Editor’s note: This guest post is written by Vivek Wadhwa, an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Executive in Residence at Duke University. Last week, he wrote about the need to lift restrictions on H1-B visas. Follow him on Twitter at @vwadhwa.
I’ve got a message for all the Silicon Valley venture capitalists who think a CEO is over the hill after age 40. Old guys rule. And they are far more likely to be the founder of a successful technology company than most of you understand. How do I know this? Research that my team conducted, based on a survey of 549 entrepreneurs in high-growth industries, showed that the average founder of a high-growth company launched his venture at age 40. We also learned that these founders are likely to be married and have two or more kids. They typically have six to ten years of work experience and real-world ideas. They simply got tired of working for others and wanted to rise above their middle-class heritage.
These clearly aren’t the talented 20-somethings who have “great passion” minus the “distractions like families and children…that get in the way of business” which Sequoia Venture’s Michael Moritz raves about (also in this Building 43 video). Or the ”very low paid” young entrepreneurs who, according to Google’s Eric Schmidt, make “all the right things happen” by “working themselves to death”. But these are the companies which Silicon Valley VC’s seem to flock to. And maybe that’s one reason why the failure rates of VC investments are so high.
I have a few theories about why VC’s favor the young. First, VC’s tend to travel in herds. For the last decade, the herd has been all about the Internet. And Internet startups require a lot less sophistication and coordination than, say, a telecom gear startup, an enterprise software startup, or a biotech startup. Everything from the product development processes to sales processes are far more complex for these types of products. I also think that in its Web 2.0 infatuation, Silicon Valley has probably funded a huge number of companies that are really features and not companies. It’s very easy to build a feature and call yourself a CEO. It’s much harder to actually grow a company, something that, according to my research, old guys appear to be better at.
Secondly, and this is speculation but I have some personal experience in this area. Younger CEOs are probably easier to push around. Wet-behind the ears and inexperienced, young CEOs are probably far more likely to sign onerous term sheets out of sheer gratitude for getting funded. Old guys know better than to sign a term-sheet loaded with a nasty double-trigger option acceleration that would consign the founders to indentured servitude for years after a liquidity event.
Lastly, it could be that VC’s share Schmidt’s stated belief that young entrepreneurs don’t like the hassles of running big companies so they’ll let VC’s bring in adult management. I don’t know if this is the reality, but I do know that the old guys are different. A paper by my team, which the Kauffman Foundation will publish this month, finds that only about a quarter of the (old) founders of the venture backed companies we surveyed ranked the advice of their investors as really important. (Nearly all valued the money, though). So VC’s may be just going where they think they’re most wanted or where they can most easily have their way.
Can young guys start and run good companies? Absolutely. Larry and Sergey have done quite well, thank you. But a sheepskin that’s still wet is hardly any indication of superior leadership capabilities. Word to the wise. Discount the old guys at your own peril.
I am a living example of the “old guys rule more than you think” reality. I launched my second company at age 39. I built a solid enterprise software company and was no spring chicken fresh out of Stanford with an MBA or CS degree in tow. And I know I’m not in the minority.
Photo credit: Flickr/Dru Bloomfield.
Thanks for the post as it encourages older fellows like me to keep on working hard on our fledging companies.
I thought 40yo don’t need encouragement, they know what they want to do.
20′s (my age) have a mind full of great ideas but they can’t put them perfectly infront of the users and 40yo’s know how idea will be executed perfectly by users but fewer ideas as compared to youngsters.
Imagine the power after they unite!
+1 Wise
Yep. I think one of the most important qualities that older guys have better than younger is that they are more persistent with their commitments. Combine that with years of accumulated experience and wisdom, you are starting to get it. Anywais, that post was a relief — I still have some time before I’ll be amortized. :P
I would beg to differ — older people don’t have fewer ideas. There’s a big difference between having 100 ideas, trying to put 5 of them into action at once before moving on, and having 100 ideas and focusing on one to completion.
The young, successful entrepreneurs and the older entrepreneurs I’ve met both have the latter in common.
I don’t think any one person has it all. Ultimately, you have to know what your weaknesses are and plug the holes with the right people. The ones that do this best, generally win.
Why is being attractive to VCs considered a definition of success, anyway? They are the money of last resort, unless you need lots of it right away to keep from being outrun by competitors all chasing roughly the same opportunity & business model. It’s well known they’ll try to take over your company, run it in their typical hurry-up style, and screw you for the upside if you let them.
Young people love to work on a grow-fast-or-die business model. It takes lots of energetic people working long hours. They think they’re smashing paradigms and changing the world. If they fail, they’ll just blame it on dumb customers who can’t catch up to their coolness.
Older people take advantages of known holes in the marketplace. You can go a lot slower, including skipping the VC money and growing the company organically. You don’t get rich as fast, but you retain control of your own company and the upside gain remains yours to take home.
I would be very hesitant to make assumptions about older people.
Why would an older person have less ideas? They have more experience to draw from to generate ideas? what they might be better at is filtering through the noise of a busy mind.
I often model “I AM YOU” (just 20 years older/younger) to try and understand a persons capacity younger or older. and think about the changes and experiences that are different.
so for you – why do you think you will have less ideas in 20 years? or be less successful in a startup?
Younger people may have more ideas, but the older person is wiser, and has better ideas. But younger people like Zuckerburg are willing to steal other peoples ideas. Plus, working long hours of overtime isn’t an ingredient in the recipe for success, if you think it is, you’re being taken advantage of.
Foreget the debate – I want the T-shirt! Does anyone know where to buy it from?
Surfing shirt that you see everywhere in Southern California. It is a great picture for the article as the kids tend to ride short boards and the old guys tend to ride long boards.
Hey Professor, I want to thank you too. I knew I was smarter than my son and would do a better job with my startup. I proved it. My company does $17 million in revenue in a short 4 years after founding. Experience is everything.
I also love the t-shirt. Can TechCrunch sell me one that says “Gals Rule” or “Mom’s Rule”??
And by the way, I was 45 when I started my company. My son was 20!! He agrees that experience rocks!!
This is encouraging to the younger folks as well to not get too over-confident. I especially liked this quote “It’s very easy to build a feature and call yourself a CEO. It’s much harder to actually grow a company…”. Very true.
What he is describing is an “inventor”. The problem is that the internet is SO new, and people are inventing so many products (in this case, a “feature”) and they don’t necessarily have the life or business experience to it these features to further development.
You gave yourself as an example, ok is your company at least have of the size of google or maybe facebook??
VC wants to find the next Google no a 50-100 million software company. I am not saying people that are 40 can’t build company eg. Home Depot but there are way fewer trying to build one.
“VC wants to find the next Google”
They have been trying to do that for the last 8 – 10 years. The VC’s who keep saying that are the VC’s that you should run away from. Here is why:
1. Google didn’t become ‘Google’ right away. It took years.
2. When Google was looking for funding, there were a number of search engines at that time. It wasn’t a revolutionary idea that VC ‘s went “Ah ha” or “Wow” over.
3. In fact, interestingly Google was rejected and laughed at by a lot of VC’s including some of the top ones.
So any investor who claims to be looking for the next Google is an inexperience VC who expects companies to be successful right before they seek investments or expect it to be successful within months. Stay away from them. Go with VC’s who can see your potential without comparing you to a giant but will help you build it to become a giant.
I absolutely agree here.
The problems with VCs… is yes they only want to hit huge home runs, grand slams if you will with a massive payback.
Many 40+ business people would have the the experience necessary to know how to run a solid profitable business but not necessarily a billions of dollar evaluation type of business.
So VC greed fuels VC risky bets. Hence a lot of “features” type businesses (not full businesses unto themselves) get the cash on the outside chance they garner enough interest or public attention to create a crazy evaluation.
and…
Most 40 somethings have gained enough wisdom to appreciate life enough to realize you don’t want to kill yourself creating a gazillion dollar company. By that age your realize there are far more important things in life.
Home Depot, huh? For better or worse, the 40yo:s in the industry have basically seen and attended the whole www revolution.
(And geez, the exits were better in the old days :-)
My cofounder and I are both 40, each with years of relevant experience, yet we’ve been told by a couple of VC’s that their target company is two technical guys in their 20′s working on Web 2.0 applications. We’re building an enterprise application based on our experiences in the enterprise. In these cases I think the VC’s deserve what they get when they have preconceived notions (right or wrong) of what a startup should look like.
I’ve had the exact same experience! The the VCs complain that said 20 year old web 2.0ers don’t need enough capital to be interesting to a VC.
So the VC’s criteria is the age of the founders and the buzzword- not the market potential of the application? Yup, they deserve what happens to them.
“And Internet startups require a lot less sophistication and coordination than”
I think that’s a great point. At 24yo, I don’t think I’m the smartest/wisest one on the block, but I think I’m savvy enough to get the job done. I have a good grasp on my industry, and it doesn’t hurt that the space is in flux either!
You just made the argument for the old guy. The fact that you think you have a good grasp on your industry shows that you truely do not. An old guy would be too wise to make such a foolish statement.
You had to do research to draw this conclusion? Anybody who has been working long enough knows it. And anybody who hasn’t won’t listen anyway because they all think they know better – remember that, when we were younger and smarter than everybody else?
I agree with your last article “lift restrictions on H1-B visas”, but not this one.
Instead of say “Old Guys Rule”, you should write “Smart Guys Rule”.
And young people are more likely to succeed in this Industry.
I don’t know what your research is based on, but Internet giants, such as Yahoo, Google, YouTube, Facebook, and Twitter, are all founded by people who are less than 35 years old.
Have you seen 40+ years old people play professional sports leagues? Rarely. Because old people can’t compete with the young.
The Web industry is the least regulated – and most competitive – industry on the earth. If you are not energetic or creative, you will fail.
That’s the nature of our industry, just like professional sports. If you are old, find a job in another industry (unionized workplace preferred), or in government, wherever the seniority counts.
Your sports analogy is one of the most idiotic things I’ve ever read. As if building a business has anything to do with reflexes and physical prowess. It’s much more about strategy and execution, which is more like, say… coaching.
+1
But give him time…he’ll grow up one day.
“I don’t know what your research is based on, but Internet giants, such as Yahoo, Google, YouTube, Facebook, and Twitter, are all founded by people who are less than 35 years old.”
So what? They run on infrastructure founded by guys in their 40s, 50s and 60s. Not every success has to be a giant. A forty-something friend of mine runs a three-person company that grosses ten million a year, works about 20 hours per week, gets to travel a lot and generally lives like a rock star. Never sought VC and never will. He’d be fucking crazy to give up such a cash cow.
Your example almost worked. While you make a point about those who play the game , you left out a much more important aspect…the OWNERS of the team. Now with that context in place, let’s revisit your example. The ratio of those who have played a professional sport to those who own the team through the decades is off the meters! But how many successful under 40 owners (in any major pro sport) are there? Most successful pro sports owners have owned their teams for at least a minimum of 10 years and most eons longer. As for OLD players, those who are Pro Hall of Famers are closer to 40 than 20 and most 20 year olds aren’t truly even be named by most people. That’s why a Tiger Woods, a Brett Farve , a T.O., a Kurt Warner (and heck at this point I’ll event throw in a Kareem Abdul Jabbar) can command pretty much any salary they want because they share a very important characteristic with the ownership…they know what they are doing and have been doing it for a long time. Something few 20 year olds can lay claim to. Think about it…
You can add the coaching and management staff to that too. Startup founders are really a combination of owner/GM/coach/player. Once you look at it like that it seems like favoring younger founders would be short sighted. Unless of course part of that equation is manipulation.
My own opinion is that age is irrelevant. It is all about a wide range of talents, dedication, perseverance, and ultimately execution.
“I don’t know what your research is based on, but Internet giants, such as Yahoo, Google, YouTube, Facebook, and Twitter, are all founded by people who are less than 35 years old.”
If you do research on blogs, then you’d think that successful companies are founded by young people. Blogs love to write about young founders because they are a good story. That doesn’t mean that young founders are the majority.
“Have you seen 40+ years old people play professional sports leagues? Rarely. Because old people can’t compete with the young.”
It is definitely not fair to compare sports with founding companies. Does a founder need to be able to bench 250 lbs or run 6-minute miles to be successful? No. While you need to be healthy, mental strength and intelligence are also important.
Umm..
Facebook profit ? zero
Youtube profit? zero
Twitter profit? zero
If your aim is to mimic the success of these companies then goods luck.
Last I checked Google and Yahoo make money, as apposed to the latter, which rely pretty much solely on VC’s to fund their “experiments” — The reason why VC’s fund some of these internet monsters (even though they have yet to turn profit — *cough* Facebook), is because they are run by 20 somethings who are very easy to manipulate, especially when thrown a lot of money. The VC’s can pretty much do anything they want, and if it doesn’t work out in the end, just announce an IPO so they can make their money back based on pure speculation and then jump ship. Don’t you find it weird that VC’s issued a share buy-back to have a bigger ownership stake in Facebook and all the employees were gladly selling them their stock (they ended up having to cut the buy-back short, and return a portion of the shares, because too many shareholders went for it)? The reason is because the employees have been working there for years and have yet to see the company turn a profit, they’re just hoping to get out before it’s too late.
I like the way all the forty year olds are ganging up on this guy. What the writer and all you guys will never understand is that the drive and passion that a young entrepreneur has can never be matched by old guys. Yes, we are a not as mature and experienced, but why is it that the greatest companies are started by young guys?
Dropping out of college, moving to another country, with no savings to fall back on requires a lot more guts than someone who has savings and experience to fall back on. There are many examples where old guys have also put their lives at stake for their idea and conviction but it’s just that it’s more common with the young people.
Let’s see who becomes the next steve.
we were young once.
why can’t we understand it?
from a capability perspective, there is no contest between the 20 year old me and the 40 year old me. (but I admit that is me)
>> Dropping out of college
I finished university.
>> moving to another country, with no savings to
>> fall back on requires a lot more guts than
>> someone who has savings and experience to
>> fall back on.
but how is that better?
>> why is it that the greatest companies are
>> started by young guys?
there are a lot of companies. not sure the stats on great companies. I might argue that the “best” are able to start companies in their 20s and be successful at it – and they will and should start companies sooner than later. so there is benefit for themselves to start companies early. But youth isn’t the criteria – it is the fact that they are the best. and I would suggest to compare their capabilities at 20 and at 40 – again there would be no contest. better networks, better knowledge and experience, surrounded by better people…
Seems like this would be the case. I was always surprised at the popular perception otherwise. Experience goes a long way in business.
I agree with the majority of this post, but I think the author may have missed one substantial point. Most of the technology in “Web 2.0″ has been less about truly complex technology and penetrating existing markets, and more about social revolution. Think about the powerhouse companies that have been built (aside from Google)–- Myspace, Facebook, YouTube, Wikipedia, Blogger/Wordpress, and Twitter.
All of these founders were well under 40 when their companies became highly successful, and that is likely not a coincidence. The reason is that they were part of a group that felt a need for a social movement and created a product to meet that demand.
I agree that the “old guy” has more business experience and knows how to grow a company vs create a feature, but I believe that sometimes that doesn’t matter as much as having a direct tie with a fervent and rapidly growing market as you’re trying to build said company. So in markets where the young dominate the user base, such as online web apps, young founders make sense.
Agreed
Agreed
Uhhh Brian, none of these so called powerhouse companies make any money… But thanks for proving the author’s point!
Interesting that you include Wikipedia on that list. Jimmy was *not* well below 40 when he started that nor when it became a success. Indeed, the previous companies he started when he *was* well below 40 did not succeed nearly so well.
Your sample of companies is biased towards web 2.0 companies. Since web 2.0 is relatively new, and young people tend to be internet early adopters, of course the CEOs of successful web 2.0 companies will tend to be younger.
It doesn’t mean younger people are better, just that web 2.0 is a young person’s arena. they know the market better.
But take a 40 year old who knows the web 2.0 market, and he’s more likely to be successful than a 20 year old with the same market knowledge, because he has the wisdom, maturity, interpersonal skills, experience and judgment necessary.
Imagine being 40 and not having children? Don’t you think that helps? Let me know your frank opinion.
Imagine being 40 and not having children? Don’t you think that helps? Let me know your frank opinion.
Having children and financial responsibilities makes you more careful of watching the cash and only focusing on business ideas with true profit potential. So precisely because you can’t afford to waste money, you’re more likely to succeed.
A 20 year old with no responsibilities is going to build a company around one feature like organising your music playlist. A 40 year-old with kids will build a company around a full-featured, profitable product.
Hi Vivek,
This is one of the very few very insightful posts I have read about startups in a long time.Very many thanks to you.
I would say it’s really a combo of being smart, being experienced and knowing one’s own value…without feeling you have to give too much to get what you desire.
If you’ve made a successful startup once, you’ll probably do it again.
40 years old, and 6-10 years of work experience? Wouldn’t you expect more like 12-15?
I read this to mean ’6 – 10 years relevant work experience’ as in the scenario where person embarks on second career and gains an outsiders insight backed by years of previous work experience (in another field) then gains enough market-relevant experience to successfully launch a venture in the new space.
That is probably a whole lot of assumption though. ;)
You are in the majority. 40 seems to be a good age to start a company. Some young ones became very famous. Hence the urban legend.
And you know what, most 20 somethings are also boring as hell. They’ve got nothing interesting to talk about, but are good workers.
Nice article. As a 40 year old with a web start-up, I think both sides of this argument have a lot of value. A 20 year – as stated – doesn’t have the distractions a 40 year old might (family, etc), but they also don’t have the experience. Now, in some cases this might not matter. If you are forging ahead in some of the social media areas or “2.0″, you may be doing something that no one has ever done before. Traditional experience may not matter as much as smarts and drive.
But – what if (like me) you are trying to drive new tools and technologies into the traditional enterprise software space? In this case, it’s hard to imagine a 20 yr old without business experience understanding the needs of CEOs, project managers, internal reporting analysts, process management teams, etc. This world is foreign to someone who hasn’t been there, done that.
My point is, when we look at “what yields success” in the entrepreneurial space, I think that we are looking at not one, but two bell curves. One – the one where 20 yr olds dominate – describes ideas and apps that push into completely new spaces where expectations (for what the app does/doesn’t do) aren’t there. The second curve – the “old guy” curve – is useful for examining success/failure in arenas where a detailed understanding of traditional businesses and how new tech might be applied is the dominant driver.
+1
Eat right, run miles, do meditation/Yoga – your 40 can be younger than your 20.
Age = bad profiling
And don’t get married and have children…Then you will stay 20 forever
Keep saying that Duane. You will be 60, wrinkly and lonely in no time.
Absolutely right!
@Dunce: Absolutely right..
complete blather. young or old is irrelevant. what matters is the ability to identify a real market need and the drive to go after it.
people around 20 do not need money so they can build companies that do not make any profit.
people over 40 need to make money so they must build companies that make money which is not really compatible with web 2.0…
+1
100% Agreed!
This mixes up average return and standard deviation.
Older people — other things being equal — are more risk averse (have less time to correct mistakes, etc.).
Early stage VCs like to back companies with a small chance of a massive success, not a large chance of a moderate success.
So unsurprising that younger teams are more likely to ‘swing for the fences’, more likely to make it huge, but also more likely to strike out.
And older teams — other things being equal — will play it safer, probably make more money (on average), but less commonly generate ‘venture returns’.
Remember, VCs hedge out idiosyncratic risk through portfolio investing.
VC’s are lemmings, but they just don’t know any other way to operate. Entrepreneurs should avoid VC’s like the plague.
Here is the real skinny. 20 somethings are to inexperience to realize that are being screwed over. Over worked and under compensated. VCs are taking advantage of immature and impressible young people. 40 somethings have been around the block and they are not easily fooled. Isn’t funny that these 20 somethings fill their boards with 40 somethings.
Very good post.
DEPENDS ON THE OLD GUY. I can tell you when I worked on Jason Calacanis and others on weblogsinc, we did not work like the fools we were in web 1.0. We realize the importance of a balanced life (except Peter Rojas), it’s role in productivity, and we accomplished a lot more, as a result of being smarter, focused and better connected. I could save 30 hours on a deal by knowing the real opportunity and getting to the key decision maker based on experience. Sometimes, having kids, wife, etc, makes you more productive, when you know you are working for more than just yourself. As I roll out this new biz, cocodot.com, I can get things done in an hour that would have taken me days, when I was 20…and I have all the benefit of the mistakes from my 20′s and 30′s.
good judgment comes from experience. and experience comes from bad judgment.
@akoha deadpool -
“Don’t trust anyone over 30.”
I’m 37. Single. No kids.
We’ll see how your research holds as 2012 approaches.
Always nice to see actual research. A couple of thoughts Vivek:
1) It struck me from looking at the BusinessWeek slideshow that a lot of the characteristics of the entrepreneurs (larger family, greater educational attainment than parents, lower or middle class) fit with being 1st or 2nd generation immigrants.
2) I’m glad to see that research offers old guys like me (34) some hope! Being steeped in the youth culture in the Valley can be discouraging for us old-timers.
3) In terms of my own investing, I’ve put a lot of money into young entrepreneurs. But I think that’s because the greatest value-add I b
(continued) The the greatest value-add I bring to the table is my ability to coach the young ones through issues like commercialization, investor relations, etc.
Wow you’re pretty retarded. Please tell me the last billion dollar tech company started by 30+ guys.
To says vcs prefer young guys cuz they are pushovers makes you lose your credibility. First and foremost, VCs need folks to build some GOOD shit. Otherwise all the control of a company won’t amount to much.
Cisco
Genentech
Oracle
SAP
Sony
IBM
EDS
Motorola
Hitachi
Samsung
+ too much more to mention
You made my point. You’ve to go back decades to find billion $ tech plays by 30+ folks.
On the other hand, let’s look at billion dollar corps started by under 30:
Microsoft
goog
yahoo
apple
facebook
oh snap.
The only company on your list that is less than a decade old is Facebook, and they don’t make nearly a billion dollars in revenue. Fact is that no matter how awesome the company, it just takes time to grow big.
> Wow you’re pretty retarded.
Spoken like a true genius. I’m sure you’ll go far in life with such a closed minded approach.
> Please tell me the last billion dollar tech company
> started by 30+ guys.
You see, here’s how it works. To get to that point, you need funding. But since the investment class, e.g. VC’s, aren’t willing to fund companies with founders who are over 30, it becomes a self-fulfilling prophecy.
Hence, we get situations where oodles of cash to companies that are basically worthless while solid ideas struggle because somehow the “demographics” aren’t right. That is a stupid business strategy. Investment should be made on the basis of the business idea and not on whether the founder has or has not reached a certain birthdate on the calendar.
Oracle
here are some good software/internet companies: siebel systems (1993)
salesforce.com (1999)
Intel