Young entrepreneurs may create a lot of buzz, but it’s their more mature counterparts who represent a sounder business opportunity.

Despite older entrepreneurs having a wealth of experience and brilliant new ideas for business start-ups, they often fall victim to age bias. This is a tendency among venture capitalists to think fresh-faced youths straight out of university are more viable investment prospects.

However, new research proves this stereotype is misleading: it shows that older entrepreneurs at the helm of a start-up have the edge on their younger counterparts.

Age and entrepreneurialism

You don’t have to dig deep to see ageism at play. Consider how you’re more likely to recognise 30-something Facebook chief Mark Zuckerberg than 50-something Netflix chief Reed Hastings.

The unfortunate reality for older entrepreneurs is that this age bias can make it difficult to find investors, source capital and set up business opportunities.

Venture capitalists tend to invest disproportionately in start-ups with younger staff. PayPal co-founder Peter Thiel has even developed a program that provides grants of $100,000 to entrepreneurs as long as they are under 20 years of age and drop out of college to take up the opportunity.

Common misconceptions

Some of the most common misconceptions about older entrepreneurs are that they are not technologically minded, that they lack innovative ideas, they’re shorter on cognitive abilities than younger people, they’re more likely to be distracted by family and more beholden to existing business paradigms.

These stereotypes and others are regularly propagated in the media and business ecosystem. In a 2017 lawsuit claiming age discrimination on the part of Facebook, Zuckerberg is quoted as having said in his 20s that “young people are just smarter”.

Research shows ageism is a big concern for start-up founders. In a survey of US tech start-ups by venture capital firm First Round Capital, 37% of the founders polled said ageism was the biggest investor bias they encountered.

It starts early, the survey found. Those polled indicated it can start as young as 36, but averages out to starting at 46.

This is a concerning finding considering that entrepreneurs between the ages of 55 and 64 years represent the fastest growing category of entrepreneurship in Australia and the US.

The truth about older entrepreneurs

A 2018 research paper by the National Bureau of Economic Research (NBER) in the US not only dispels the myths surrounding older entrepreneurs, it completely turns them on their head. Rather than the stereotype of a 20-something start-up founder, the study found the average start-up founder in the US is 45.  

Then, instead of being less successful than younger entrepreneurs, middle-aged entrepreneurs were found to be significantly more successful. In fact, the study found that a 50-year-old founder was about twice as likely to have created an upper-tail growth firm than a 30-year-old founder. The research also revealed that founders in their 20s were the least likely to have achieved success, as measured by the Financial Times’s FT 1000 High-Growth Companies list.

Experience essential

Various studies have attempted to determine why older entrepreneurs have an advantage over younger ones. Experience is one of the more commonly studied traits and the evidence supports positive correlations between greater business experience and entrepreneurial success.

A study published in The Journal of Business Venturing found that older entrepreneurs with experience in marketing, finance and government contracting were more likely to have larger start-up ventures. However, the same study also found that the positive effects of previous business experience declined after two-to-four years.

What could be more advantageous for older entrepreneurs is the human, social and financial capital that tends to accumulate with age, say the NBER researchers.

As a research associate at Queensland University of Technology, Dr Roxanne Zolin, suggests, it could be the ability of older entrepreneurs to “better capitalise on previous knowledge and experience for faster entrepreneurial learning”.

Whatever the advantage may be, investors are implored to take notice of older entrepreneurs and their start-ups, or risk missing out on a good thing. 

Mercer Financial Advice

Thinking of starting your own start-up? Talk to your local advisor now. Mercer Financial Advice has seven offices across Australia – Melbourne, Glen Waverley, Sydney, Paramatta, Brisbane, Adelaide and Perth.