The college dropout fallacy and ageism in entrepreneurship
Originally posted on FastCompany here.
Source image: KEHN HERMANO/Pexels; Rawpixel
As a teenager, I lived opposite an Irish entrepreneur who owned the local organic food shop. Armed with a Harvard MBA and some brand experience at Guinness, Bryan Meehan transformed a dusty, hippyish oatmonger into London’s first aspirational eco food chain, Fresh and Wild. My dad wept at the prices but secretly loved it, like the rest of us. We marvelled when Whole Foods announced a $40m takeover as part of their U.K. launch.
Bryan had clearly caught the startup bug. Taking his street cred to new levels, he quickly launched his second venture with Bono’s wife, Ali Hewson. It seemed almost inevitable when we heard that the luxury giant LVMH had acquired Nude, an ethical cosmetics brand. Having learned how to start, scale, and sell a consumer brand to a corporate behemoth once before, it only took him five years to repeat the feat.
Years later, I found myself pitching Bryan my own startup at his new home in the Bay Area. After each of his first two exits, he could have stopped and become a man of leisure. Instead, he cashed in his compounding experience to create something even bigger than before. The result was Blue Bottle Coffee, a “third wave” coffee chain backed and adored by Silicon Valley insiders. This time Nestle was the acquirer and the valuation was on a different scale: $700 million.
By the time I reconnected with Bryan in San Francisco, I was one of five kids on the same street who had been inspired by his success to become founders ourselves. Two of us moved to California to start a photo app and we persuaded Twitter cofounder Biz Stone to become our chairman. The Twitter founders provided my second lesson in the power of experience.
Biz Stone and Ev Williams had spent years building Blogger, one of the early blogging platforms, before selling it to Google and starting the short-form version, Twitter, with Jack Dorsey. But even more instructive was what the trio did after Twitter took off. Apocryphally described by Mark Zuckerberg as clowns who fell into a goldmine, I always got the sense the Twitter founders were driven by a desire to prove they were more than lucky one-hit wonders. Biz and Ev created Medium, their third incarnation of a global blogging tool, while Jack started Block, the fintech company valued at $100 billion last year.
It turns out that experience really helps when starting companies. You avoid many of the unforced errors made the first time around, you know where to focus your time, and you benefit from strong relationships with investors, talented employees, and partners. You know how to play the game. Even if they have not founded their own companies before, older entrepreneurs have typically learned in previous jobs how to lead teams, so often the greatest challenge for their inexperienced peers.
All of this contradicts the cult of youth that pervades the venture capital industry: the great startup myth of the visionary college dropout. Unduly influenced by the striking but unusual examples of Zuckerberg, Steve Jobs, and Bill Gates—all of whom left university to start iconic companies before they turned 22—many investors unconsciously discriminate against older founders. VCs like to be sold the dream, and they find it easy to project those dreams on blank canvases rather than more mature, sometimes imperfect résumés. In Europe, entrepreneurial failure too often remains taboo.
It is not just my anecdotal experience that suggests ageism in venture capital is misguided. Harvard Business Review research found that the probability of extreme startup success increases with age, at least until your late 50s. The average age of the founders behind America’s highest-growth startups is 45. Other data suggest that unicorn founders are most likely to be well over 30 when they start. Silicon Valley’s reverse snobbery against MBAs and consultants also appears ill-judged. Sixty-two percent of unicorn founders have a postgraduate degree compared to just 4% who were college dropouts, while McKinsey alumni alone have produced 45 unicorns.
Through our own firm, Giant Ventures, it is the Twitter founder archetype that we often seek to back. The repeat entrepreneur who has built something significant once, but for some reason remains hungry. Some want the world to know the first time was not a fluke. Others need to prove they can do it again as the CEO rather than number two. Occasionally a founder might have created a company of note without reaping sufficient financial reward. Many are simply addicted to the rush of creating something from thin air. They are united by accumulated knowledge and scars that make them far, far more likely to succeed.
Tommy Stadlen is the cofounder of Giant, a global venture capital firm. He also cofounded Swing Technologies, which was acquired by Microsoft.
