Starting early can provide an advantage to founders, but learning from experiences and embracing risks are crucial for progress.
In the realm of entrepreneurship, there exists an ongoing debate regarding the ultimate success between middle-aged founders and those initiating ventures in their 20s and 30s. Recent studies reveal that the average age of prosperous startup founders is 45. However, founders under 40 helm more than 40% of all emerging enterprises.
Many renowned entrepreneurs kick-started their endeavors at a young age. Figures like Mark Zuckerberg, Bill Gates, and Steve Jobs launched their companies in their 20s, reinforcing the notion that youthful initiation correlates with success. Conversely, advocates for middle-aged founders argue that accumulated experience and lessons contribute significantly to their achievements.
Adding to this discourse, Kathryn Shaw, an economics professor at Stanford Graduate School of Business, along with Anders Sørensen from Copenhagen Business School, present new findings. Their research suggests that founders in their mid-20s to early 30s progressively learn and invest, eventually overseeing firms that outperform those established by older entrepreneurs.
Specifically, entrepreneurs who commence early and venture into subsequent enterprises can achieve notable success, often surpassing the accomplishments of those who start later in life. Shaw and Sørensen observe that young founders who transition into serial entrepreneurship witness a near doubling of sales revenues between their initial and subsequent ventures. Remarkably, their second enterprises tend to outsize typical firms founded by older entrepreneurs.
The authors highlight specific attributes shared by these ambitious young serial entrepreneurs that contribute to their success. Shaw emphasizes, “Serial entrepreneurs demonstrate remarkable success when they commence at a young age, as they learn while on the job.”
These young entrepreneurs who mature into serial entrepreneurship, constituting 9% of all new founders, have the potential for significant success, Shaw asserts. She describes them as a select group characterized by their proactive attitude.
Examining data from Denmark spanning from 2001 to 2016, the researchers focused on firm sales, tracking over 131,000 firms, predominantly single-founded.
On average, the founders monitored were 38 years old with 13 years of education, and 75% were male. Among the analyzed firms, which included sole proprietorships and limited liability corporations across various sectors, nearly 18% were helmed by serial entrepreneurs.
Comparatively, subsequent ventures tended to exhibit more prolonged success than standalone ones. Serial entrepreneurs’ initial firms were typically 57% larger on their launch day than those initiated by novices.
The researchers noted that young serial entrepreneurs, particularly those in their mid-20s to early 30s, experienced heightened returns with their second business. Sales figures for young founders’ first ventures averaged $92,750, increasing to $169,000 for their second, marking an 82% surge. In contrast, although older founders’ initial firms started with higher sales, nearly $125,000 on average, their second ventures were only 20% larger, never reaching the sales levels of younger entrepreneurs’ second firms.
While some founders may opt to stick with a thriving initial venture, a subset chooses to launch a second endeavor fueled by a promising idea and energy. Shaw and Sørensen also examined these portfolio founders, who maintained their first firm while establishing a second, comprising 83% of all serial founders.
Second ventures led by young serial entrepreneurs exhibited lower failure rates compared to those initiated by novices. Novice-run firms typically failed approximately three and a half years after inception.
Additionally, the researchers investigated the influence of parental entrepreneurial experience. Among the founders studied, 7% had entrepreneur fathers, with a higher likelihood of opting for an incorporated firm over a sole proprietorship, along with higher sales figures.
As young serial entrepreneurs progress, they increasingly opt to register their second venture as a limited liability corporation (LLC), safeguarding personal assets in case of failure. This transition to LLC status corresponds with increased sales between first and second ventures, indicating a correlation between risk-taking and success.
Shaw underscores the advantage of an LLC in mitigating personal financial risk, empowering entrepreneurs to undertake riskier projects. Consequently, the transition to LLC status underpins the greater success of second ventures.
In conclusion, Shaw and Sørensen identify young successful serial entrepreneurship as synonymous with portfolio entrepreneurship, labeling portfolio founders as the “stars” among serial founders. Shaw emphasizes, “We demonstrate that this is a clear path to success.”
