Many media outlets pay attention to stories of college dropouts of 20-something age who built billion-dollar businesses from scratch. Famous personalities like Steve Jobs, Bill Gates, and Mark Zuckerberg have made it clear that you need to be young to succeed in business. Is this true or a myth?
We used data from the U.S. Census Bureau and the Kauffman Foundation to distinguish fact from fiction. The following metrics were used to determine the optimal age to start your business:
- Business Survival Rate
- Education Attainment
- Industry Experience
- Earning Capacity
- Perceived Opportunities
- Age range of highly profitable founders
Continue reading to find out the ideal age to start your business.
1. More Than Half of Businesses with Lasting Power Were Founded by Entrepreneurs in Their 30s
The number of years a business has been in operation is one way to gauge its success. Studies have shown that over half of all businesses fail to make it past their fifth year. There are many reasons why a company closes. However, how the owners keep the doors open for three years tells a lot about their willingness to start a business.
According to the Census Bureau 2015 data, there are approximately 1.17 million companies between 6 and 10 years of age. The highest percentage of companies that were founded by founders under the age of 36.5, is 55 percent. At 4.8 percent, the lowest percentage of companies started by owners in their 20s was found.
Our finding is supported by a longitudinal study , which covered the period 1979-1992. The study concluded that survival rates are lower for those who start young. Your survival rate will increase as you get older. Age has a positive impact on survival of a business. This is evident starting at 32 years.
2. 2. Successful founders started in their mid-thirties
It makes sense to start your business in your mid-thirties as education, experience and funding all combine. This is supported by the data. The 2013 study by Cowboy Ventures examined companies that were founded in 2003 and had a value of at least $1B in the public or private markets. The Unicorn Club was a collection of 39 companies that they created. They discovered that founders under 20 were not the norm. Their founders were 34 years old at the time their company was founded.
The same is true in the tech sector. A study by Kauffman found that nearly half of US-born tech entrepreneurs were in their mid-thirties at the time they started their business. As with the Cowboy Ventures study findings, entrepreneurs in their 20s and early twenties were not the norm. They made up just five percent of the sample.
Almost half of founders in the tech industry are in their mid-thirties.
This trend is supported by a more recent study. First round, an early stage venture capital firm, surveyed over 700 business owners and found that half of them founded their businesses between the ages 31 and 40. Only 3 percent of respondents started their businesses in their 20s, which is the lowest percentage among the age groups.
3. Opportunities are strongest in your mid-thirties
People are the most important thing in business. Sometimes it is who you know that decides whether or not you start a company and whether your company succeeds. It can be beneficial to both sides to know other entrepreneurs.
Research shows that people are more likely to start their own business if they have a connection with an entrepreneur, such as a friend, family member or business associate. Interacting with other entrepreneurs is a key to unlocking networking opportunities. According to the 2015 Global Entrepreneurship Monitor, people who start at 35 are more likely to have a strong network of entrepreneurs. Another reason to consider starting a business in your mid-thirties.
In their thirties, people tend to be more familiar with entrepreneurs than they are in their thirties.
Source: GEM 2015
Additionally, opportunities are more likely to become available if you have more entrepreneurs. These two factors seem to be related for those in their thirties. According to the 2015 Global Entrepreneurship Monitor, perceived opportunity will be strongest in your mid-thirties. Similar trends were also noted in the 2013 Global Entrepreneurship Monitor.
Entrepreneurs are more likely to help people see more possibilities.
Source: GEM 2013
Opportunities are more abundant in the mid-thirties than education, funding, and experience. You will likely be connected to other business owners at this time of your life, who can both be role models and provide you with additional opportunities.
4. Many successful founders have advanced degrees
If 20-year-old entrepreneurs were the norm in business, you would not expect to see many successful founders with advanced degrees. A Kauffman study found that many business owners hold postgraduate degrees. This not-for-profit company polled more than 500 entrepreneurs from high growth industries. They found that 95 percent had bachelor’s degrees, with 47 percent holding advanced degrees.
Business owners tend to be well educated
The Kauffman research is supported by 2016 research by Bloomberg. Global provider of financial news, information and data gathered data about US companies that received at least $20,000,000 in venture capital or other equity funding between 2009 and 2015. Bloomberg found that 9.3 percent of internet founders were dropouts and received funding. Except in real estate, more founders from all industries were educated to a Master’s, MBA or PhD degree than any other.
Education for founders who are awarded VC funding
The Council of Graduate Schools states that graduate students are on average 32.4 years old, meaning they will be in their thirties when they graduate.
5. The majority of business owners have significant industry experience
Most entrepreneurs have extensive industry experience before they start their business. Kaufmann’s Anatomy of Entrepreneur shows that 50.9 percent of founders in high-growth industries have 6-15 years of industry experience before they start their first business.
Business owners tend to be experienced in their field
It is safe to assume that 95 percent of founders in high-growth industries have at least a bachelor’s degree. This means that many of them founded their first company after six to fifteen years of industry experience. They would have launched their businesses in their thirties for those with more advanced degrees.
They wait too long to make the transition from working to entrepreneurship. This is due to the fact that it takes time and effort to acquire the skills and knowledge necessary to succeed in business. Entrepreneurs feel more confident when they have the necessary skills.
This claim is supported by the 2015 Global Entrepreneurship Monitor. Nearly 6,000 adults of working age were surveyed in the US. The results showed that people in their thirties are the most confident about their abilities to start businesses at 63 percent. At 36%, the 18-24 age group scored lowest. According to the study, many are still in school and have little business experience.
These studies show that entrepreneurs gain significant industry experience over time before feeling confident in their ability to start a company. They feel most confident when they are near the top of their careers.
6. The mid-thirties are a peak time for entrepreneurs
Entrepreneurs need funding to make their ideas a reality. This is in addition to industry experience and higher education. The Census Bureau found that 75 percent of entrepreneurs in the country relied solely on their personal savings and assets to finance their businesses. The mid-thirties and twenties are the most financially independent age group. They have the ability to save enough money to finance their business, and they may be able to access credit to pay the rest.
An PayScale survey shows that both men & women see rapid pay growth up to their mid-thirties, when both genders are close to their peak earnings. Their older counterparts have more disposable income, which allows them to save more money for their business. Although those in their 40s and 60s earn more, it is not as substantial.
A significant increase in income can help entrepreneurs in their thirties be financially prepared. A InsuranceQuotes survey found that 82% of small businesses have cash flow issues. The ability to manage cash flow problems can make the difference between survival and bankruptcy in many cases. People in their thirties can save more to avoid cash flow problems or get credit to cover the difference.
Bottom line: Is the Best Age to Start A Business
Data supports the assertion that it is not true that you need to be young to succeed in business. Success comes later in life, after you have at least completed college, developed your skills, increased your income and cultivated your professional network. These factors can often work in your favor during your thirties, according to our analysis. Adeo Rossi is the founder of The Founder Institute. He also echoes our findings. Adeo Rossi wrote that older age had been shown to correlate with more successful entrepreneurs until the age of 40. After which, it had limited or no effect.