How These Fintech Founders Learned The Disadvantages Of Being Young

I met an iconic startup founder only once. He was in his late 20’s, wore a T-shirt, played ping-pong in the coworking office all day long and stayed there late typing on his newest Mac machine. A few weeks before he had founded his startup, which turned out to be relatively successful from day one. I was very impressed because the guy’s perspective and the solution he proposed was unique.

When I asked to meet him again and invite him to be a part of a study that I conducted at that time, he was already out of the market. The reason was pretty simple: his provider refused further cooperation, and my character could not convince him to do so. “Did you prepare your negotiation strategy before jumping into talks with your partner?” I asked. “No, didn’t think it was needed,” was his reply.

This could happen even to the most experienced entrepreneurs. Unfortunately, for that guy, lack of background was what killed him. Now he works in a corporation in Stockholm as an up-and-coming expert within the FinTech realm. I wish him a lot of luck and believe he will implement his idea (that’s why I don’t reveal what it is).

Founders In Their Forties

According to the Stockholm FinTech Report 2018, the average age of FinTech company leaders in the Greater Stockholm region is between 36 and 40. Less than 10% are younger than 31. The average male CEO in the FinTech realm is 40 (ranging from 24 up to 70). With regard to women, the average CEO is 43 (age range: 35 to 65). As you can see, this is far from stereotypical.

You can find more about female FinTech founders and the gender gap with this link.

Researchers from MIT, the Kellogg Innovation and Entrepreneurship Initiative and the U.S. Census Bureau recently 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. In their paper issued by National Bureau of Economic Research, they reveal their findings. The average age of a U.S. company founder is 42. Even when data was filtered and researchers focused only on companies that were granted a patent, received a venture capital investment, operated in an industry that employs a high fraction of STEM (Science, Technology, Engineering and Mathematics) employees or founded in an entrepreneurial hub such as Silicon Valley, the outcome was very similar.

The Global Entrepreneurship Spirit

These figures may look slightly different when considering founders beyond FinTech, one of many other tech fields. In fact, they depend on geographic region but much more on the development level of the economy. In the latest report by the Global Entrepreneur Monitor, the authors showed the average age of business owners in three groups of countries.

They divided 54 subjected states into three groups, according to World Economic Forum classification. As they explain:

(…) the factor-driven phase is dominated by subsistence agriculture and extraction businesses, with a heavy reliance on (unskilled) labor and natural resources. In the efficiency-driven phase, an economy has become more competitive with more efficient production processes and increased product quality. As development advances into the innovation-driven phase, businesses are more knowledge-intensive, and the service sector expands (http://weforum.org). Economies in transition from factor- to efficiency-driven have been grouped with the factor-driven economies, while those in transition from efficiency- to innovation-driven have been included in the efficiency-driven category.

Based on this, they analyzed the populations of each country to calculate the rate of adult (18-64) people and in the phase of the process of starting a business or started a business less than 42 months before the survey took place.

As you can see, the data does not precisely match other studies. In fact, the difference in results between the 25-34 and 35-44 groups is only 1%, regardless of the economy type. This may be a result of methodology differences. However, the tendency is the same: young adults are not leaders starting businesses in any group. Interestingly, the more advanced the economy, the fewer number of young entrepreneurs.

Authors of the Global Entrepreneur Monitor report 2017/2018 write:

The lowest differences among age groups are found in factor-driven economies, confirming that starting a business is an important avenue to be included in the economy for all people. The double rate of early entrepreneurial activity among the 18-24-year-olds in factor-driven economies (16%) compared to innovation-driven economies (8%) could be further analyzed by using data on involvement of young people in tertiary education, as well as including data on the motivational index (ratio of improvement-driven opportunity to necessity).
(…) Europe has the lowest TEA [Total early-stage entrepreneurial activity - individual who are starting or started their business in last 42 months - M.G.] of all regions in all age groups, still the highest proportion of early-stage entrepreneurs is in the age groups 25–34 and 35–44 (10.9% and 10.17% respectively).

Apparently, according to studies, the wonder boys of FinTech and startups worked for other companies many years after graduation. This seems reasonable because they had enough time to acquire knowledge, experience, and networking within the industry. But it’s not the only path. You can also join a fellowship founded by Peter Thiel, the co-founder of PayPal. The program provides $100,000 grants to would-be entrepreneurs, so long as they are below the age of 23 and drop out of school. And have ideas that absolutely can’t wait.

Disclaimer:

Together with my colleagues who contributed to the ‘Stockholm Fintech Report 2018’, I am one of the authors of the study. You can read more about the report here, and you can download the report for free here.

You can read my other Forbes posts here.