Khosla, who believes that old entrepreneurs can’t innovate because they keep “falling back on old habits,” said this at the NASSCOM Product Enclave in Bangalore, on Nov. 9.
- Vivek Wadhwa
The case for old entrepreneurs
He isn’t alone in his views.
Khosla and those who think like him are wrong.
The young may have good ideas, but there is no substitute for experience. You aren’t born with the management, marketing and finance skills necessary to turn ideas into successful ventures. This obsession with the young may be why the venture capital system is in such steep decline and underperforms key public market indices, such as the Russell 2000. VCs are doing themselves a big disservice by ignoring the real innovators: old, experienced people.
In 2008, I led a research team in exploring the backgrounds of 652 U.S.-born chief executive officers and heads of product development in 502 successful engineering and technology companies established from 1995 to 2005. These were companies with real revenue -- not just the start-ups founded by the college dropouts that some venture capitalists like to fund. We learned that the average and median age of successful founders was 39. Twice as many founders were older than 50 as were younger than 25. And there were twice as many over 60 as under 20.
In a follow-up project, we looked at the backgrounds of 549 successful entrepreneurs in twelve high-growth industries. The average age of male founders in this group was 40, and the average age of female founders was 41. The majority had two or more kids. Kauffman Foundation director of research, Dane Stangler, built on our findings by analyzing Kauffman Firm Survey data and Kauffman Index of Entrepreneurial Activity—which uses data from the U.S. Census. He found that the average age of U.S. entrepreneurs is actually rising, with the highest rate of entrepreneurial activity shifting to the 55–64 age group.
Our research revealed that successful entrepreneurs typically start companies for three reasons:
— They have ideas for solving real-world problems.
— They want to build wealth before they retire.
— They like the idea of being their own bosses.
The experience entrepreneurs have gained, the contacts they have made, networks they have formed, their ability to recruit good management teams and their education give them their greatest advantage. Young adults fresh out of school don’t have these advantages.
Do people stop being creative as they reach middle age? Ben Franklin certainly didn’t. He invented the lightning rod when he was 44. He discovered electricity at 46. He helped draft the Declaration of Independence at 70, and he invented bifocals after that. Henry Ford introduced the Model T when he was 45. Sam Walton built Walmart in his mid-40s. Ray Kroc built McDonald’s in his early 50s. Some of the most creative people of the century were also not young. Ray Kurzweil published The Singularity Is Near in his 50s; Alfred Hitchcock directed Vertigo when he was 59; Frank Lloyd Wright built his architectural masterpiece, Fallingwater, when he was 68. And let’s not forget the greatest innovator of recent times: Steve Jobs. His most significant innovations—iMac, iTunes, iPod, iPhone, and iPad—came after he was 45.