has more money but also less time to make up losses.
Still, the founders say they never had a second thought about trusting their fortunes to the AARP crowd. Pedego store owners “are more mature and, I think, more rational” than younger business owners, says CEO DiCostanzo, an electric-vehicle zealot who is on his third Tesla. “Think about the decisions you make at 55 compared with when you were 25. They’re probably better decisions.”
DiCostanzo notes that he and Sherry, now in their 60s, are tackling the most ambitious entrepreneurial venture of their lives, one they believe can hit $100 million in five years. “I have more energy now than 20 years ago,” he says. “We don’t think of the dealers as old because we don’t think of ourselves as old.” IN 2006, DICOSTANZO, closing in on 50, lived at the top of a hill. The beach was at the bottom. Biking home from surf and sand, his legs rebelled. So he bought an electric bike online and then seven more from different manufacturers. DiCostanzo liked what they did (helped him up that hill), but he didn’t like the bikes. Mostly for kicks, he opened an electricvehicle store in Newport Beach in 2007.
The store was just a side gig. Back then, DiCostanzo was enjoying new life as an entrepreneur after 25 years working for a manufacturer of automotive chemicals. In 2004, he launched a magazine for the service departments of auto dealers and recruited Sherry—who was feeling restless after a long career in the mortgage industry—as his partner. The two have been best friends since 1975, when they locked horns over the presidency of the Phi Kappa Tau pledge class at Cal State Fullerton.
DiCostanzo and Sherry ran the magazine for a while (they still own it) and then, in 2007, moved on to the next thing: making customization kits for Toyota trucks. The business faltered in the wake of the Great Recession, and the two turned their attention to DiCostanzo’s “hobby” business: electric bikes.
Almost all of DiCostanzo’s customers were Boomers or older, many returning to two wheels for the first time in decades. The spirit was willing, the flesh, perhaps, not so much. Electric bikes acted as psychic training wheels. “A lot
Allan Lat, Rancho Santa Margarita, Calif.
Pam Marini, Danville, Calif.
HEALTH CARE EXECUTIVE
Aaron Maynard, Myrtle Beach, S.C.
COLONEL, U.S. AIR FORCE (RET.)
Frank Muscato, Bloomington, Ind.
Sandy Kinslow, Aurora, Colo.
REAL ESTATE AGENT
THE BEST IS YET TO COME
Pedego co-founder Don DiCostanzo predicts the company will hit $100 million in sales in five years, just as he and his business partner hit the age when most Americans retire.
GEARING UP Terry Sherry, Pedego co-founder, had already had a long career when he and DiCostanzo decided to start launching companies together.