Should VCs invest in young or old founders? Using hard data, we find out.
19, 26 and 21. These are the ages at which Mark Zuckerberg (Facebook), Evan Spiegel (Snapchat) and Steve Jobs (Apple) started their companies, respectively.
There’s a common belief that successful founders start their businesses in their twenties. Paul Graham, co-founder of YCombinator (a successful US startup accelerator and investor) said “the cutoff in investors’ heads is 32… After 32, they start to be a little sceptical.”
I think this misconception (I’m about to show why it’s a misconception) is due to the occasional cases where startups are founded in a dorm room by college dropouts. These extraordinary (and by definition rare) cases are the ones that the press hook onto, and we, the public, let form our world views.
As VCs, we’re supposed to be aware-of and resilient-to biases, but I don’t think that’s often the case. We, just like any other member of the media-absorbing public, are often guilty of a bias towards youth when evaluating founders.
For this research, I’ve gathered data from Beauhurst which while not perfect, is pretty good. There will no doubt be companies and founders missing from my data, although I don’t believe these omissions have any significant impact on the results.
So let’s cut to the chase — when do the most successful founders start their businesses.
The criteria for the search is founders of UK-based software businesses that have raised at least £30m of venture capital funding. £30m funding is a somewhat arbitrary definition of ‘successful’, but I think it’s a pretty good measure for the sake of this research. Unfortunately, bootstrapped companies won’t be included here, nor exited ones, but I don’t believe that including those (if you could find the data) would have that much impact. You can decide for yourself which way you think my results are skewed, but I think this provides a good indication of the situation.
The average (mean) age of founders at the time they found their business, is 34.4 years old.
Why these results?
I was quite surprised by the results — I thought the founders would be younger, so we discussed this internally out of curiosity. One of the partners found this HBR article on the subject, which suggests that even 34 is young when compared to the wider, global market.
Here are three contributing factors to consider:
- Experience: older people have bigger networks, more situational evidence to base decisions on, and more experience of successfully managing others. These will all improve the likelihood of building a good business.
- People have enough of a financial buffer to set up businesses at this age. Perhaps these founders have a partner who can help put food on the table.
- The big idea comes later in life. It may take years to find a problem worth solving — maybe these founders suffer from the problem for years before founding a company to solve it.
The chances are it’s a mixture of these and many other factors that combine to create the perfect storm.
There’s one thing worth mentioning that I’ve always felt works in young founders’ favour: Relative immaturity and the feeling of invincibility that this can provide, may stand them in good stead for building an unstoppable growth machine. Do knowledge and maturity breed excess caution? Does youthful naivety mean bold (high-risk, high-return) decisions are made quickly? Perhaps.
Anyway, back to the point. The interesting thing is that VC’s perception of young founders being the best ones to back has probably led to the average age of successful VC-backed founders falling; a self-fulfilling prophecy, I hear you say.
VCs throw money after young founders, who do, with buckets of capital, manage to build big businesses. Are we, however, throwing money after the wrong people? Would VCs have delivered better returns if they’d consciously invested in older founders? Who knows — it’s pure speculation — but there’s certainly an argument.
If you’re an old (or young 😉) founder looking for funding, please drop a message to hector@episode1.com.
