Founders over fifty.

Experience makes the best entrepreneurs.

The Wall Street Journal has a report about Katerina Stroponiati, a Venture Capitalist who is now investing in founders who are aged fifty and over.

A suburban mom with decades of experience in her industry might not be the first person who comes to mind when you picture a venture-backed entrepreneur building an AI-powered company.

As it turns out, that’s exactly why Katerina Stroponiati chose to invest in her.

Stroponiati is a venture capitalist with a contrarian theory of entrepreneurial success: She believes that older founders can make for better founders.

Stroponiati believes that older founders have many advantages: connections, credibility, experience, expertise, and relationships.

They’ve seen it all, so they can spot opportunities that others miss. They know the rules of their business—and how to break them. They also know which problems need to be solved because they have encountered those problems too many times themselves.

This is an exciting development and I hope Stroponiati succeeds. You can read about her fund, Brilliant Minds, here. “Brilliant Minds is about what’s next. The world is not going to run by a bunch of developers anymore—AI changed the game, and experience is the new edge.” Quite so.

I wrote in Second Act about older entrepreneurs. There are many compelling examples.

Herbert Boyer was forty when he founded Genentech, later sold for $47 billion. David Duffield founded Workday aged sixty-four. It is now worth more than $43 billion. Julian Robertson set up his own investment firm aged forty-eight. He had one of his best ever trading years in retirement, during the subprime credit default swap crisis of 2007–8.

Maybe the most compelling story is of Bill Franke, who just keeps evolving as an entrepreneur ever since he quit being a lawyer aged fifty.

Bill Franke was home-schooled before attending an American school in Brazil. After Stanford, and three years in the army, he became a lawyer. Through a contact he found a job working in mergers and acquisitions in a forest products company where he became CEO. He discovered he enjoyed business more than law. Aged fifty, after negotiating a merger with a Chicago firm, he quit and started his own investment firm. A few years later, he took over as CEO of the failing America West Airlines. In his sixties, he opened an investment firm focused on airlines. He invested in Wizz Air, Tiger Airways, Smart and other low-cost carriers, becoming a pioneer of the budget air travel industry.

This is not just anecdote. A economic study by Pierre Azoulay, Benjamin F. Jones, J. Daniel Kim, and Javier Miranda looked at a sample of high-growth businesses started by 2.7 million founders in the United States between 2007 and 2014. They linked up tax, census and patent data to estimate the average age of people who founded ‘“growth-oriented” firms. These are the firms that have large economic impact. Their results are quite striking. (I have bolded some of this quote from Second Act.)

They found that the average age of people whose business went on to hire at least one employee was 41.9. The average age of founders of the highest-growth businesses was forty-five. In this sample, the 1,700 fastest-growing new businesses (the top 0.1 per cent) were founded by people with an average age of forty-five. Furthermore, a fifty-year-old founder is twice as likely to make a successful sale of their company than a thirty-year-old founder. The results are even more counterintuitive about technology founders: ‘Founders in high-tech employment sectors tend to be slightly older than the US-wide average, and founders of patenting firms are the oldest of all, with an average age of 44.3 in Silicon Valley.’

This can still be consistent with the idea that young founders produce the very highest-growth companies—Bill Gates and Mark Zuckerberg, for example—but on average you are more likely to find high-growth businesses being started by the middle-aged than the young.

Older founders have the advantage of failing, and learning from failing.

A study of retail entrepreneurs found that people who have started more than one company have a higher success rate and a lower dropout rate. The skills they accumulate through experience contribute to the success of their later ventures. This is how Michael Ramsey founded TiVo aged forty-seven.

I won’t tell the story of TiVo here, but it’s in the footnote. I find it fascinating.¹ Lots of VCs think that young talent is more likely to succeed. It might be the case that more young talent requires funding. And many VC will find it easier to get returns on a young person, who tend to sell their companies earlier.

In one study, it was found that people in their early twenties are most enthusiastic to start a business, but least able: as they age, they acquire the skills necessary to start a company, but gradually lose their willingness. That study also found that your employment experience—such as experience of being self-employed—affects your chance of starting a business. Although willingness declines with age, opportunity is the main limiting factor. Getting funding increases the chance of starting a business, but experience can somewhat compensate for a lack of funding. Learning through experience remains a strong indicator of whether someone will start a company. This is why so many entrepreneurs are older: there is often no quick way to get experience.

The middle-aged are also more likely to have some money to start a business. A study by David Blanchflower and Andrew Oswald found that the more money someone inherits, the more likely they are to become an entrepreneur at a younger age: ‘A gift or inheritance of £5,000 approximately doubles a typical individual’s probability of setting up his or her own business.’ The year under study for starting businesses was 1981. £5,000 in 1981 would be worth approximately £17,000 today. Of course, someone in middle age is more likely to have accumulated the money needed to start a business, rather than needing to rely on an inheritance.

But that is not always the case, which is why I am so excited for Katerina Stroponiati’s fund. Tim Harford wrote in the Financial Times this weekend, “Everyone has the potential to do something worthwhile, regardless of how much or how little they may have achieved in the past.” Katerina Stroponiati is going to be helping some of those people in the future. Good for her!

---

If you want to know more, read Second Act!

---

1. He moved to the United States in his twenties, worked for Hewlett-Packard (HP), and then took a stint away to work at a start-up: after a year back at HP, he realized he could no longertolerate big company culture, and went back to working for a smaller company, SGI.

At HP he had met the colleagues with whom he would later found TiVo. They left HP with him to go to SGI. At SGI he started meeting people who worked in entertainment and got interested in how to apply computer technology to that area. One former HP colleague, Jim Barton, had gone to work elsewhere on a video-on-demand service. That turned out to be technically accomplished but soured Barton about working in the television industry. One day, Barton and Ramsey had lunch and shared experiences. They began developing the idea for TiVo. Initially, they struggled to get investment. Their idea was too complicated; it was through the trial and error of starting the company that they came to TiVo as we know it. Without their combined professional experience, they wouldn’t have been able to found the company. Ramsey also needed to move to the United States to make him think like a founder. He had previously lived in the UK where the culture was ‘much more subdued... more cautious’. As we will see in the networks and culture sections, the people you associate with have a major influence on what you do.