The recent articles proclaiming that 25 is the peak age for entrepreneurship deserve a considered and factual response. The demographic and racial profiling that has plagued venture capital and tech entrepreneurship has a new friend-ageism. This has to stop.
Factual data
In order to identify the traits of successful entrepreneurs, the Founder Institute has conducted a battery of proprietary personality and aptitude tests on more than 3,000 applicants worldwide, and then carefully tracked the progress of our nearly 1,000 enrolled founders and 350 graduates. Research scientists employed by the institute have examined the results of the successful founders and the less successful cases, looking at high-level traits and even examining test results on a question-by-question basis.
The research shows that an older age is actually a better predictor of entrepreneurial success, and that three other traits also correlate strongly to success – strong fluid intelligence, high openness and moderate agreeableness.
These are the four key traits of entrepreneurial success:
1. Older age has shown in the data to correlate with more successful entrepreneurs up to the age of 40, after which it has limited or no impact.
Our take: older individuals have generally completed more complex projects – from buying a house to raising a family. In addition, older people have developed greater vocational skills than their younger counterparts in many, but not all, cases. We theorise that the combination of successful project completion skills with real-world experience helps older entrepreneurs identify and address more realistic business opportunities.
2. Fluid intelligence is a largely genetic trait that measures one’s ability quickly to learn a rule set and apply the learned logic to solving problems. It can also be referred to as abstract thinking, and fluid intelligence declines with age.
Our take: entrepreneurs are constantly faced with new problems that need to be understood and solved within minutes – from sudden resignations to service outages. It makes sense that they require fluid intelligence to succeed.
3. Openness is a Big Five personality trait that measures the ability to see and appreciate the world around one. It is often synonymous with curiosity, adventure or cultural awareness.
Our take: entrepreneurs, particularly in fastgrowth start-ups, need to challenge accepted norms and be open to changes and new information that affect the success of their enterprise.
4. Agreeableness is another Big Five personality trait that measures co-operation as opposed to antagonism. It can be synonymous with compassion or, conversely, with suspicion.
Our take: a moderate level of agreeableness correlates with the ability to stick to a chosen path despite conflicting information and nay-sayers, allowing an entrepreneur to persevere in the face of obstacles.
Our methodology
The 3,000-plus tested applicants come from 17 cities in four continents, and range in age from 17 to over 60. Applicants self-select as being interested in entrepreneurship by applying to the institute in the first place. Twice each year, the institute expands the breadth of the test with different batteries, lasting as long as three hours, providing a greater set of data to identify new traits of success. In addition, the institute enrolls a number of semesters per year without using the test results so that we have a control group to measure the effectiveness of the test results in admissions.
Since the institute is only 25 months old and the oldest graduates are only 18 months out of the programme, there are no merger and acquisition deals or public offerings among the graduates yet. So the institute uses a careful performance evaluation of founders and their companies to identify their relative "success".
Each founder is rated weekly during the programme by a subset of their closest peers in their programme, rated twice throughout the programme by seasoned chief executive mentors, and tracked quarterly after graduation through self-reporting on key metrics, such as revenue growth and market traction, with validation of this progress by the Founder Institute itself. All this data is collected, processed and analysed twice a year to check, validate and change our assumptions.
Only 39% of applicants are under 30, and of those who graduate, 36% are under 30. The average age of all graduated founders is 34.4 years, and the performance results of graduates speak for themselves:
The testing results
The admissions test itself predicts success well by factoring in age and the other traits. 53% of the time the test will predict the assessment of a founder’s success by peers and mentors within 5%. The predictions of the test are off by 20% or more in only 14% of cases.
Conclusion
Age is only one factor among many in predicting the success of entrepreneurs, and anybody at any age can break any moulds put forward by so-called experts. However, it is clear that the stories of a few "college-dropout turned millionaire" start-up founders have clouded the picture for both the mass media and the tech industry. We have romanticised the idea of a young founder because, well, it is a great story, but these stories are not the norm. In the end, classic biases of gender, race and age need to be discarded for a real science of success.
This article was first published at techcrunch.com/2011/05/28/peak-age-entrepreneurship/