Humorist P.J. O'Rourke titled his 1995 memoir Age and Guile Beat Youth, Innocence and a Bad Haircut. He was writing about his journey from hippie to conservative, but the phrase applies just as well to the differences between younger and older entrepreneurs, according to a recent article by Annie Lowery on Slate.
In the piece, Lowery quotes research by the Global Entrepreneurship Monitor, showing that the cohort of entrepreneurs under 35 may have created more new businesses in 2009, but accounted for only 19.1% of "total entrepreneurial activity." Additional studies by the entrepreneurship-focused Kaufmann Foundation found that the average age of entrepreneurs was 39, with far more successful businesses launched by Americans over 50.
It stands to reason that experience would be helpful in something as complex as starting a new company. So are other factors that often correlate with age, such as a longer credit history, a thicker rolodex of potential investors, partners and customers, the aura of mature authority, and deeper knowledge of a particular market or industry.
Part of the appeal of the notion of "young entrepreneurship" is that it is counterintuitive. It flies in the face of the very sensible idea that, in business, experience and seniority are key. Young people stereotypically offset the advantages of maturity with greater energy, fewer encumbrances in their personal lives, a streak of unjaded idealism, and, frankly, a willingness to take risks that more seasoned people might consider foolish. When you're making a big bet on entrepreneurship, it's sometimes helpful to have less to lose.
One reason there is so much focus on young entrepreneurs is because they tend to succeed most spectacularly in highly-visible industries such as IT, media and entertainment. It may be comparatively more difficult for a 25 year-old to open an auto dealership or a cold storage warehouse, but it's a much smaller leap to launch a videogame studio or social media marketing agency. In addition to perhaps having more familiarity and up-to-date skills in these areas, young people are also adept at using technology to close some of the entrepreneurial age gaps. For example:
Social networks automate relationship-building: Online networks make it practically effortless to find and connect with people who might prove to be useful business contacts. In addition to general networks like Facebook, there are now increasing online resources and communities purpose-built for young entrepreneurs. This partially offsets the advantages of a thick rolodex built up over years.
Data supplants wisdom: Insights that were previously limited to those with keen intuition or deep experience are now broadly available to anyone who knows what questions to ask. Not only is more business knowledge accessible online than ever before, but savvy entrepreneurs can mine online sites and communities for market intelligence and customer data.
The economics of attention have changed: Innovative businesses need attention from customers, investors and the market to break through. In the past, industry veterans with long experience could count on insider connections to give them an edge. Now great ideas can go viral and global in an instant, and formal structures such as innovation contests are becoming popular ways of exposing and validating new talent.
Capital requirements for knowledge-based businesses are lower. It still takes credit to start most traditional businesses, but in certain kinds of knowledge and service industries, the only capital a startup entrepreneur needs is between his or her ears. That creates a more level playing field for those with short credit histories, and who may lack tangible assets like property or retirement accounts to leverage into the new business.
These tools exist for young and old alike. There's no reason a 70 year-old entrepreneur couldn't make just as extensive use of LinkedIn and online analytics as anyone else. However, they all serve to mitigate the traditional advantages of experience, and dramatically reduce the barriers to entry in the highest-impact segments of the economy.
Midcareer professionals who leave established companies to found new ventures in their fields of expertise will still enjoy considerably better odds of success than someone just starting out, and retirees with a lifetime of accumulated savings will still be able to put more resources into a company to give it time to find its feet. A diversified economy needs those kinds of businesses and should celebrate their success.
At the same time, we've seen significant changes in the past decade that make it a lot easier for young people to make a serious run as entrepreneurs much earlier in their lives. The kinds of businesses founded by young entrepreneurs make a much bigger impact when they succeed, and leave a much lighter mark when they fail.
Rob Salkowitz is author of Young World Rising: How Youth, Technology and Entrepreneurship are Changing the World from the Bottom Up, and Generation Blend: Managing Across the Technology Age Gap. Follow him @robsalk.