We’d like to introduce Laura McKenzie of Scale Investors. We’ve asked her to provide us with some thoughts on entrepreneurship and the importance of age (or not) as a determinant of success.
What do Elizabeth Holmes, Sara Blakely, Linda Avey and Arianna Huffington have in common? They are all female entrepreneurs who have successfully built billion dollar businesses. But what does differ dramatically is their age.
A number of studies have tried to correlate an entrepreneur’s age with ultimate business success. There is the perception that venture capitalists only invest in university drop outs. But the Founders Institute concluded the ideal age to be an entrepreneur is 34. Duke University and Kaufmann Foundation studies claim older entrepreneurs have more experience and the probability of success increases with age.
Elizabeth Holmes was 19 when she dropped out of chemical engineering at Stanford University to start Theranos in 2003. She hated needles and spent a decade developing a device to simplify blood tests a process involving nothing more than a finger-prick. Theranos hardware and software allows simpler comprehensive lab testing. Having raised $400m it is valued at $10 billion. She owns ~50%.
Young gets the money
Veteran venture capitalist Fred Wilson conceded that “Yes, tech is biased towards younger people.” Niko Bonatsos, partner at General Catalyst said “It may sound bizarre to outsiders, but we – investors – are keen on paying a premium to partner with very young first time founders that simply think differently before the rest of us.”
Investors rely on pattern recognition. Hence they tend to stick with what’s worked before. Entrepreneurs in their early twenties typically don’t have kids or a partner, and can often focus 110% on their start-up. Investors value that level of commitment and determination.
Billionaire Sara Blakely was 27, and was selling fax machines door to door in 1998, when shebootstrapped Spanx. She wrote her own patent, generated $4m in sales when she launched in 2000, and now has over $400m in sales. Spanx dominates the “shapewear” market.
Age means experience
The Founders Institute concluded that older age has shown to correlate with more successful entrepreneurship up to the age of 40. After that it has limited or no impact. They attribute this to the fact that once people have experienced “complex projects” like “buying a house and raising a family” they can identify and address more realistic business opportunities.
Scale Angels invested in both CloudPeeps and Trademark Vision when founding CEOs Kate Kendall and Sandra Mau were in their early thirties, but both founded the businesses when they were 29. Kate is a “serial” entrepreneur and Sandra’s business built on her engineering experience at NICTA.
Linda Avey was 46 when she co-founded personal genetics service 23andMe, the world’s first personal genetics service. Linda had relevant experience. She’d spent 20 years in sales and business development and biopharmaceuticals. Her co-founder Anne Wojcicki was 33 with a decade of health care investing on Wall Street. 23andMe has raised over $100m and is valued at over $1billion.
The more complicated your area, the more age matters
Duke University research shows “the average age of a successful entrepreneur in high growth industries such as computers, healthcare, and aerospace is 40. Twice as many successful entrepreneurs are over 50 as under 25.”
Between 40 and 64, people focus on productivity and creativity, key attributes of entrepreneurship as they’re motivated to provide value, not just for themselves, but for others.
They have also developed ways of working more efficiently. Deb Noller founded Scale Angels’ investee company Switch Automation when she was 42. She transformed from a self-funded consulting business to a global PaaS (platform as a service) IoT (internet of things) company when Scale led her first external investment round. Deb has four children who have all left home. An increasing number of women in a similar scenario are applying to Scale for funding.
Internet media pioneer, Ariana Huffington, was 55 when she founded online news site Huffington Post in 2005. She founded the digital internet news business after a career as a journalist and publishing 14 books. In 2011, Huffington sold the business to AOL for more than $300m. The New York Times speculated earlier this year that the publisher, with 200m monthly active readers, might be worth $1 billion.
Both ends of the spectrum deserve a look
The Kaufmann Foundation recently reported that founders over 55 years old now comprise 25% of entrepreneurs in the US. This compared with less than 15% a decade ago. This demographic represents 20% of female entrepreneurs applying to Scale. I expect this proportion to increase with our aging population.
One area none of the studies focus on is school children. The Australian Government recently announced their Innovation Agenda, including equipping students to create and use digital technologies to prepare for the future of work. On that day, Minister Kelly O’Dwyer awarded the prizes at our Scale/Girls Invent pitch evening. The winning team was Aditi and Xialene, 16 year old girls from MacRobertson’s Girls High School. They invented the roll on “band aid”, a convenient, hygienic, versatile alternative to the traditional plaster.
This generation of digital natives is already establishing themselves as entrepreneurs at a very young age. Gold Coast sisters, Charli and Ashlee were 3 and 6 when they founded Charli’s Kitchen. Charli’s Kitchen is YouTube’s largest kids baking show globally. It has more than 50 million viewers and over $150k per month in revenue.
Data has shown that both older and younger entrepreneurs can start brilliant, high growth start-ups. Previous start-up and industry experience are key drivers of success, but younger entrepreneurs can substitute this with a combination of passion and experienced mentors. Entrepreneurship is “age-blind”. Savvy investors should be too.
Note: In researching this blog I noticed that publications such as Entrepreneur, Tech-crunch, Venture-beat, Founders Institute, Kauffman Foundation and Harvard Business Review primarily reference male entrepreneurs. In addition to ageism, another unconscious bias is gender, and that will be a future blog.