It’s widely believed that the most successful entrepreneurs are young. Bill Gates, Steve Jobs, and Mark Zuckerberg were in their early twenties when they launched what would become world-changing companies. Do these famous cases reflect a generalizable pattern? VC and media accounts seem to suggest so. When we analyzed founders who have won TechCrunch awards over the last decade, the average age at the time of founding was just 31. For the people selected by Inc. magazine as the founders of the fastest-growing startups in 2015, the average age at founding was only 29. Consistent with these findings, Paul Graham, a cofounder of Y Combinator, once quipped that “the cutoff in investors’ heads is 32… After 32, they start to be a little skeptical.” But is this view correct?
Our team analyzed the age of all business founders in the U.S. in recent years by leveraging confidential administrative data sets from the U.S. Census Bureau. We found that the average age of entrepreneurs at the time they founded their companies is 42. But the vast majority of these new businesses are likely small businesses with no intentions to grow large (for example, dry cleaners and restaurants). To focus on businesses that are closer in spirit to the prototypical high-tech startup, we used a variety of indicators: whether the firm was granted a patent, received VC investment, or operated in an industry that employs a high fraction of STEM workers. We also focused on the location of the firm, in particular whether it was in an entrepreneurial hub such as Silicon Valley. In general, these finer-grained analyses do not modify the main conclusion: The average age of high-tech founders falls in the early forties.
These averages, however, hide a large amount of variation across industries. In software startups, the average age is 40, and younger founders aren’t uncommon. However, young people are less common in other industries such as oil and gas or biotechnology, where the average age is closer to 47. The preeminent place of young founders in the popular imagination may therefore reflect disproportionate exposure to a handful of consumer-facing IT industries, such as social media, rather than equally consequential pursuits in heavy industry or business-to-business sectors. Read More »
President Donald Trump has demanded that pharmaceutical companies cut drug prices in return for fewer regulations. As a matter of economics, this plan makes no sense.
Politically, however, it might just work. But traditional critics of the industry should think long and hard about whether going along with the president out of fear of his wrath is a cause for celebration. Pharmaceutical firms should also consider the long-term dangers of aligning themselves too closely with the new president and his volatile brand of policy making.
What type of corporate culture is best for innovation? How ought firms and managers encourage their workers to be more creative? And if those workers fail in the pursuit of creativity, is that necessarily a bad thing?
These are the questions we wanted to answer in our latest paper.* We used life sciences as the backdrop of our research comparing similarly accomplished scientists who received either financial support from the Howard Hughes Medical Institute (HHMI), the large non-profit biomedical research organization, or federal funding from the National Institutes of Health (NIH). The HHMI money lasts five years and is often renewed (at least once); the program “urges its researchers to take risks … even if it means uncertainty or the chance of failure.” The NIH grants, on the other hand, last three to five years, have more specific aims, and their renewal is far from an assured thing.
MIT Sloan Assoc. Prof. Gustavo Manso
Among other things, we looked at how often these scientists published articles that were among the top 5 percent or top 1 percent of the most cited papers in their fields. We found that the HHMI-funded scientists produced twice as many papers in the top 5 percent in terms of citations, and three times as many in the top 1 percent, relative to a control group of similarly accomplished scientists funded by the NIH. But they also were more prone to underperform relative to their own previous citation accomplishments. The take-away lesson is clear: biologists whose funding encourages them to take risks and tolerates initial research failures produce breakthrough ideas at a much higher rate than peers whose funding is dependent upon meeting closely defined, short-term research targets. But there is a cost associated with these long-term incentives, since they also lead to more frequent “duds.”