Advice to Students on When to Start Your Company

I was listening to Dave Kellog and Thomas Otter’s most enjoyable The SaaS Product Power Breakfast podcast, this time about a VC-turned-entrepreneur (in his fourties), and it reminded me about advice that I give to my students. Heads-up: The funniest ageist comment by a student, ever.

Research has shown repeatedly that the biggest chances of success for a startup are with founders in the age range of 40-50 years. Thus, the rational thing for my students to do is to learn, in industry, well-paid, and start their companies in said age range, and for VCs to invest predominantly in companies with such founders.

Yet, there are all kinds of enticements for starting your company as early as possible. The Thiel Fellowship (of $100K) is for students who are willing to drop out of college for it, the startup school model pioneered by Y Combinator caters to young(er) people, and any self-respecting university these days has an incubator that tries to motivate students to start-up (rather than pair innovation with experienced industry people).

Why is this? I ask my students.

My own answer is that VCs are biased towards younger people, because the returns on investment have a much higher standard deviation (are much more likely to fail, but if they win, win much bigger). Of the GAFAM and BAT founders, none were significantly older than 30 years; many much younger. And many VCs like the bragging rights from having found the next Mark Zuckerberg.

There are other explanations possible, of course. The funniest answer to my question that I ever got came from one of my students:

Maybe VCs don’t like to fund fourty-year old entrepreneurs because they might die soon?

He said it with a straight face.

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