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20-year-old entrepreneur is a myth

Staff Writer | April 26, 2018
Forget what you've heard about 22-year-old wunderkinds, sitting in the corner offices of their wildly popular Silicon Valley startups—if you want to find the most successful entrepreneurs, you have to go back a few decades.
20-year-old entrepreneur
Business   The correlation between age and entrepreneurship
According to a working paper from MIT Sloan professor Pierre Azoulay and Ph.D. student Daniel Kim, the average age of entrepreneurs who've started companies and gone on to hire at least one employee, is 42 years old.

"If you knew nothing else, and you had two identical ideas, one proposed by a very young person, one proposed by a middle-aged person, and that's the only thing you have to go on, you would be better off—if you wanted to predict success—betting on a middle-aged person," Azoulay said.

To find out the correlation between age and entrepreneurship, Kim and Azoulay went to the government, specifically, administrative data from the Census Bureau's Longitudinal Business Database, and Schedule K-1 business owners data from the Internal Revenue Service.

The team looked at data around the 2.7 million people who founded businesses between 2007-14 and went on to hire at least one employee. Along with average entrepreneur age, they also learned those new ventures with the highest growth had an average founder age of 45.

The researchers broke out the data into high-tech employment, VC-backed firms, and patenting firms. Across the entire United States, the average founder ages were 43, 42, and 45, respectively for those divisions.

The team looked at ages and startups in areas like California, New York, Massachusetts, and specifically Silicon Valley. The closest any founder age got to "young" was in VC-backed firms, where the average age was 39 in New York.

Similarly, the average founder age for one of the "youngest" technology sectors—in this case wireless telecommunication carriers—was 39 years old.

Kim and Azoulay also found that entrepreneurs were 125 percent more successful if they were previously employed in a particular sector in which they are starting a business.

While that might come as a shock—at least to the 20-somethings looking to start companies and the venture capitalists looking fund them—Kim said for economists, that idea shouldn't be much of a stretch.

"In theory, we know that with age a lot of benefits accumulate," Kim said. "For instance you get a lot of human capital from experience, you also get more financial resources as you age, as well as social connections, all of which will likely boost your odds of success as an entrepreneur."

That's a lesson for both founders and funders, Azoulay said. Right now some ideas that are deserving of funding might not be getting it because their 37-year-old founders are labeled as washed out.

That's not to say there aren't some young people who've created "very robust, very large successful businesses," Azoulay said, but that also doesn't mean they're not going to get better with age. Bill Gates and Jeff Bezos, for example, had more success as 50-year-olds than as a 20-year-olds.