The case for old entrepreneurs

http://wadhwa.com/2011/12/02/washington-post-the-case-for-old-entrepreneurs/

by mikeleeorg • 15 years ago

82 59 15 years ago

Hah! As someone who is nearing their forties I find this Silicon Value obsession with youth quite interesting. I live in Ireland and I have never even been in the States, so my opinions should be taken with a pinch of salt :)

I know of plenty of successful "older" entrepreneurs here, even in IT. We don't have this cult of the under 25s here as much I think.

Perhaps VCs like under 25s because they are just easier to manipulate? Or is it just another sign of a culture that is worryingly obsession with youth and staying young at any cost?

mikeleeorg3• 15 years ago

An angel investor once shared candidly with me that if he were evaluating two teams competing in the same market, where one was young & inexperienced and the other was old & experienced, he would invest in the younger team.

His explanation was that building a startup is incredibly hard & time-consuming, and a vast majority of teams fail. A younger team would have a lower burn rate, be able to work all hours of the day to get things done (for better or worse), and be more likely to stay with the startup life after several failures.

An older team generally needs more of a salary for financial obligations (especially those with a family, mortgage, etc), wouldn't be able to work as many hours (especially those with a family), and might be able to survive a failure or two, then give up and go back to a FT job somewhere because of their already-established connections.

Whether you have the same mindset or not, this may be the mindset of many investors in Silicon Valley. And perhaps journalists & industry bloggers too, which would explain why the media here tends to emphasize younger cofounders.

jacquesm• 15 years ago

The media emphasizes younger co-founders because it makes for a much better story. Rags to riches before you're 25 sounds so much better than the same before you're 60.

einhverfr8• 15 years ago

The flip side to this is that older teams, more aware of their limits, may play a more conservative game, funding more carefully from operations, and the like. This means also less of a need for VC funding, and it means less of an opportunity for VC's to leverage successive rounds to dilute founder's shares.

In other words, lower risk, lower rewards.

einhverfr8• 15 years ago

One thing that's really bothered me about this narrative. My business has tried lots and lots of things. Most fail. A few succeed. Some fail because of issues getting the right people together. Some fail because the ideas aren't as viable as I thought. Some fail because I don't have the ability to position them. However, the path to success really is littered with failures. This can put stress on a marriage, etc. However, it is important for everyone in a business of any sort to recognize that there will be way more failures than successes.

Also I think every new business fails before it succeeds.

I would expect those with more life experience to get this lesson more often than the young people who have not yet experienced the intimate relationship between success and failure. If I were an angel investor and some day I might be able to be, I'd look much more at how founders saw failures than what their ages were.

danbmil993• 15 years ago

this.

lelele• 15 years ago

> An angel investor once shared candidly...

Candidly? Really?

I agree with the previous poster that youngsters are naive and much easier to be taken advantage of. I've been exploited in my younger years in ways which would not work anymore with my current me.

Moreover, older entrepreneurs are more likely to start sustainable businesses, that is businesses which will steadfastly grow, whilst VC may be more interested in business which will grow exponentially. You may end up wasting your younger years, which are irreplaceable, they have wasted just their money, of which they have plenty.

Youngsters throw themselves at entrepreneurship, and by the sheer law of great numbers, some of them will succeed. Seriously, how may business started by the young make it big?

dicroce• 15 years ago

VC's are looking for home runs, not base hits. Younger people are more OK with big risk... The exception, of course, is older guys who have already sold a company (and thus, probably aren't looking for a base hit)...

Czarnian4• 15 years ago

That is a horrible way to play baseball.

minimax• 15 years ago

It's just a bad analogy. For starters, power hitters tend to get better with age (up to a point).

nanijoe• 15 years ago

But VCs are not playing baseball. In baseball, a home run can get you no more than 4 runs, whereas the home runs the VCs are playing for can get you many many multiples of what would be considered a single.

greenyoda2• 15 years ago

VCs desperately need the home runs because they throw money at so many losing ventures. If they were better at picking successful businesses, they wouldn't have to rely so much on the home runs to make a profit.

Czarnian4• 15 years ago

What they're looking for is people with under-developed bullsh*t detectors.

I suspect the reason IT applications are sometimes being pioneered by younger people has more to do with immersion in the technology from an early age that can provide novel insights into how people will use technology. But as the years roll on and the low-hanging fruit (like facebook) is picked clean, the young folks are going to find it increasingly harder to uncover problems to be solved.

Vivtek• 15 years ago

There will never be a shortage of problems to be solved.

Czarnian4• 15 years ago

Never said there would be. Just saying that the problems are going to be increasingly obscure and harder to solve.

greenyoda2• 15 years ago

I think that picking all of your business ideas out of a group that's immersed in a particular technology and culture also has a downside: lack of diversification. There may still be lots of money to be made, for example, in innovative software for corporate IT departments, but nobody in their 20s is likely to be interested in that. From an investment point of view, an undiversified portfolio is risky -- if all of a VC's investments are in social networking or iPhone apps, then a decline in that market segment could wipe them out.

Also, a large amount of the low-hanging fruit is concentrated in narrow areas, like web-based businesses. Social networking web sites are something that you don't need a lot of experience or education or capital to be able to build -- some smart guy who has been programming since his teens can drop out of college and do it. But you're less likely to hear about some guy who just dropped out of college starting a successful bio-tech company or figuring out how to design a more efficient car, since you're not likely to be able to pick up too much experience in those fields on your own. This leads to a further lack of diversification the VC world. Not to mention that if everybody is pushing into the same crowded market, they'll all be competing against each other. All this may help explain why, as the article points out, VCs are underperforming the Russell 2000 (a very broad-based stock market index).

johnrob• 15 years ago

One phrase I associate with startups is "dumb enough to try". Startups usually have to break rules, and the most reliable way to pull that off is to not know you're breaking rules (i.e. youth).

It's not a death sentence for older entrepreneurs, though. A simple countermeasure is to live/act/feel young.

rdl• 15 years ago

Presumably a great strategy is to work for your 20s in a certain field (say, IT/web), and then in your 30s spend a year or two working in something tangential (say, trucking/logistics), and then do a startup which combines the two. Then you're sort of a newcomer to one, but with a lot of experience to bring to bear, as well as general workplace skills.

ojbyrne• 15 years ago

I know that I've seen the opposite behavior. When someone is young and unknowledgeable, they often are easily intimidated by "experts" and what the experts say is the correct way to do things.

If you're experienced, you know the conventional wisdom well enough that you can set it aside when you determine it isn't appropriate.

jasonjackson• 15 years ago

This article sets up a straw-man argument by claiming the reason why VCs invest in young people and not older people is because creativity diminishes in older age. I think their refutation of this idea is well done with good evidence, but who's to say that's the reason VCs invest in young people?

I think one of the main skills that young people bring is relentless execution and incredible thirst for learning. Especially when you pair these skills with the investment team who bring tons of experience, it seems to be a winning combination for the 100x ROIs.

jpdoctor2• 15 years ago

> “People under 35 are the people who make change happen,” said venture capitalist Vinod Khosla, “People over 45 basically die in terms of new ideas.”

The real problem for Vinod: People over 45 are much savvier when it comes to term sheets. They already have financing scars and have friends with big scars too.

It is much easier to take advantage of someone young who still believes the VC bullshit lines, and those folks tend to be younger.

zackzackzack2• 15 years ago

That was the first thing I thought when I saw this.

I tried starting a business my freshman year with a professor. The entire time my dad, a guy who has failed starting up businesses as many times as he has succeeded, just kept saying "Get the papers signed, get the papers signed, where are the papers, what are the numbers, how do you know he won't screw you over?" It went on for a couple of months until the professor finally cut me out. My dad had seen it coming from the very beginning and tried to tell me, but since I was young and smarter than him and gonna be really awesome early on in my life and and and and I ignored him.

I imagine some VC's are pretty much like the professor multiplied by like 50 million dollars of institutional money. Get the smart naive kids to make them money and then screw them out of the reward ASAP. (Other VC's are, of course, probably really awesome people who hate the reputation they have.)

jpdoctor2• 15 years ago

> but since I was young and smarter than him and gonna be really awesome early on in my life and and and and I ignored him.

I feel your pain... Among my favorite Mark Twain quotes:

"When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years."

Edit: Damn you Czarnian. http://www.snopes.com/quotes/twain.asp

OK, I will henceforth attribute it to Abraham Lincoln.

femto• 15 years ago

Can anyone comment on the rates of use of bootstrapping and VC, between old and young entrepreneurs?

My gut feeling is that older people are more likely to have the savings and connections to bootstrap a company, and so route around any bias from VCs. Is this borne out in reality? Data anyone?

_delirium3• 15 years ago

Just in terms of practicalities, isn't the health-insurance thing a much bigger issue for older would-be entrepreneurs? A healthy under-35-year-old can buy (sort-of) reasonably priced non-group health insurance, but I wouldn't want to be looking for it as a 50-year-old, especially with any sort of non-crystal-clear medical history.

jaylevitt2• 15 years ago

Here in MA we're running the 0.5 beta of health care reform, and the absolute best PPO refer-yourself-anywhere no-claim-denied coverage was $350/mo in 2010. There were high-deductible HMOs for a third that.

It's actually more of an issue for me now, working for someone else's startup, since I'm eligible for group coverage at work and therefore no longer eligible for the great individual coverage plans.

danbmil993• 15 years ago

It would be interesting to hear more about how the MA plan is or isn't working. It's been such a political hot potato.

blurry• 15 years ago

As a counter-practicality, a 30+ year old is more likely to be legally attached to someone with health insurance.

daave• 15 years ago

This is only a major issue if you are in the US. Here in Australia, as well as in Canada & most of Western Europe, universal health care is a lot closer to reality.

Perhaps that's part of the reason why more than half the people at Sydney's weekly meetup group for startups (Silicon Beach) seem to be well over 30.

anamax2• 15 years ago

> Here in Australia, as well as in Canada & most of Western Europe, universal health care is a lot closer to reality.

The US has universal healthcare. Americans either don't know about it or don't like it.

And no, I'm not talking about the emergency room. Even folks well over the poverty line are eligible for medicaid, (In fact most of the so-called "uninsured" are eligible for medicaid and are signed up as soon as they actually need care.) There are free clinics almost everywhere, and county-level care is free. Most people don't know about the latter two.

Yes, folks who get chronically sick have economic problems - not being able to work does that so healthcare isn't the solution.

ww520• 15 years ago

Older people tend to have better financial cushion. They are more likely be be able to say no to bullshit terms from VC. Younger people have less choices to refuse unfair terms from VC. Yeah, VC like younger bright-eyes entrepreneurs.

bond• 15 years ago

I'm 39 and I still have lots of ideas floating around. Even at this age I still can do long hours and keep pressing if needed. The only problem is to find a partner who can have the same vision, keep focus and put the necessary work for things to get done. My experience with younger people is that some of those guys loose focus or interest pretty quickly and it's hard to keep them motivated if we hit a roadblock or something gets on the way. Seems they're good for a short term work but bad for getting to see the whole picture, which involves a bit more experience/patience...

I bet there's a lot of younger guys willing to take risks and have what it takes to make it, but so are the guys on their 30s and 40s...

einhverfr8• 15 years ago

I would agree. In fact, I have a huge amount of ideas floating around too, and have been running my own business for some time (and now looking at finally dramatically expanding it).

I am 36, and figure I will never have a shortage of ideas. It's finding the time and people to make sure I can implement them which is hard.

tomlin• 15 years ago

Young entrepreneurs like this narrative because it gives them a sense of possible success over actually experienced individuals.

"Old" entrepreneurs (apparently, older than 25 years old), will find this stance unsettling, for a few reasons. One reason that stands out for me: What if I was under 25 when I started, but now "old" and still successfully running the same company?

The problem with this narrative is that it never bothers to ask what happens if you don't dump your company at valuation and leave rich, enjoying the high life.

Young entrepreneurs may see this outcome as more probable, "older" ones have passed this fantasy and are happy to go further than a "cut and run" approach.

Possibly two different conversations, but I don't really understand the mentality of building something great, getting a valuation and hoping to bail out to supposed utopia. How can you call yourself a passionate entrepreneur if your game plan is to run your startup like a lottery winning?

6ren• 15 years ago

In general, you get better with experience; but in computing, it is possible for youth to succeed. We pay attention to this because it is striking, not because it is generally true.

It does indicate something different about computing that offsets the benefits of expertise - the obvious factor is that the periodic revolutions in computing technology largely neutralize past expertise, putting old and young on a more equal footing than is usually the case. Some expertise carries over to the next revolution; some does not; and some is actively detrimental.

I like the example of postscript, the first product of Adobe, developed by two guys in their 40's. Of course, Microsoft, Apple, Google and Facebook were founded by young guys, so it does seem as if past expertise is not just neutralized but actively detrimental, at least for the technology revolution itself.

over40guy4• 15 years ago

It's deplorable that people like PG insist on age as a criteria for the YC application :-(

danbmil993• 15 years ago

you missed the memo -- no age limit: http://www.quora.com/Is-there-an-age-limit-to-get-funding-fr...

johnohara• 15 years ago

Lots of cross-currents in this article.

The premise focuses on "internet founders" which invariably celebrates software development over hardware development.

Okay. But the truth is, an enormous amount of innovation continues on the hardware side, and those development teams and founders are not generally under 25.

Heck, if MSL Curiosity suddenly sputters on Mars it will probably be due to a gray hair making contact somewhere.

trotsky• 15 years ago

Much easier to bully your way into a shot caller role as a VC if your portfolio companies are being run by inexperienced managers. An important part of that is convincing your stars to "spend big" and burn through the cash quickly so you can take larger positions before revenue catches up.

ChuckMcM• 15 years ago

I find this an interesting article in light of the previous "Oh shit I'm 30 and haven't done anything!" article.

There are young engineers who are too gullible and naive. Many VC's eat these folks for lunch like Hollywood eats wannabe movies stars. I met a guy who said that after his first startup he felt like some young kid who came out to act and settled for a role in an adult film, only to have all the proceeds go to the producer and a reputation sullied by is previous 'history.' His startup had a good exit, for the VCs but was considered 'poorly executed' so he took the heat.

I've met older engineers who were amazing creative forces to be reckoned with in their 'day' but are now stuck in a bitter, curmudgeonly loop rebelling against new technologies because they 'add no value over the old way which still works fine thank you very much.' They get reviews they don't understand, things like 'stuck in your ways, not a team player, argumentative.'

Flashy loud mouth hipsters reflect badly on young entrepreneurs and bitter engineers reflect badly on older engineers. Its not like you can change that though.

All you can do is take an engineer, listen to their ideas and observe their work, and if they are good it will show. If they are past their sell by date, that will show too. And if they are more air than insight, well that comes out pretty quickly too.

One thing I've come to appreciate is how dangerous a generalization can be.

einhverfr8• 15 years ago

Let's look at the reason for the "stuck in your ways" dynamic. There is a saying in the software engineering world, which is "Those who do not learn from UNIX are destined to reinvent it badly." Very often times new approaches come to the fore as fads which then fade away just as quickly. Often times these new approaches have tradeoffs people make because they don't understand the value of the old approaches. Nothing shows this better than something like Ruby on Rails, a technology personally I will never touch more than I have to.

Older engineers who have been around the block tend to assume new technologies are fads until proven otherwise. Many have been burned a few times. Many have learned the hard way that the best engineers are methodologically conservative. And so they get labelled as stuck in their ways not because they are not creative, but rather because they are cautious about new fads. The way to sell to these engineers is to demonstrate understanding of the values of the old methods as well as the benefits of the new approaches.

I will entirely second this however.

pbreit• 15 years ago

You've gotta question the data and analysis when it seems like every big startup was founded by young people. I'm thinking of Amazon, Ebay, PayPal, Yahoo, Google, Groupon, Facebook, Twitter, etc.

safeerm• 15 years ago

I started a company with my dad ( a serial entrepreneur) and a couple other older people. The issue is that even though my dad has bootstrapped us a little till the end of the year, we are approaching the time that we need funding and since all the other co-founders need to support their family it is extremely difficult to manage the company because they don't have the flexibility and luxury.

So they can't take that many risks..

Ex-PraliteMonk• 15 years ago

An ex-ski racer told me the young racers are faster than the older racers not because of athletic ability but because the young ones haven't taken a serious fall yet.

The case for old entrepreneurs

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