Today, I rang the opening bell of the NYSE with Steve Howe, EY US Chairman, in honor of the 30th anniversary of the Entrepreneur Of The Year Awards, a program that has honored great visionaries much before their time. More than ever, entrepreneurship is celebrated, and it should be. But with all this celebration, few understand how much the start-up formation pace is on the decline and has been for almost four decades.
The state of entrepreneurship in America matters and is a critical driver of U.S. economic growth. We understand the importance of creating policies that encourage the formation of new businesses. But that requires us to consider the facts, as opposed to the myths, about entrepreneurship—and entrepreneurs.
There’s a perception that we live in a “golden age” of entrepreneurship. That perception is partly fueled by headline-grabbing success stories like Uber and AirBnb, and the growth and popularity of business school entrepreneurship centers. Unfortunately, it could not be further from the truth. In reality, the rate at which new businesses are being created sits at historic lows, according to the most recent research by the Kauffman Foundation.
There is also a perception that the typical entrepreneur is a 20-something cut from the same cloth as Mark Zuckerberg. In reality, as Forbes reported, “the average entrepreneur is 40 years old when they launch their startup, and people over 55 are twice as likely as people under 35 to launch a high-growth startup.” Additionally, based on Kauffman Foundation research, The New York Timesreported that first-time entrepreneurs are getting older: In 2015, 24.3 percent were between 55 and 64, up from 14.8 percent in 1996.
A September 2016 EY survey, The Millennial Economy, suggests possible reasons for this trend.
Saddled with low wages, student loan debt, and concerns about the economy, millennials are more risk-averse than the baby boomers who founded companies like Apple and Ben & Jerry’s.
Interestingly, while our millennial survey respondents did not see entrepreneurship as a viable career path for themselves, they nonetheless believed their generation was more entrepreneurial than previous ones.
Clearly, we must strive to create a better startup climate for entrepreneurs of all ages. Still, there are reasons to celebrate the strengths that older entrepreneurs bring to their ventures. Investor RonJon Nag, who founded invention incubator Thinkica, told the Financial Times, “Older entrepreneurs are likely to have made more mistakes and are less likely to repeat them.” Founders backed by Nag have an average age of 38, and many are in their 50s.
Older founders also typically have more—and deeper—connections and industry knowledge, both of which can boost their odds of success. With deep industry knowledge, for example, comes a better ability to spot and develop potentially transformative innovations. In addition, as the baby boomer population grows, members of this group are uniquely positioned to recognize this market’s needs.
As we consider how to best serve would-be entrepreneurs, we must recognize that people launch successful businesses at various ages, and that their needs may vary accordingly. For example, a study co-authored by Krisztina ‘Z’ Holly found that the availability of health insurance fosters entrepreneurship—especially for those who are older, married, and parents.
Of course a range of policies, including those related to immigration and raising capital, impact the startup rate. But to make the right decisions, we must first know where we really stand.
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