While the typical image of an entrepreneur is someone young and fresh-faced, with their relative inexperience seen as vital to looking on a situation without the jaded “wisdom” of how things should be done, the evidence actually suggests that the best entrepreneurs are often older people who can tap into their experience and connections to create a successful startup.

Despite this, some 40% of all new businesses are believed to be created by people under 40 years of age.  Research from Stanford’s Graduate School of Business explores whether there is anything younger entrepreneurs can do to improve their chances of success.  The study suggests that there are things entrepreneurs can do to ensure that they’re just as successful as their older peers, and the key is to learn from their experience.

Learning on the go

Indeed, the study found that when young entrepreneurs are able to crystallize the learnings from a first foray into entrepreneurship into a second foray, they can become even more successful than the fabled entrepreneurs in their 40s.  These serial entrepreneurs were able to grow their revenue at roughly twice the rate in the second firm compared to their first, with this second firm also outperforming startups created by older entrepreneurs.

The researchers argue that serial entrepreneurs often have particular character traits that lend themselves to success, not least that they tend to start their entrepreneurial journey at a very young age so have ample opportunities to learn on the job.

The researchers examined entrepreneurship data from Denmark between 2001 and 2016, which covered around 131,000 firms.  While the majority of these founders had only created one firm, with the average founder being 38 years old, there were 18% of firms that were run by serial entrepreneurs.

Serial entrepreneurs

The firms run by serial entrepreneurs tended to be more successful than those firms run by novice entrepreneurs.  Indeed, they were typically 57% bigger on their opening day than firms created by first-time entrepreneurs.  This in turn resulted in higher financial returns, especially in their second business, with the second business typically securing an 82% boost in revenue compared to the first.

As such, while firms created by older founders had higher revenue than those by first-time entrepreneurs, they had lower revenue than those of serial entrepreneurs.   What’s more, the second firms of older entrepreneurs also secured a lower boost in their income, with those firms achieving 20% more sales than the first firm.

Interestingly, of the serial entrepreneurs, 83% chose to keep their first firm open at the same time as opening their second, with this intense experience meaning that the second firms were not failing anywhere near as often as first firms, which on average failed 3.5 years after opening.

In a sign of the professionalism of serial entrepreneurs, they were also found to be more likely to register their second business as an LLC, which provides them with protection should the business fold.  The researchers believe this step is also linked to the rise in sales between first and second businesses.

“The advantage of an LLC is that no creditors can go after your personal wealth if your firm fails,” the researchers say. “It gives downside protection, and when you have downside protection, you’re going to take on riskier projects in starting your new firm. Outsized firm success is then more likely when the entrepreneur takes greater risks, thus moving to LLC status with the second firm underpins the second firm’s greater sales success.”