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Tech Start-ups Aren't Just for Wunderkinds
jonniee writes "The results of a new report from the Kauffman Foundation are contrary to what we usually hear about U.S. tech start-ups. Who are these entrepreneurs? Is the report in sync with what you're seeing?"
According to the linked article, "Challenging the perception of American technology entrepreneurs as 20-something wunderkinds launching businesses from college dorm rooms," the new study "reveals most U.S.-born technology and engineering company founders are middle-aged, well-educated, and hold degrees from a wide assortment of universities."
I've spent most of my professional career working for startups. Every one of them has been run by middle-aged entrepreneurs, most of them on their third or fourth attempt to run a successful business. I suspect this is because most investors wouldn't actually touch a startup with a ten foot pole, and most young people lack the personal resources to accumulate any startup cash. We hear about startups run college dropout wunderkinds precisely because they are unusual and therefore newsworthy, which is much the same reason we hear about absurd personal liability lawsuits instead of the millions of humdrum cases no one would bat an eyelash at.
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> I think the biggest reason 20-er's succeed is they do not understand the world wants them to fail (so they don't). Older folks are so much more cynical that they don't step out of the comfort zone.
I'm not sure this holds water. There's a perception that young entrepreneurs are successful, but it's basically a myth, perpetuated because of all the attention that a few (rare) successes bring.
The entire focus of the article is that most startups, and I'd be willing to wager most successful companies, aren't started by young people fresh out of college. They're somewhat unsurprisingly started by people with experience in the industry. But "several well-educated 40-somethings go to a bank, get a business loan, rent an office space, and start a new company by filling a niche they know there's a demand for" just doesn't make for as exciting reading as "two college kids in their dorm room risk it all and run up credit card debt pursuing their dreams".
Really it's just the real world turning out to be less romantic, you might say, than the media sometimes makes it out to be. No real surprise there.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
'Wunderkinds' type founder stories make better story telling than "I started my hosted application business in my garage after putting in my time at the DWP and seeing a need."
Some of the most ridiculous startup fiction that come to mind,
-Michael Dell. Both Mom and Dad Dell had the deeep pockets, knowledge, connections to grow their son's so-called dorm-room start up. Reselling PC's is very capital intensive for those who aren't aware of the business problems.
-Cisco. After the guy who founded cisco stole/borrowed/whatever the IP from the university he worked for, the sexier fiction to cover up the legal gray area and ethical skulduggery was he used was to claim the networking technology was used to talk to his future wife. (or something like that) Meanwhile the guy who -actually- did all the work and seemed to have an ethical bone in his body, retired from the university in relative anonymity.
Along with all of the VC money comes the story tellers to paper over most of ethically challenging details.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
Partly I think it's just that if you're the sort of person who is going to have success as an entrepreneur, it's all about drive, vision and creativity. Those don't tend to increase that much with experience.
Kind of like what they say about Mathematicians - if you've not made a big contribution by your 30s, you probably never will.
On the other hand engineering work is very much improved by experience, and many of the best engineers I know are in their 40s or older.
So the newsworthy startups are often started by college kids. But the majority of startups have a decent if not earth shattering premise, backed up by business and engineering skills built up with experience and run by older people.
Most of the 40-somethings around me are stick-in-the-muds who have no interest in change or taking any risks.
As one of those 40-somethings, it depends on the environment in which they work and the risks they've taken.
In the bigger places I've worked, blame-shifting and doing nothing was the standard operating procedure. It's a very corrosive environment that has little to do with age.
For some do-nothings, they've got a significant other they'd like to stay married to, a family to feed and educate and a mortgage too. That can chill the entrepreneurial spirit.
Most of the responsible adventurers have got a really good pad to fall back on or have a failure path more or less worked out. If they go the VC route, they'll get a sexy start up story made up, or even a young face to act as the "sexy startup" proxies while the old guys actually get the work done. (Though, they usually provide the cash)
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html
No, the biggest reason 20 somethings succeed is that they have less to lose if they fail. Thus, they are more likely to take the risks of losing it all.
"Growing old is inevitable; growing up is optional."
Quote "The entire focus of the article is that most startups, and I'd be willing to wager most successful companies, aren't started by young people fresh out of college. They're somewhat unsurprisingly started by people with experience in the industry...".
I am one of those who did not even get involved seriously in the industry until I was in my mid 30s and never had much use for standard 9 to 5 jobs so have worked as a hired gun most of my career.
This experience has provided a rich return as far as experience, maturity, and (most importantly) contacts that have allowed me to create my own niche that plays to my personal talents and experience. Further, I have never been afraid to take a chance and "risk all" when I believed in the project.
The real determinants on who is more likely to have a successful startup are not really age, rather it is more about the personal traits of the people creating the startup. If you are not prepared to risk it all, you are likely not to succeed...
Coldmoon over Dark water...
Partly I think it's just that if you're the sort of person who is going to have success as an entrepreneur, it's all about drive, vision and creativity. Those don't tend to increase that much with experience.
Kind of like what they say about Mathematicians - if you've not made a big contribution by your 30s, you probably never will.
On the other hand engineering work is very much improved by experience, and many of the best engineers I know are in their 40s or older.
So the newsworthy startups are often started by college kids. But the majority of startups have a decent if not earth shattering premise, backed up by business and engineering skills built up with experience and run by older people.
The biggest problem I've seen with the younger people in charge of startups is that even the rare ones truly gifted with drive, vision, and creativity just don't understand business. So, they may know their engineering, and they may have a good handle on their market, which is what's key, I think, but they sort of expect everything else just to fall into place, and it doesn't. The smart ones are fully aware of these gaps in their experience and value the people who can fill them in. More often than not, the successful companies hooked up with more experienced people early on and together they made it work. Many of the flashy stories about young entrepreneurs' success tend to gloss over the fact that it was a small, but diverse team that made it all happen, not just two hackers with a cool idea.
Fortunatelty, when things do go great, the older C-levels and server architects and such bank so much money, they don't care much who Good Morning America calls a genius.
In any event, I'm not minimizing the contributions of young entrepreneurs, but as many here seem to have realized already, the media does romanticize a bit.
New technologies give little advantage to the experienced, and so the playing field is flat for creativity, fresh perspective, and all that lovely stuff to succeed.
That said, there's a lot more maxed out credit cards than there are Facebooks.
Still, I think the reason that there's a perception of startups being littered with 21 year olds, is that when a 21 year old's startup does something noteworth, a LOT more gets written about it.
A general phenomenon I like to call the "Action News" effect. If something is being reported on, it is an anomaly not the rule. The stuff on Action News doesn't kill your kids, cars and run of the mill accidents kill your kids. Kidnappings by strangers are so rare as to be national news. Etc.
In Capitalist America, bank robs you!
I've only briefly examined the report, but it's already clear that there is a strong selection bias in the results. They're pulling from a database of companies worth $1m+ founded between 1995-2005. There are probably at least four issues with this:
First, it doesn't properly account for businesses that take a long time to mature. it's very possible that a business started in 2003-2005 hasn't broken the $1m+ barrier yet, and these companies aren't examined at all by the survey.
Second, they aren't using the best data for tech companies; it's pretty plausible that many tech companies aren't in the database of companies for having simply failed to be submitted (it's a largeish, largely automated database), or have confusing accounts such that they either aren't directly eligible or aren't. This is a big deal particular to "young people" style tech companies; they're often not traditionally founded or managed, and so are less likely to reply to some external survey.
Third, they are reliant on businesses to respond to their requests for information. Around 40% did this. I suspect this creates a bias towards traditional CEO-style corporate hierarchies - exactly the kind of corporate hierarchy that a Silicon Valley business only 5 years old and started by University graduates is unlikely to have. A business started in a garage is probably unlikely to respond to some cold calling survey pollster.
Finally, and probably most importantly, they have failed to be specific enough about the kind of company that they are trying to measure. I haven't had time to look precisely yet, but other studies of tech business have suffered from the difficultly of including a lot of not-quite-really-if-we're-honest tech companies. I'm talking companies that don't do a lot of R&D, and companies that are generally pretty low tech. This is a pretty serious (and probable) bias considering all the data is drawn from a single, third-party database, because these companies are so unlikely to have the typical "California Startup" DNA that the study is testing for.
Additionally, it would be better if they'd done the survey in a way to examine the near-miss companies that did reasonably well but failed. It would add extra insight because there is an awful lot of luck in the startup business game, especially in tech. This survey would better examine this topic if it was more carefully followed tech startup-specific data.
Sadly, this study doesn't prove a whole lot. The data is too marginal and suffers from the typical issues related to drawing many times derived conclusions; to inherit all the biases of the study below you in the chain. This is a really big deal if the study below you is general in nature compared to your interests.