The surprising facts about age and entrepreneurship
If I asked you to describe a stereotypical entrepreneur, chances are you would fall back on a familiar image: a tech-savvy twenty-something donning a hoodie, revolutionizing the world with a piece of software or new technology.
This prototypical tech founder boldly disrupts established industries from the outside, outmaneuvering older and more conservative business executives at rival firms.
This is the story of Bill Gates at Microsoft, Larry Page and Sergey Brin at Google and Mark Zuckerberg at Facebook among several others.
But this story misleads. It turns out that very few business founders fit this description.
Business owners under age 35 are actually somewhat rare, accounting for only about 6 percent of Alaska’s businesses with employees, according to US Census data. Grey-haired entrepreneurs dwarf the younger sort — just over half of the state’s business owners are 55 or older. Even those over 65 vastly outnumber the under-35 set by three to one. Though these are Alaska numbers, they closely mirror national figures.
So how does starting a business fit into the lifecycle of an individual? Kauffman Foundation research reports that the average age for starting a business is around 40. Another study focusing on the fastest growing venture-backed firms — exactly where you’d expect to find the young Silicon Valley entrepreneur — found the average founder age was even older, 45 years old.
There are good reasons for entrepreneurs to be a little older. By their early 40’s, a person is more likely to have acquired personal savings, which is by far the most common form of startup capital. They have also gained the valuable experience that comes from working for someone else and seeing how organizations function.
Rates of business failure tend to fall as the age of the founder rises, so it seems that experience makes for better entrepreneurs.
Another perspective comes from rates of new entrepreneurship by age, which is unfortunately not available at the state level. The national figures show that the share of individuals aged 20-34 starting a business each year is lower than for other age groups from 35-64 and has actually fallen in the last two decades.
Given that half of Alaska’s business owners are at or approaching retirement age, the low rates of entrepreneurship among the young are worrying. Who will replace them as job creators?
At the Center for Economic Development, we think part of the solution is introducing students to entrepreneurship as a potential career pathway. Our Upstart Internship gives UAA students the opportunity to experience the excitement of working for an innovative startup company here in Alaska.
This gives entrepreneurs access to talent, and students a chance to test the waters of entrepreneurship.
Our Upstart Alpha student accelerator is a signature effort to guide students through the process of launching a business and will strive to compress years of experience into months. Like accelerators nationwide, Upstart Alpha will accept a cohort of entrepreneurs into a structured boot camp to validate their business models with the help of mentors, instructors, and hard work.
These initiatives join others that introduce young people to entrepreneurship. They include the King Career Center’s Entrepreneurship and Enterprise class that gives high schoolers the experience of starting a real business. The Alaska Small Business Development Center’s Lemonade Day is another example, focusing on that ubiquitous symbol of youthful enterprise, the lemonade stand.
Entrepreneurship is never an easy pursuit, but Alaska’s economic future will depend on vibrant businesses that make the most of our human capital. Let’s do our best to make sure smart people with entrepreneurial talent discover their pathway, regardless of age.
As Executive Director, Nolan provides overall leadership for the University of Alaska Center for Economic Development, as well as support for other programs of the UAA Business Enterprise Institute. He is a Certified Economic Developer (CEcD) through the International Economic Development Council, and serves as chair for the Municipality of Anchorage Budget Advisory Commission. Nolan was named to Alaska’s “Top 40 Under 40” in 2015. He holds a Master of Public Administration from the University of Kansas and a Bachelor of Arts, History and Political Science from Gustavus Adolphus College.