Philosophical Musings

August 8, 2007

My two cents on Age and Entrepreneurship

Filed under: entrepreneurship,youth — Elad Kehat @ 12:34 pm

Mark Andreessen chose to weigh in on the age and entrepreneurship debate, but instead of just “mouthing off” on the subject, he’s brought forth some research data, which makes his post a great read.
He ends with a question:
“…is entrepreneurship more like poetry, pure mathematics, and theoretical physics — which exhibit a peak age in one’s late 20s or early 30s — or novel writing, history, philosophy, medicine, and general scholarship — which exhibit a peak age in one’s late 40s or early 50s?”

So here’s my small contribution to the debate, in the form of an answer to this question:
I think that Mr. Anreessen is wrong in looking at entrepreneurship as a single discipline. An internet entrepreneur, enterprise software or telecom equipment entrepreneur, an “old” business entrepreneur and a life sciences entrepreneur, while they all engage in the act of starting a business, and no doubt face some challenges that are the same across all fields, mostly take on very different endeavors, especially when viewed from the question of age. That is because age, as analyzed in the research data pointed out by Mr. Andreessen, pertains mostly to the question of creativity, i.e. its effects on the impetus to dream up a new business and the courage (or foolishness) required to go ahead and start one, age has far bigger effects on entrepreneurial success when it comes to the entrepreneur’s knowledge of the market, and the various barriers to entry that stand in his or her way there.
Let me explain:
Take for example an entrepreneur in the field of Life Sciences. This field is characterized by a long and costly R&D period, before a product can be brought to market, much of it due to regulatory hurdles. The result is that this enrepreneur must raise a large sum of money in order to have a chance. This is a barrier to entry, in which age plays a role, because venture capitalists are unlikely to give a young person this funding – the risk is too high. Funding usually goes to biology professors and MDs who did some research in academia (that’s the seed capital) and wrote a patent. For someone to head a lab in a university, or be in a position in some other way to be able to direct such research, first requires a slow processions through the echelons of of academia. Young entrepreneurs simply can’t enter this field.
Next, lets look at business software. Here the R&D period is also usually pretty long and costly, though not as long as in life sciences (no regulation…). Nevertheless, the need to raise a lot of money _before_ one can start selling a product creates a difficulty for the young (and therefore relatively inexperienced) entrepreneur to get VC money. Another barrier is the customer – CIOs are aren’t too enthusiastic to take a risk and make a bet on some software touted by a 25 year old. There are exceptions of course (Confluence is an interesting case), but still, age, in and of itself and regardless of talent, poses a problem.
So where is young age less of a hurdle? Naturally, where the cost of bringing a product to market is lower, and where the customer judges the product itself, rather than the person behind the product.
If you add to that a market where a majority of the customers are young, making a young entrepreneur more likely to understand their needs (or even realize that such needs exist in the first place) and young age becomes an advantage.
Classic examples of such businesses are pubs, dance bars and other places of entertainment that cater to a younger audience. From my experience the owners of such places are almost always young entrepreneurs.
And the best example of course is consumer internet start-ups. Successes such as ICQ, HotOrNot, MySpace, Facebook, YouTube etc. all share characteristics that made it possible to their young founders to succeed: customers of roughly their age (or lower), relatively low cost of building their service and low cost word-of-mouth marketing. These combined to allow the entrepreneurs to quickly get to what Mr. Andreessen calls “product/market fit”, i.e. prove that there are millions of customers out there who want their product. After that, raising money from VCs to scale the business is much easier.
Obviously, the same cannot be done in life sciences start-ups, where you can’t give your product to consumers before the FDA approves it (which costs many many millions), and is very hard to do with enterprise software, where the customer isn’t normally in an experimentative mood – it isn’t easy to get them to even try your product out, even if it’s free, and in any case, you expect them to pay you a lot of money for it, not just use it so you can show them ads.

In short, my opinion is that while age may or may not affect an entrepreneur’s creativity, correlation between age and success is far more likely to be the result of the peculiarities of the specific market that the entrepreneur is pursuing.


1 Comment »

  1. I definitely agree. I myself am a ‘young’ entrepreneur and have an internet-startup. I would face a lot of barriers if I tried to be a founder in say, the life-sciences discipline.

    Comment by thesush24 — August 10, 2007 @ 6:02 pm | Reply

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