
The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25 - pauljonas
http://www.pbs.org/newshour/rundown/2013/04/the-truth-about-entrepreneurs-twice-as-many-are-over-50-than-under-25.html
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DavidAdams
I can't speak to "over 50," but I can speak to "over 40." I founded my first
software startup in 1995 while I was still an undergraduate. I had the good
fortune of timing it so that after a year and a half of toil and obscurity we
hit the wave of the dotcom boom, and I was able to establish myself as a
proven serial entrepreneur and have been able to found a series of moderately
successful tech companies over the years. I'm 42 now, and I'm currently
getting a new startup off the ground with three other co-founders who are also
in their early forties. We have the good fortune of all having had at least
one big success in our careers, but I can attest that our experience has been
valuable, and we haven't had a particularly hard time raising money.

I mention this because I think that there are a lot of people between 40 and
50 right now who are the first generation of true digital natives (for
example, I have no idea what it was like to work in a pre-email office). Many
of us weathered the dotcom boom and bust. From where I'm sitting, this cohort
is quite well equipped to found successful tech companies, despite the fact
that we tend to have families and children.

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jeremyjh
I think you and analyst74 make some good points here. It doesn't surprise me
at all that VCs are happy to invest in a start-up with founders who have
experience like yourself. At your age - that is going to be expected. If you
were 42 and spent the last 20 years working in Big Corp - even if you did
impressive work - I'm sceptical you'd be on an even-footing with a 25 year old
who spent 3 years at Zynga.

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drone
_If you were 42 and spent the last 20 years working in Big Corp - even if you
did impressive work - I'm sceptical you'd be on an even-footing with a 25 year
old who spent 3 years at Zynga._

I would disagree with this, depending on the focus. That is, if the person who
spent 20 years at "Big Corp" was doing a startup in a related domain to "Big
Corp," she would have a large network of contacts, and years of domain
experience in the problem-space she's tackling. The person who spent 3 years
at Zynga likely only has a brief experience of how to poorly run a company,
and few contacts outside of the gaming world.

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jpdoctor
VCs tend to break investments into two classes: "Better, faster, cheaper" and
"Brave New World"

The "Brave New World" ideas put 25 year olds on equal/better footing than 50
year olds, since they tend to be everything new.

The "Better Faster Cheaper" ideas leave the 50 year-olds with the advantage:
They have a better sense of what the market wants, and what features are
important/not important, since they've been working in the field about 6 times
as long.

There's difference which is much bigger though: VC's can take much bigger
advantage of a 25 year old than a 50 year old.

Edit: Notice the article was about an iPhone EKG (better, faster, cheaper) +
50 yo who used his own money.

~~~
pg
_VC's can take much bigger advantage of a 25 year old than a 50 year old_

This is a persistent myth, but if you examine the math it doesn't work out. A
VC firm could improve their returns by at most 2x or 3x by extracting really
good terms from an inexperienced founder. But that's rounding error compared
to the 100x difference between a big success and a small one.

This is a subset of the more general rule that there is no "value investing"
in startups. All the returns are concentrated in a few big hits, and a VC does
well iff they invest in them, regardless of the terms.

The empirical evidence confirms this. Google and Facebook are among the
biggest recent hits for VCs. Both had young founders. But the reason VCs made
so much from these deals is not that they extracted unusually good terms from
the founders. In fact, the founders extracted unusually good terms from the
VCs. The VCs made a lot despite that, because the companies were so
successful.

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jules
> This is a persistent myth, but if you examine the math it doesn't work out.
> A VC firm could improve their returns by at most 2x or 3x by extracting
> really good terms from an inexperienced founder. But that's rounding error
> compared to the 100x difference between a big success and a small one.

Can you explain this? If by some method you can get overall 2x the returns,
why does it matter that most of the income is in the big hits? 2x is 2x
regardless.

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InclinedPlane
The point pg is making is that it's not an averages game, it's a lottery game.

Say there are two different people playing the lottery. Every day they buy a
number of tickets. Person A buys tickets in a pool along with someone else.
Person B buys tickets on their own. Thus, if Person A wins the lottery they'll
have to split their winnings, whereas Person B gets to keep it all.

OK, so who ends up being better off? The answer to that is entirely decoupled
from their share of the lottery winnings, what matters is entirely whether or
not they won the lottery. In terms of VC financing, the RoI from "winning the
lottery" by hitching your horse to a small company that grows until a multi-
billion dollar enterprise in a few years is going to dwarf any other aspect of
investing and returns. Thus it's vastly more important to ensure that you are
doing everything possible to maximize "winning the lottery" rather than trying
to maximize the share of the prize you'll get. 2x or 3x may seem like a lot,
but it's nothing compared to the 100x, 1000x, or 10000x that you'll get from
being on the ground floor of the next big thing.

For example, Horace Rackham was an early investor in Ford and he received a
1300x RoI, Peter Thiel received a 3000x RoI on his investment in Facebook,
while Kleiner and Sequoia capital each turned $12.5 million into $2 billion
through their investments in google.

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jules
If strategy A is buying lottery tickets at $5 and strategy B is buying the
lottery tickets at $10, A is twice as good off. It doesn't matter that the
earnings are dominated by one single winning lottery ticket; strategy A is
always twice as good as strategy B. So getting terms that are twice as good
for a VC will double their expected earnings.

Sure, if you just consider the winning ticket, it doesn't matter whether you
are paying $5 or $10 for it. The thing is that you don't know whats the
winning ticket, and it does matter whether you are paying $5 or $10 for each.

~~~
InclinedPlane
You're still not getting it. It doesn't matter how much of the lottery
winnings you get, the only thing that matters is winning the lottery or not.

20% of DuckDuckGo is a rounding error compared to 10%, 5%, or even 1% of
google.

~~~
jules
I'm not getting it because the reasoning is not sound. Your reasoning is
basically "the numbers are BIG! so a factor of 2x doesn't matter". If you can
get your lottery tickets for half price, you can buy twice as many lottery
tickets, and double your chances. Equivalently, getting 1% of Google or 5% of
Google is a 5x difference, which is huge. That could easily mean the
difference between a net profit or net loss for an investor over all his
investments.

If you _really_ believe that the terms don't matter, then I'm sure lots of YC
startups are happy to take money from you at terms that are 5x better than
what YC offers.

~~~
johnrob
Lottery tickets are a good example in this case. By definition, strategy A and
B cannot both be winners (there is only one winning ticket). So the only thing
that will set either apart is if one of the two strategies has the winning
ticket. The price per ticket is only relevant if neither has the winner, in
which case you're comparing who had bigger losses.

The reason I like the lottery example is that two venture capital firms don't
have matching portfolios (if they did, then valuation would matter for
relative performance). In reality, when you compare firm A vs firm B it's the
performance of the startups that determines the winner (not the amount of
equity owned).

~~~
jules
Yes, in the end the VC with the winner is going to win, but that's beside the
point even if there is a single winner in the world (which in reality is
obviously not true, there are not dozens but hundreds of huge ROI winners).
The point is that you don't know the winner beforehand. A VC who is getting
2*x% equity for $y is expected to perform twice as good as one that is getting
x% for $y. The arguments that are being made here are incredibly vague. I'd
love to see an argument based on solid logic why valuation doesn't matter
much. I'm sure PG is right, but I'd like to understand why.

~~~
pmarca
It's not the same equity. Quality is not distributed equally among the sample
set of companies. The great startups (as judged retroactively via returns --
e.g. Facebook and Google) often (but not always) can get multiple competitive
offers from top-tier venture firms, so having some abstract theory about how
you're going to only pay low prices significantly damages your opportunity to
invest in the companies that are going to generate all the returns.

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SiVal
I'm going to guess--I have no proof--that entrepreneurs over 50 tend to be
looking for a technology to meet a specific market need that has been eating
at them for a long time, while those under 25 are more likely to be looking
for a market need they could address with the brand new tech skills they've
been developing.

If I'm right, they could make pretty good partners.

~~~
pmarca
We tend to see the opposite. The high-quality young founders tend to be
pursuing a single great idea. The high-quality older founders tend to decide
to start (another) company first and then try to figure out an idea worth
pursuing. The fact that the older founders tend to have more domain experience
helps them with this strategy.

~~~
SiVal
Ah, interesting point. This isn't quite the opposite of what I was saying, but
it's definitely different. You're saying the youngsters are passionate about
solving a specific problem, which is opposite of my speculation that the
oldsters have the problem in mind. But you aren't saying that the oldsters
just want a vehicle for their _technical_ skills, you're saying they want a
vehicle for their _business_ skills.

Interesting observation....

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nitroscott
I'm amazed no one has commented on the fact that the pool of potential
entrepreneurs under the age of 25 is incredibly small (most kids ages 0-18
aren't out there starting companies, and a big chunk are in college) versus if
you're 50+ there is a much bigger pool (reasonably ages 50-75) and you
probably have the means and connections to be more successful.

I'm surprised it's only twice as many...

~~~
pmarca
There aren't that many qualified people over the age of 50 with the energy and
determination to mount another startup effort again. It happens, but often
people who have done well in their careers simply won't subject themselves to
that level of trauma again.

Plus, the marvelous yet infuriating problem that we have in this industry is
that the people who succeed young often make a lot of money and check out.

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pbreit
Wadhwa must be taken with very large grains of salt as he is relentlessly
pushing an agenda which is probably not completely accurate. How are they
defining entrepreneur here? Including dry cleaning shops and law practices?
And are they having the kind of success as Zuckerberg, Gates, Jobs, Page/Brin,
Yang/Filo, Omidyar, Musk, and on and and on and on?

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bdcravens
Most 24 years old never achieve those levels of success either.

$1B+ exits (not all are exits of course, but I'm talking personal financial
impact) are a pretty narrow way of defining success. Most people would call
anything 7+ figures winning at life, and I'm sure there's tons of those who
are 50+.

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dustingetz
killer quote: "Ideas come from need; understanding of need comes from
experience; and experience comes with age."

~~~
wellboy
I'd rather say experience in corporate correlates negative with the ability to
innovate. Who do you think is gonna create the next billion dollar company,
someone with 20y experience in IT or an crazy student who thinks he can take
over the world.

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gridmaths
One thing that struck me about this article is the anti-pattern : Describe the
distribution in words, then don't show the chart / graph.

I refer to "Twice as many successful entrepreneurs are over 50 as under 25;
and twice as many, over 60 as under 20. ... ". That takes a bit of parsing and
visualizing to actually make sense of, and is pretty central to the topic of
the article.

That sentence describes some sort of log-normal bump distribution. But you'd
want to compare it to the some-sort-of-lognormal distribution of population
per age to draw a conclusion.

The assumption may be "our readers are too math-dumb to read a chart". If
true, why is that? Most people can read a map, so I wonder what percentage of
people can read a population distribution and make some sense of it. How can
it be improved?

[ I created GridMaths.com [ early demo stage], so I'm actually interested in
how to get Math concepts across to young people. ]

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jared314
If the data was collected in the last 10 years, I would be curious as to what
percentage of the over 50 crowd of entrepreneurs had their existing retirement
plans affected by the last two economic downturns, thus influencing their
decision to go into, and in some cases back into, building businesses.

~~~
HarryHirsch
Oh yes. There was this rash of startups in 2003 when there was the first big
round of layoffs from chemical and pharmaceutical companies and venture
capital wasn't quite as tight as it is now.

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futhey
My first reaction is that this makes sense if you're counting restaurant
owners, etc. Also, the media isn't going to draw attention to someone of
average age doing something average, so the misconception seems expected,
although I've met very few 50 year olds hacking away on their Web 2.0 startup.

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bdcravens
"Hacking away" is a narrow definition of entrepreneurship.

~~~
mseebach
Never mind "web 2.0".

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tsotha
It's also likely people over 50 have more money saved, so it's just easier for
them to start a company. Both because they can use savings for living expenses
and because potential investors are happier when the founder has some skin in
the game.

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jvrossb
Does anyone have stats for the silicon valley specifically?

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broham
Not exactly what you're looking for, but here is some recent sample data
featuring Y Combinator - Age Rises for Some Tech-Firm Founders:
[http://online.wsj.com/article/SB1000142412788732400070457838...](http://online.wsj.com/article/SB10001424127887324000704578389103697378458.html)

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usablebytes
I don't think there is much to these statistics; surely, it was different 20
years back and it will be 20 years from now.

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n0mad01
does that not mean in other words that the utmost part of entrepreneurs is
between 25 and 50 years old?

~~~
lutusp
Statistically, one cannot locate a mean or establish a standard deviation
using only the provided remark -- the values could be nearly anywhere, with
some broad limitations.

