Wednesday, April 21, 2010

The Age of Entrepreneurship

By Akira Hirai

Entrepreneurship. The word conjures images of twenty-something graduate students hacking code in a Silicon Valley dorm room, fueled by a steady supply of Red Bull and Ramen. Starting a tech company requires youthful vigor, endurance, freedom from obligations like mortgages, imagination, and an intimate understanding of what’s trendy and hip. Right?

To be sure, a number of well-known tech titans started more-or-less this way: Facebook, Google, Microsoft, Yahoo, and Hewlett-Packard, to name a few.

However, a paper published a while back by the Ewing Marion Kauffman Foundation – the group devoted to fostering entrepreneurship around the world – suggests that the age distribution among company founders is much broader than we might have imagined.

The article summarized several findings that I personally found surprising:

  • Technology company founders born in the U.S. had an average age of 39 when they started their companies.
  • There are twice as many over-50 technology company founders as there are under-25 technology company founders.
  • Among a sample of companies started in 2004, two-thirds of founders were in the 35-54 age bracket.
  • The 55-64 age bracket exhibited the highest rate of entrepreneurial activity every year from 1996 to 2008, while the 20-34 bracket actually had the lowest rate. In fact, the rate of entrepreneurship was one third higher in the former group than in the latter.

This last point is illustrated by the chart below. The vertical axis measures the “percentage of individuals... who do not own a business in the first survey month that start a business in the following month with fifteen or more hours worked per week.” So, for example, in 2008, about 0.26% of people in the 20-34 age range started businesses each month, compared to 0.36% of those in the 55-64 age range:

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Source: Ewing Marion Kauffman Foundation’s 2008 Kauffman Index of Entrepreneurial Activity

Perhaps this can be explained in part because middle-aged entrepreneurs have several real or perceived advantages over their more youthful counterparts:

  • More hands-on business, technical, and people experience;
  • More past failures to learn from;
  • Larger personal networks;
  • More personal financial resources; and
  • More likely to be taken seriously by potential investors and business partners.

So why is this important?

First of all, we all know that the age distribution in the U.S. is inching higher. Baby boomers – those born between 1946 and 1964 – are now 46 to 64 years old. These are the ages with the highest rates of company formation – the entrepreneurial sweet spot.

Second, it’s widely believed that entrepreneurship is the force that drives economic growth, prosperity, job creation, and innovation. In recent decades, most net job creation can be attributed to firms that have been around for five years or less.

If you connect these dots, it becomes clear that middle-aged entrepreneurs will play a central role in leading us out of our recession and restoring normal levels of employment. The Kauffman article concludes that “we may be about to enter a highly entrepreneurial period.”

If you’re middle-aged but have been reluctant to take the entrepreneurial plunge simply because you think you’re too old, think again. As it turns out, you’re exactly the right age to be starting a business!

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Today's guest blog is by Akira Hirai, the founder of Cayenne Consulting. He has a diverse background as a Tier I management consultant, investment banker, technologist, and Silicon Valley entrepreneur. His passion today is to help entrepreneurs get their act together before they talk to investors, with a team of advisors and affiliates around the country. He blogs regularly at http://www.caycon.com/blog, and you can contact him directly through his website.


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Thursday, April 8, 2010

I Knew Bill Gates When He Was a Regular Guy

Bill Gates Regular Guy Sometimes I like to drop the comment socially that “I knew Bill Gates back when he was a regular guy.” I know that dates me a bit, but it also shows that I have been hanging around startups for a long time. The honest truth is that I worked with Microsoft then from my “safe” perch in big IBM, during the early days of the IBM PC.

At that time I couldn’t imagine a startup succeeding that was first called Traf-O-Data to process raw traffic data into reports, later changed to Microsoft to sell Basic Interpreters to microcomputer manufacturers. In retrospect, however, Bill Gates did a lot of things right as a startup that I still look for today in aspiring entrepreneurs and their companies:

  1. Build a strong team. In my opinion, Bill Gates would have failed without his partners Steve Ballmer, and Paul Allen. Bill Gates ran the technical show, but Steve Ballmer never let him forget the marketing and business side of the equation. Steve came from Procter & Gamble Co., handling marketing for Duncan Hines' Moist & Easy cakes – so he and Bill were a perfect mix, so to speak. Paul Allen was the visionary, believing in graphic user interfaces and a mouse, when the Xerox Star was still a kludge.

  2. Market vision, focus, and opportunity. Their vision was a world of “personal” computers, meaning every person in the world was the opportunity. We in IBM didn’t get it at all, and we insisted on calling the IBM PC a “workstation” which in retrospect sounds like “work” for a bunch of robots at their “stations.” Many of my friends at IBM couldn’t imagine why anyone would spend money on such toys.

  3. Enlist community of support. One startup, no matter how smart the people and how well it is funded, can only do so much. You need to convince a thousand partners that they can become winners, if they join you as believers. That’s real viral marketing. Microsoft spent a huge amount of time and money with software developers for applications, and with hardware manufacturers to support multiple PC platforms. IBM wanted to do the whole job themselves, because it was the only way they know how to deliver quality. Quality is a good thing, but it is not everything.

  4. Marketing, marketing, marketing. Before Microsoft, computers had never been “marketed.” Large enterprises engaged major mainframe competitors in a series of benchmarks and technical evaluations, and the best technical solution won. I personally spend many nights and weekends hunched over a computer console optimizing a job stream to make it run a little bit faster. Now CIOs, as well as consumers, buy their next computer based largely on an image set by marketing. IBM learned a lot from Microsoft on this one.

It’s amazing how things change with time (as the world turns). Now Microsoft is the big gorilla, and I am a small startup, working with startups. I guess you could now say that my business experience is “well-rounded.” Also I suspect that Steve Ballmer wishes he could go back to dealing with startup problems, rather than the biases against large enterprises like Microsoft.

There is a lot more to this story than I can put here. In fact, there are several good books written about Bill Gates and Microsoft. One of my favorites is “Hard Drive: Bill Gates and the Making of the Microsoft Empire.” On the IBM side, the message did get across after lots of pain and struggling, and a culture change occurred. See “Who Says Elephants Can't Dance?” by Louis V. Gerstner, Jr. for that story.

Reminiscing is such fun. We all start out as regular guys. But for those of you that learn these lessons early, the world of ultra-billionaires is still beckoning.

Marty Zwilling


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