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If The Shoe Fits: Startups, Millennials and the Future

Friday, December 14th, 2018

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

For years the media has been proclaiming that the great majority of young people want to be entrepreneurs or work for a startup, as opposed to a larger/older company, because startups were “cool.”

Now it looks like their ardor is what’s cool, as in cooled off.

Research suggests entrepreneurial activity has declined among Millennials. The share of people under 30 who own a business has fallen to almost a quarter-century low, according to a 2015 Wall Street Journal analysis of Federal Reserve data. (…) Two years ago, EIG’s president and co-founder, John Lettieri, testified before the U.S. Senate, “Millennials are on track to be the least entrepreneurial generation in recent history.”

What changed?

Maybe they learned that wanting to and doing it are very different. That they will work far harder for themselves, even if they are well-funded, or that startups fail  far more often than they succeed (90% vs 10%).

A survey of 1,200 Millennials conducted in 2016 by the Economic Innovation Group found that more Millennials believed they could have a successful career by staying at one company and attempting to climb the ladder than by founding a new one.

But maybe there is something else going on.

Maybe they have figured out that the world doesn’t need another social network / dating app / review site / etc.

Maybe investors have realized that monetizing through ads isn’t a good road to sustainable profitability, considering the push for more European-style privacy.

Or maybe, just maybe, reality has reared its ugly head and they’ve figured out they don’t have enough experience or know enough to create enterprise solutions for real-world needs.

Matt Krisiloff, the former Y Combinator executive, added that the opportunities “to start compelling start-ups,” for college students without industry-specific knowledge, “has vastly shrunk.”

Maybe they aren’t all looking for a safe harbor in the next downturn (there aren’t any), but for the experience that will ground their startup in their 40s, 50s and beyond.

What they found is that the average age of a startup founder is about 41.9 years of age among all startups that hire at least one employee, and among the top 0.1 percent of highest-growth startups, that average age moves up to 45 years old. Those ages are taken from the time of the founding of the company.

Maybe our media-inspired view of entrepreneurs is a reflection of the warped views of Silicon Valley as engendered by VCs.

VCs believe they have “pattern recognition” abilities that they simply don’t have. Instead, they rely on suppositions and stereotypes that don’t match the underlying data on startup success. The same reason why older founders are ignored by the ecosystem is the same reason why women and other minorities struggle in the Valley: It’s really not about what you build, but what you look like while building it.

Maybe the entrepreneurs of the future will look more like our real world in all its diverse, messy glory.

And a final “maybe.”

Maybe there is room to hope.

Image credit: HikingArtist

Data Says Older Entrepreneurs are More Successful

Tuesday, April 17th, 2018

http://www.hawking.org.uk/

Yesterday’s Golden Oldie ended with my sarcastic comment about tech’s distorted and manipulative approach to data a la “gut instinct” and “pattern recognition,” especially when it comes to age and gender equity.

Data only matters when it supports prevailing prejudice.

A couple of years later I linked to articles that clearly showed that age was more a mental state than a physical one, including this one.

Vivek Wadhwa, a Duke University researcher, worked with the Kauffman Foundation in 2009 to explore the anatomy of a successful startup founder. That survey of more than 500 startups in high-growth industries showed that the average founder of a successful company had launched his or her venture at the surprisingly high age of 40. The study also found that people over 55 are almost twice as likely to launch high-growth startups than those aged 20 to 34.

In March, Forbes again focused on the fact that older entrepreneurs are more successful.

…late-career entrepreneurs benefit from the kind of deep domain expertise that younger counterparts lack. The more intimately an entrepreneur knows their particular industry, after all, the better positioned they are for success. A newly published study of hundreds of companies confirmed just this: the startups most likely to succeed have technically savvy founders who know their space inside and out. A classic example is Garmin, maker of the ubiquitous GPS devices. The company was started in 1989 by two career aerospace contractors (in their 40s and 50s, at the time) who pooled their technical know-how to turn military-grade technology into consumer tools. Today the company is worth more than $10 billion.

Even Brian Acton was almost ancient when he founded WhatsApp at 37.

Earlier this month, KG sent along an article from TechCrunch that added more data.

What they found is that the average age of a startup founder is about 41.9 years of age among all startups that hire at least one employee, and among the top 0.1 percent of highest-growth startups, that average age moves up to 45 years old. Those ages are taken from the time of the founding of the company.

The researchers broke down the population of founders along a number of lines, including geography and industry. They found little difference in their results between subcategories, and, in many cases, the subcategory definition actually increased the average age. For instance, industries like oil and gas can have average founder ages as high as 51.4 years old. The researchers wrote that “The only category where the mean ages appear (modestly) below age 40 is when the firm has VC-backing. The youngest category is VC-backed firms in New York, where the mean founder age was 38.7.”

One interesting dynamic in the data is that older entrepreneurs appear correlated with better startup performance. “For example, the 1,700 founders of the fastest growing new ventures (1 in 1,000) in our universe of U.S. firms had an average age of 45.0 (compared to 43.7 for the top 1% and 42.1 for the top 5%),” the researchers wrote.

As you mull these numbers, stay aware that these are companies with actual, and often substantial, revenues, as opposed to valuations based on fundraising and hype.

Image credit: Hawking.org

Golden Oldies: The Shallowness of Youth and the Myth of Age

Monday, April 16th, 2018

https://www.flickr.com/photos/deryckh/2884858619/

Poking through 11+ years of posts I find information that’s as useful now as when it was written.

Golden Oldies is a collection of the most relevant and timeless posts during that time.

This post is from 2014. Study after study has proven that more successful founders are in their 40s and 50 than in their 20s. More on the most recent studies this week.

Read other Golden Oldies here.

On one hand you have Jim Goetz, partner at Sequoia Capital, lamenting the lack of enterprise startups and on the other you have Sequoia’s Michael Moritz, “an incredibly enthusiastic fan of very talented twentysomethings starting companies. They have great passion. They don’t have distractions like families and children and other things that get in the way.”

Other things such as experience.

The shallowness of so many of today’s startups makes a great deal of sense if you remember the advice given to every aspiring writer, i.e., write about the things you know; write from your own life and experiences.

Investors give entrepreneurs similar advice, which is probably why you have an abundance of hook-up apps, gossip apps, games and social time-wasters.

And then there is the question of what purpose our economic growth actually serves. The most common advice V.C.s give entrepreneurs is to solve a problem they encounter in their daily lives. Unfortunately, the problems the average 22-year-old male programmer has experienced are all about being an affluent single guy in Northern California.

Monday we looked at the economic dangers from Silicon Valley’s generational gap highlighting the incredible waste of talent engendered.

But the real stupidity in the rush to fund the young is that their success is a myth and not backed up by any kind of hard data.

A 2005 paper by Benjamin Jones of the National Bureau of Economic Research studied Nobel Prize winners in physics, chemistry, medicine, and economics over the past 100 years, as well as the inventors of revolutionary technologies. Jones found that people in their thirties contributed about 40 percent of the innovations, and those in their forties about 30 percent. People over 50 were responsible for 14 percent, the same share as the twentysomethings. Those under the age of 19 were responsible for exactly nothing. One study found that even over the last ten years—the golden age of the prepubescent coder, the youth-obsessed V.C., and the consumer Internet app—the average age of a founder who could claim paternity for a billion-dollar company was a rickety 34.

Everybody in tech focuses on the importance of “data driven” decisions—until the data doesn’t support the decision they want to make.

That’s when they start talking about the importance of “gut instinct” and “unconscious pattern recognition.”

Data only matters when it supports prevailing prejudice.

Flickr image credit: Deryck Hodge

If the Shoe Fits: How Old is an Entrepreneur?

Friday, July 22nd, 2016

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

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Age is more a mental state than a physical one.

I’ve always said that smart people say/do stupid things and venture capitalist Vinod Khosla is proof of that.

“People under 35 are the people who make change happen,” said, “People over 45 basically die in terms of new ideas.”

The problem is that the data the tech world is so enamored with doesn’t back that up.

Vivek Wadhwa, a Duke University researcher, worked with the Kauffman Foundation in 2009 to explore the anatomy of a successful startup founder. That survey of more than 500 startups in high-growth industries showed that the average founder of a successful company had launched his or her venture at the surprisingly high age of 40. The study also found that people over 55 are almost twice as likely to launch high-growth startups than those aged 20 to 34.

The term “high growth” is key. 2010′s top two fastest-growing tech startups, according to Forbes, were First Solar, founded by a 68-year old, followed by Riverbed Technology, co-founded by entrepreneurs who were 51 and 33 at the time.

He should also inform the Merage Institute, which awards $100K to the top startup by a 45+-year-old founder (more runner-ups at the link).

  • In 2016 it was iSilla – Movement for people with disabilities
  • 2nd Prize –  SonicBone – Bone Age – Ultrasound Device for Bone Age assessment
  • 3rd Prize – Inensto – Aluminum Air Battery

In 2015 they were:

  • 1st Prize – NiNiSpeech
  • 2nd Prize – A new Hydrogen Energy Storage
  • 3rd Prize – Glasses for AMD Macular Degeneration

Brian Acton was 37 when he founded WhatsApp.

Notice that all of them solve a real problem — a problem of which they wouldn’t be aware if they hadn’t faced it directly or indirectly themselves.

Which meant they had real world experience.

Even Mark Zukerberg had real world experience; he wanted an easy way to engage and keep up with his friends. Remember, Facebook was originally started for college kids.

The reason Khosla is so far off base, is that an entrepreneur can only disrupt that with which she is familiar enough to figure out a better way or see a hole and fill it.

Hence young males created Tinder and its clones to hookup and Match and its clones for something more permanent.

If you look at socially oriented startups, many of their founders, both young and old, saw the need first hand, while volunteering and/or traveling, came home and created a solution that answered that need.

It’s not a matter of age.

It’s a matter of three things

  1. See the need/experience the want/desire what isn’t
  2. Think of a way to solve/provide it
  3. Possess the drive, tenaciousness, guts and slight insanity required to turn an idea into a reality and a reality into a company

And those three things can happen to anyone at any age.

My thanks to KG for reminding me of how important it is to help smash these myths.

Image credit: HikingArtist

Entrepreneurs: Fundraising

Thursday, February 19th, 2015

kg_charles-harris

It’s Valentine’s Day and I’m in deep fundraising mode.  In essence, I’m the guy at the dance trying my best to land the pretty girl, and experiencing the challenges, rejection and hard work that this entails.

The process and preparation has made me reflect on a number of dearly held “truths” among startup founders.  Most consider fundraising highly distracting and grueling; preventing them from doing the real work founders should be focusing on.  Add to this the perception that investors and VCs often come across as assholes, and it becomes a chore worse than scrubbing public bathrooms.

I view it very differently.  To me it is a real test of whether the Kool-Aid I’m drinking is actually as tasty as I believe it is.  The fundraising process is an opportunity to interact with smart people (some are truly great people) who see a lot of deals and problems and have a very difficult challenge — putting themselves in the customer’s shoes without having their experience or being in their situation.  As a consequence, they have to try to imagine themselves as someone they are not and ascribe value to problems they are not dealing with personally.  If you try it, you’ll see that it’s virtually impossible.

This causes the constant delays, increased information search, desire for proof points, and the follower behavior that looks so ridiculous from the outside.  But we who are starting companies don’t have to deal with problems as difficult as this; we just have to understand the customer’s problem and deepen our knowledge of them.  And we’re usually not dealing with 15 different customer types, products and industries in a single day.  Just one product, one customer and one industry everyday for an extended period of time.  So let’s be a little more humble about the significantly more difficult work of making investing decisions.

Beyond that, investors often provide introductions (in their search for proof points) to knowledgeable and interesting people from whom I can learn.  I usually don’t have the time to seek them out (or even know who they are) unless I encounter them in a fundraising situation.  So I’m grateful for the investors that seem so frustrating — they make me more knowledgeable and professional every step of the way.

But the most important thing is my perception of My Baby — the product and company I’m creating.  As a parent, I believe my baby is the most beautiful and important thing that has happened to the world in recent history, and I expect others to agree with this.  It is so easy for me to believe that when people don’t see this, it’s because they are blind, stupid or narrow-minded.  Sometimes it can be the case, but I remind myself of how often I visit new parents who proudly show me their new baby, expecting me to offer compliments on its cuteness and how often I’m amazed that something so ugly can actually be called human.  Yes, I’m being extreme, but I’m sure that this is how investors feel when they sit through hours upon hours of meetings every day with delusional founders.  Or maybe they are just pointing out a blemish on the cheek of the baby and we react as if it’s a mortal challenge, rather than take it as good feedback and a learning experience.

Ultimately, we need to have humility and compassion for investors.  Making money this way is really difficult.  And if we mix in the politics of being part of an institution I’m amazed that they actually manage to keep going every day.  We have passion for solving a problem or seeing a market opportunity.  They are just trying to maximize returns and hope to be able to work with great founders to accomplish this. 

There is no question that we founders have the better deal.  More fun, more learning, more challenges, more passion.  And for this we have to pay a price – the risk of loss and temporary poverty, much heartburn and far too much work. 

I enjoy what I do.  In fact I love it.  And investors help me to accomplish my vision in so many ways, even when they reject My Baby or me.  I’m grateful each time they invest and each time they don’t – they are putting me in a stronger position to succeed whatever they do.  Thank you.

Image credit: Quarrio

Entrepreneurs: the Shallowness of Youth and the Myth of Age

Thursday, March 27th, 2014

http://www.flickr.com/photos/deryckh/2884858619/On one hand you have Jim Goetz, partner at Sequoia Capital, lamenting the lack of enterprise startups and on the other you have Sequoia’s Michael Moritz, “an incredibly enthusiastic fan of very talented twentysomethings starting companies. They have great passion. They don’t have distractions like families and children and other things that get in the way.”

Other things such as experience.

The shallowness of so many of today’s startups makes a great deal of sense if you remember the advice given to every aspiring writer, i.e., write about the things you know; write from your own life and experiences.

Investors give entrepreneurs similar advice, which is probably why you have an abundance of hook-up apps, gossip apps, games and social time-wasters.

And then there is the question of what purpose our economic growth actually serves. The most common advice V.C.s give entrepreneurs is to solve a problem they encounter in their daily lives. Unfortunately, the problems the average 22-year-old male programmer has experienced are all about being an affluent single guy in Northern California.

Monday we looked at the economic dangers from Silicon Valley’s generational gap highlighting the incredible waste of talent engendered.

But the real stupidity in the rush to fund the young is that their success is a myth and not backed up by any kind of hard data.

A 2005 paper by Benjamin Jones of the National Bureau of Economic Research studied Nobel Prize winners in physics, chemistry, medicine, and economics over the past 100 years, as well as the inventors of revolutionary technologies. Jones found that people in their thirties contributed about 40 percent of the innovations, and those in their forties about 30 percent. People over 50 were responsible for 14 percent, the same share as the twentysomethings. Those under the age of 19 were responsible for exactly nothing. One study found that even over the last ten years—the golden age of the prepubescent coder, the youth-obsessed V.C., and the consumer Internet app—the average age of a founder who could claim paternity for a billion-dollar company was a rickety 34.

Everybody in tech focuses on the importance of “data driven” decisions—until the data doesn’t support the decision they want to make.

That’s when they start talking about the importance of “gut instinct” and “unconscious pattern recognition.”

Data only matters when it supports prevailing prejudice.

Flickr image credit: Deryck Hodge

Entrepreneurs: What is Your Worldview?

Thursday, January 9th, 2014

Have you noticed that many of the hot startups from young founders are relatively shallow—focused on sharing pictures and facilitating casual hookups.

Facebook was originally a way for college students to connect with each other campus by campus and Twitter was more a digital gossip line than a vehicle for the likes of Arab Spring.

There’s a simple reason for that—people tend to create solutions for the problems they find in their own lives.

It’s not so much how old you are but your experiences and how you see the world that makes for great entrepreneurs—but more are older than younger.

“The average age of a successful entrepreneur in high-growth industries such as computers, health care, and aerospace is 40. Twice as many successful entrepreneurs are over 50 as under 25. The vast majority — 75 percent — have more than six years of industry experience and half have more than 10 years when they create their startup,” says Duke University scholar Vivek Wadhwa, who studied 549 successful technology ventures. Meanwhile, data from the Kauffman Foundation indicates the highest rate of entrepreneurship in America has shifted to the 55-64 age group, with people over 55 almost twice as likely to found successful companies than those between 20 and 34.

These are the people who often tackle enterprise and healthcare challenges, because they have been stymied with them in their own work.

Additionally, the larger the worldview the greater the level of empathy leading to substantially more compassion and a stronger desire to “fix it.”

A good example of this is found in Project Daniel.

Project Daniel started in 2012, when Mick Ebeling read a story in Time magazine about Daniel Omar, a then 14-year-old Sudanese boy who lost both his hands from a bomb. It inspired Ebeling to assemble a team capable of creating a low-cost, 3D-printed prosthetic on consumer-grade 3D printers.

Ebeling is the founder of Not Impossible, a company dedicated to “technology for the sake of humanity” which also developed the Eyewriter.

Now you, too, can volunteer with a team, expand your worldview and help change lives, as well as expand your network and have great bragging rights.

YouTube credit: Not Impossible Labs

Entrepreneurs: Valley Unreality

Thursday, July 12th, 2012

After the 2010 debut of the film “The Social Network,” which made Mark Zuckerberg and his band of Facebook friends famous: the public became enthralled with technology geeks much as it was with movie stars.

Two years before The Social Network Jesse Draper, great granddaughter of California’s first venture capitalist, created and hosts the Silicon Valley Internet talk show “The Valley Girl Show” where entrepreneurs do stupid stuff in the name of “taking themselves less seriously.”

Considering the media focus on entrepreneurs can a reality show be far behind?

No, but don’t look for substance over form.

Among those is Randi Zuckerberg, Mark’s colorful sister who left Facebook last summer and recently signed on to be an executive producer of a Bravo reality show that will chronicle the hard-partying life of 20-something entrepreneurs.

Many in the Valley aren’t enamored with the idea and with good reason.

Watching anyone think and work on a computer is boring, but creative editing should effectively eliminate the thought, work and effort leaving only the stuff that will cause viewers to shake their heads and adequately feed the media hype machine.

It’s also every inaccurate, since most successful entrepreneurs are not twenty-somethings.

Vivek Wadhwa’s, a Duke University researcher who worked with the Kauffman Foundation, survey of over 500 startups operating in “high-growth industries” showed that the average founder of a successful company launched his or her venture at the surprisingly high age of 40. The study also found that people over 55 are almost twice as likely to launch high-growth startups than those aged 20 to 34.

And gray entrepreneurs outpacing green ones isn’t an isolated trend that’s only occurred in the past few years. “In every single year from 1996 to 2007, Americans between the ages of 55 and 64 had a higher rate of entrepreneurial activity than those aged 20-34,” says Dane Stangler, a research manager at Kauffman.

Of course, young, good looking, single, articulate folks in their twenties who can talk a great story about their world-changing app over drinks at a cool bar are better TV material than those who labor and then go home to spouse, family and mortgage.

My guess is the show will offer about as much reality as does the Real Housewives franchise.

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Image credit: Bravo TV

Leadership's Future: A Two-Edged Sword

Thursday, January 22nd, 2009

I’ve focused a lot over the last six months on the problems in education and attitudes of the workforce-to-be and it’s been a pretty dismal picture. Obviously, there are plenty of exceptions, but that, too, is problematic.

It’s not just that entrepreneurship attracts the best and brightest, is also attracts a significant percentage of high-initiative students and it’s those with initiative who drive innovation wherever they’re at.

And there lies the problem.

Not because these kids want to solve problems, start businesses and attack the world’s social ills—that’s great. But the MAP that drives these kids is the same MAP that is so desperately needed by today’s corporations.

“”They’re [the Net generation] great collaborators, with friends, online, at work,” Mr. [Don] Tapscott wrote. “They thrive on speed. They love to innovate.” … A report issued last year by the Kauffman Foundation, which finances programs to promote innovation on campuses, noted that more than 5,000 entrepreneurship programs are offered on two- and four-year campuses — up from just 250 courses in 1985…Since 2003, the Kauffman Foundation has given nearly $50 million to 19 colleges and universities to build campus programs.”

We live in a world of impatience; Boomers, contrary to some perceptions, were and are impatient; Gen X is still more impatient and it’s increased by an order of magnitude in Gen Y—and it will continue to increase the faster the world moves and changes.

And, to paraphrase, the world, it is a changin’.

The youngest generation is the most impatient, and that impatience is traveling up.

Yet, it is those with initiative, not just impatience; those with a desire to accomplish, not a sense of entitlement, that companies need to attract if they want to compete and thrive in the new world.

These are the people who can fuel innovation and corporate America’s ability to succeed.

These are the people you have to hire and manage.

Are you ready?

Your comments—priceless

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