By Seth Levine and Elizabeth MacBride, next avenue
Entrepreneurs over 55 are among the most active new business owners in America, creating businesses at rates that outperform their younger peers. According to the New York Federal Reserve, 80% of small business owners are over the age of 45.
With a wealth of knowledge acquired through years of experience, older Americans are well placed to apply that experience to building their own businesses. And with the average American living well past the traditional retirement age of 65, many are starting a business to extend their careers or, in some cases, pursue a path they didn’t take earlier in life.
Even after the pandemic, older entrepreneurs are better positioned than their younger counterparts to thrive.
The role of older entrepreneurs in innovation
Less obvious is the role that older entrepreneurs play in generating innovation.
For a variety of reasons, the innovation narrative—particularly in the tech economy—is focused on younger entrepreneurs. Paul Graham, an entrepreneur investor and co-founder of the famed Silicon Valley business accelerator Y Combinator, once quipped that “the limit in investors’ minds is 32…After 32, they get a little skeptical.”
This is certainly in line with the way the media typically portrays startup founders. But a closer look tells a different story.
The average age of entrepreneurs when they start their business is 42, according to researchers from MIT and the US Census Bureau. And, perhaps going against the conventional wisdom of Silicon Valley, the average age of a tech founder is almost the same: 40.
America’s entrepreneurs may be older than is widely believed, but what are they up to?
Meet Fred Sachs
One of the older entrepreneurs we met while writing our new book, “The New Builders: Face to Face with the Real Future of Business,” was Fred Sachs of Alexandria, Virginia, then 76.
In his early and middle years, Sachs owned a lumber company and a commercial door and hardware company. After selling both, he thought he would retire. But then he started messing around with wheat on a small farm he owns in Virginia.
It was a hobby at first, but quickly his entrepreneurial juices began to flow. By 2018, Grapewood Farm was producing tons of flour that was selling to regional bakers for over $7.00 a pound, depending on the variety.
“I think we could probably do twice as much business as we do now because it’s unique and people are interested in eating healthy food and shopping locally,” Sachs said.
In the meantime, he also works on and invests in a medical diagnostic equipment business.
Sachs always learns something new, he told us. He is a “New Builder” through and through — Part of a larger group of black, brown, women and older business owners who together represent the future of American entrepreneurship.
One of Sachs’ key qualities, which seems to intensify with age, is the ability to innovate.
Like the definition of entrepreneur, the common definition of innovation is increasingly associated with the high-tech world—those Silicon Valley prodigies.
The blurred concept of innovation
But in practice, innovation is a much more fuzzy term than you might expect, especially in the mind of an entrepreneur who focuses on the whole process: not just the innovation itself, but how and why it is valuable enough is other people that they will spend money on it.
When Sachs interviewed consulting firm McKinsey in 1972 (before he embarked on a life of entrepreneurship), the company asked if he was more innovative or more creative. Over the years he has learned that as an entrepreneur you need both and that the definition of innovation is ambiguous.
“Sometimes you have to find a solution to a specific problem, and other times you have to innovate to overcome a specific hurdle,” Sachs said. “And if you don’t address the problem, you’re left behind. You have to keep changing.”
Experts divide innovations into different categories:
The biggest and most valuable are breakthrough innovations. Think of the classic scientist in his lab or the inventor working on a circuit board. Research suggests that these innovations often fall within the purview of young people in their 30s and 40s.
But Benjamin Jones, a professor of strategy and entrepreneurship at Northwestern University
Incremental innovations and ongoing innovations
In addition to groundbreaking innovations, there are also incremental innovations that build on previous breakthroughs and often shape them to suit the market. This is how entrepreneurs spend their lives.
Sachs, for example, is bringing homegrown flour to a new market in a new bulk form. This is also an innovation.
Nor is science (or software technology) the only area where innovation can take place. Some of the most valuable innovations – think Henry Ford figuring out the assembly line – are innovations in process.
If you look closely, the spirits of science, innovation, and entrepreneurship are linked through history.
Thomas Edison is a classic example. The phonograph, film camera, and lightbulb all grew out of his ability to invent and collaborate with others to turn invention into a business process. He found like-minded financiers – including Henry Ford and Harvey Firestone (the rubber and tire magnate).
Margaret Sanger is another example. She started a chain of clinics, which later became Planned Parenthood, to offer birth control to low-income women. She was in her 70s when she and Katherine McCormick convinced scientist Gregory Pincus to work on the birth control pill. By then she had a lot of experience breaking the law and circumventing societal norms in the interest of progress.
Where older entrepreneurs excel
In our research and careers, we have found that older entrepreneurs excel in these other areas of innovation, bringing products to market, finding new processes and ways to tackle a problem. And perhaps most importantly, they excel at building the team to innovate.
Early success gives older entrepreneurs the freedom to play with ideas, and over time they have often built extensive networks that they can leverage for new ventures. Innovation and entrepreneurship seem to have become a habit for many older entrepreneurs.
Older entrepreneurs are more likely to have the insights that lead to process innovation because they better understand the systems in their industry. That Founder of McDonald’sCoca Cola and Kentucky Fried Chicken, for example, were all in their 50s when they started their empires.
While it’s easy to search through history for stories about how inventions and innovations came about that we often take for granted, it’s much more difficult to think of innovations that way not happen.
We know that the funding system for small businesses of all kinds is collapsing, and it’s fair to conclude that given our penchant for celebrating and chasing both youth and big breakthroughs, there are innovations living in the brains of older entrepreneurs that don’t exist a way to the market.
We will never know.
There is another key role that older entrepreneurs (and innovators of all kinds) play in the innovation economy. They serve as examples.
But a large body of research suggests that at every step of our innovation economy, America is doing a worse job. Increasingly, success in innovation and entrepreneurship today depends more on circumstance – particularly how wealthy your family is – than on ingenuity or talent.
Fred Sachs’ 3 tips for older entrepreneurs
Older entrepreneurs, especially women, black or brown, who are not born of wealth, may well create new systems that lead other scientists and entrepreneurs to the riches of a lifetime of innovation.
By the way, if you want to bring an innovative idea to market, Sachs has a little piece of advice in a piece of paper he’s carried in his pocket for decades. It has three simple rules for building a business, learned from a mentor, which are its “Management Musts”: Spend time identifying and pursuing unique market segments rather than launching broad attacks on entire industries; Segment your business by product, customer, customer service, and location, and emphasize profits over revenue growth.