Surprising research on the age of founders
At Tensility, we’re constantly improving on our pattern recognition. Our ability to spot revolutionary technology innovations, market opportunities, and high-performing founding teams is shaped largely by the previous successes and failures that we’ve had with our portfolio companies. The long time horizon of the venture business makes it difficult to spot the correlations and causations in the data, which often is fuzzy and incomplete. Outcomes are influenced by so many factors that searching for statistically significant relationships is difficult.
Let’s talk about founders. Our experience over 20+ years of venture investing in technology startups has taught us what to look for in successful entrepreneurs:
Commitment to the problem
Technical background
Charisma, leadership, industry knowledge, and sales ability
The energy required of founders to both have all these skills as well as grind through building a company from scratch has historically implied at least one characteristic: youth. Anecdotal evidence appears to support this trend: Mark Zuckerberg founded Facebook when he was 19. Michael Dell started Dell Technologies at the age of 21. Paul Graham once said that “the cutoff in investors’ heads is 32… After 32, they start to be a little skeptical.”
Recent research from Ben Jones, professor of strategy at the Kellogg School of Management, however, offers surprising results:
“The researchers were chiefly interested in high-growth new ventures—the kinds that can transform the economy—and understanding whether the Silicon Valley mythology was true. So they limited their dataset to include only technology companies, and further winnowed that down to the fastest-growing 0.1 percent—in other words, the one company out of every 1,000 that saw its sales or number of employees increase the most in its first five years.
Among this exclusive subset, the average founder age was 45.0.”
45! What a disconnect from the prevailing narrative of young founders being successful. We see this narrative at play everywhere. The average age of YCombinator Winter 2018 Cohort was 29.9. The average age of TechCrunch awards recipients between 2008-2016 was 31. Etc.
Several factors may contribute to this phenomenon. Technology startups depend heavily on software developers- and the average age of software developers appears to be 28.7. The media also tends to overemphasize young entrepreneurs.
How does this new understanding of who are likely to be successful founders affect our investing?
We’ve never explicitly targeted younger founders. But, prevailing narratives can have subtle and unintentional effects on our investing decisions. Moving forward, we should all be aware of potential biases and make sure we don’t fall prey to them.