Posted by Carol Mahamedi
January 3, 2022 | 3-minute read (513 words)
A report from the Harvard Business Review, published in 2018, found that the average startup founder is 45 years old. At the same time, an ongoing debate has continued to question whether founders in their 20s and 30s are more successful in the long run than middle-aged founders.
Now, a paper jointly authored by Stanford professor Kathryn Shaw and Copenhagen Business School professor Anders Sørensen, has shown that founders under 40 years old run more than 40% of new businesses.
The authors suggest that startup founders from their mid-20s to early-30s gain skills over time that allow them to run new firms that are more efficient and productive than those started by older founders. In other words, younger founders get a head start and leverage that experience to launch a second enterprise and are therefore often highly successful. In many instances, younger founders achieve greater success versus those who first launch a startup in middle age.
Breaking down the data
Shaw and Sørensen analyzed data on company sales in Denmark from 2001 to 2016. They also assessed over 131,000 firms that comprised both sole proprietorships and limited liability corporations in multiple industries.
The firms shared these attributes:
The authors’ research indicates that subsequent businesses tended to be more successful over time as compared to standalone or first-time firms for both age groups. New firms launched by novices fail, on average, within their first 3.5 years of operation. But serial young entrepreneurs’ first startups on average were 57% larger on opening day versus those founded by older novices. And in general, young serial founders’ second firms failed much less often.
- Most had founders who launched only one venture.
- On average, the founders were 38 years old, with 13 years of education.
- Three-quarters of the entrepreneurs were male.
- Close to 18% were run by serial entrepreneurs.
How the age groups differed
The authors suggest that serial entrepreneurs who start their first venture in their mid-20s through their early 30s attain a higher degree of financial success as they launch and lead their second businesses. By starting at a younger age, on-the-job experience helps these entrepreneurs generate higher revenue in their subsequent startup, significantly higher than startups founded by older entrepreneurs.
Sales at younger founders’ first ventures were found to average $92,750 in their first year, while sales at older founders’ first ventures averaged $125,000 in their inaugural year. But younger founders’ second ventures saw an 82% increase in sales, or an average $169,000 in the first year. For older founders, sales in the second startup grew only 20% higher than their first firms.
What underpins younger founders’ success?
According to the report’s authors, the following two attributes can explain, at least in part, the remarkable sales increase in the young serial founders’ subsequent ventures:
- Younger founders were more likely to register their second startup as an LLC. This shielded them from personal losses in the event of business failure.
- The most successful young founders were portfolio founders, meaning they retained their firm while establishing their second one.