Investing in startups

At a recent family event, I struck up a conversation with a distant relative about what makes a great founder. The traits foremost in my mind were dedication and industry expertise. Unsatisfied with my reply, my relative pushed for specifics and asked, “What age should a founder be before I provide seed money?”

I didn’t have an answer, and the question left me pondering the relationship between age and start-up success. Does passion and energy trump expertise and business wisdom?

The established view says younger entrepreneurs (under 30) tend to be high-energy contrarians, while mature founders (age 40-plus) bring experience and connections.

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But which, statistically, yielded a better chance at long-term success?

Age ain’t nothing but a number, or is it?

Looking into the matter, I found a 2010 U.S. Small Business Administration study of botched businesses suggesting entrepreneurs below the age of 35 are more likely to fail than older ones.

But to answer my relative’s question, and find a link between age and success, I needed to look at a group of entrepreneurs who founded successful start-ups—whose products have been widely adopted and generate millions in revenue—and see if they tended to be run by younger or more mature people.

I tapped into one of my favourite writers on the subject, Jessica Livingston, whose book and blog Founders @Work provides detailed insights about some of the world’s best-known entrepreneurs. I compared their dates of birth with the dates they founded the companies that made them famous. (The founding dates provide an accurate measure of when the seed capital would have been needed.)

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While not a comprehensive study, the results are interesting. The mean age of a successful founder at the time of start-up was 31 and there were few successful founders over 40, and even fewer over 50. On average, successful founders were neither particularly young (under 30) nor overly mature (over 40).

This is in line with the more rigorous results recently published by Adeo Ressi’s Founder Institute. It tested more than 3,000 participants worldwide and then carefully tracked their progress. Ressi’s team discovered age did in fact correlate with more successful entrepreneurs but their impact peaks at 40, after which age becomes less relevant as a determinant of success.

So what does it all mean?

While youth is not a requirement for success, when it comes to start-ups, investors may want to fund those over age 45 with caution. So, then, what do I tell my relative? Perhaps I will combine what the research says with my own views and advise he back a 30-something entrepreneur, but look for one who’s youthful energy has been tempered by the wisdom of experience.

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Sean Wise is a venture capitalist and seed investor who teaches entrepreneurship and strategy at the Ted Rogers School of Management, Ryerson University.

This article was originally published on capitalmagazine.ca.