Middle Age Entrepreneurs Need Not Apply: Silicon Valley does not want you

Founding your own company is the American Dream. But being an entrepreneur requires skills and capital. For skills you take time working in a field, learning everything you can about a particular area so that you'll have a unique, sustainable and defensible competitive advantage. Only after toiling away for years developing a deep knowledge about a specific market and then refining a winning concept can you then approach the capital markets about funding your brilliant idea. For new markets, "capital markets" means venture capital. The only problem is that if you are over 40 (and possibly over 30), you're almost certain to be rejected before you can say "full-ratchet anti-dilution".

You are guilty of being too old and all of the tweaking of the business plan and/or your pro forma models won't change the fact that you are no longer in your twenties. Yes, Silicon Valley is as ageist as Hollywood movie studios or New York modeling agencies.

The ageism label is not a random attack on Silicon Valley by an anonymous outsider. It comes from one of the most inside of the insiders, Fred Wilson, a venture capitalist at Union Square Ventures. Fred is also a blogger and his blog (A VC blog) one of the most read venture capital blogs.

Fred kicked off the debate three weeks ago when he posted "The Mid Life Entrepreneur Crisis":

...do you know any 45 year old entrepreneurs?

Yes I do. But only one of the entrepreneurs in our current portfolio is older than 45. And he'll probably be starting companies until he dies. It's what he does.

But the facts are pretty eye opening. Nine of our eleven entrepreneurs are in their 30s. One is in his 20s, and one is in his 50s.

That says to me that prime time entrepreneurship is 30s. And its possibly getting younger as web technology meets youth culture.

And a firestorm ensued. It's one thing to be ageist, it's another thing entirely to be called out for it.

Wilson, who is 45 himself, later posted a follow-up where he hedged his position a bit and then further "clarified" it here:

"I don't think it's totally about age, it's about a mindset. If you are willing to throw out old habits and start anew, you can compete with anyone."

The influential Silicon Valley gossip blog Valleywag then weighed in with their post "Is 30 Too Old To Start a Company"?

Bad news for the graybeards: a quick check on the great tech companies of the last three decades shows a pretty brutal rule. The most spectacular successes are launched by founders still in their twenties. The peak age: 26. Within a year of that age were Google's Sergey Brin and Larry Page, Apple's Steve Wozniak, Yahoo's Jerry Yang, Skype's Janus Friis, Chad Hurley from Youtube, and Tom Anderson from Myspace.

ValleyWag did note a few exceptions of companies who were founded by individuals in their mid-30s (including Skype and MySpace). Older, yes, but certainly not silver surfers.

Is Silicon Valley ageist? Inarguably yes. But the story doesn't stop here.

First, we should all know that while "numbers don't lie, statistics do" and we should be suspicious of any quick analysis done to support such broad generalities. ValleyWag could easily have changed the companies it selected for its story and created a positive analysis of successful investments of founders over 30. After all, Mike Ramsey was 47 when he founded TIVO and Reed Hastings was 37 when he founded Netflix. Second, and more importantly, Wilson and all of his VC peers would fund a paunchy, balding 50-year old in a nanosecond if they thought it was a good investment.

VCs are as capitalistic as one can get. If they can make more money by outsourcing jobs, they'll lead the charge moving jobs at the portfolio companies they control to India and China. If there is money to be made by investing in those countries, they'll pump in investment and expertise. They are too busy maximizing their returns to have unsupportable biases get in their way. But in being so busy, they are forced to fall-back on certain time-saving generalities about which opportunities are worth pursuing. And unfortunately for old guys like us one of those generalities is that on the whole older entrepreneurs don't produce as good of returns as younger entrepreneurs.

Stated differently, the reason VCs don't invest in "mature" entrepreneurs as often as youngsters isn't any inherent dislike of older people, it's because in their experience investing in older entrepreneurs isn't where smart start-up money should be placed.

These experiences may have been the result of older entrepreneurs not being as in tune with technical movements as younger entrepreneurs or possibly that they believe that "older" workers simply have too much to lose (with family, established career, etc.) to be able to take the necessary risks or put in the incredible time commitment required to build a company from scratch. It's not hard to imagine a 25-year old thinking there is nothing more important in the universe than the success of their start-up, but it would be sad to know a 48-year old father of two who felt the same way. Whatever the reasons that feed the bias it's not unreasonable for a VC to to weigh expected focus and commitment as they decide where they are going to get the best return on their investment--regardless how we may feel about it. (Note: it's also possible that older and wiser entrepreneurs simply steer clear of the win-at-all-cost VC mentality, something that younger entrepreneurs don't have the opportunity to do, either way the results are the same.)

So what should the middle age entrepreneur do?

1. Go to other sources. Angel financing is a good place to start.
2. Make "youth" part of the team. Jim Clark did Netscape with a twenty-something Marc Andreessen.
3. Show that you and your idea are so strong that the "age factor" can be overlooked.
4. Don't equate being an entrepreneur with being funded by a traditional VC. You can be one without having the other. It's not a defeatist attitude as much as deciding which battles are worth fighting and where you allocate your effort.
5. Go for it anyway. Even VC Wilson had this advice for midlife entrepreneurs, "Don't let everything you've learned get in the way. Go for it with gusto and don't think too hard." This is perhaps the best advice ever given to would-be entrepreneurs regardless of age. As a commenter said at the bottom of one of Wilson's posts, "once an entrepreneur ... always an entrepreneur. Just maybe not a VC-backed entrepreneur." Indeed.

Finally, so us would-be middle age entrepreneurs don't end this article feeling too good about our chances with VCs, we'll leave you with an very interesting take on the subject from tech columnist Clay Shirky:

Young entrepreneurs have an advantage over older ones (and by older I mean over 30), and contra Fred’s second post, age isn’t in fact a mindset. Young people have an advantage that older people don’t have and can’t fake, and it isn’t about vigor or hunger — it’s a mental advantage.

Fortunately there appears to be no such age restrictions on blogging, so we at LifeTwo are okay for the moment.