The Age Question (continued)

Brad suggested I write this post. I've been reluctant because I don't want to pick at this scab of a meme. I really don't want to be the guy who made it harder for anyone older than 30 to get funded in the web services market.

But I've been thinking about all the young entrepreneurs we are seeing walk through our offices. I've been thinking about Mark Zuckerberg, Rob Kalin, all the ycombinator entrepreneurs, and the 15 year olds who are hacking up facebook apps. You can't ignore it. There is something fundamental and important going on.

The answer lies in Marc Andreessen's words of wisdom about the web:

After an initial phase of the Web as a medium, in which lots of people attempted to make the Web look like a newspaper, or a magazine, or a TV channel, we as an industry have recently been collectively developing a much clearer idea of what the Web is really like as a medium in and of itself.

This has led to broad realization of a set of design patterns for how Web services and Web companies often get built and used.

Who is developing this "clearer idea"? Who is developing the set of "design patterns"? It's the younger generation. And its important to understand why.

It is incredibly hard to think of new paradigms when you've grown up reading the newspaper every morning. When you turn to TV for your entertainment. When you read magazines on the train home from work.

But we have a generation coming of age right now that has never relied on newspapers, TV, and magazines for their information and entertainment. They are the net natives. They grew up in AOL chatrooms, IMing with their friends for hours after dinner, and went to school with a Facebook login.

The Internet is their medium and they are showing us how it needs to be used.

Now don't get me wrong. We've only funded one of these net natives out of close to fifteen portfolio companies. We'll certainly fund more. There's a lot more we look for in an investment than a 23 year old design whiz.

But the truth is that some of the most interesting things I've seen this month and this year are the creations of kids who barely shave. And it's not an accident.

Comments

[Dan Tiernan]

Isn't it normally the case that the best entrepreneurs are those that understand their customer? What percentage of all these widgets and platforms are actively used by 40 year-old guys like me? As much as I play around with the stuff, my peer group doesn't and I'm not living it. I knew there was a good reason I avoided getting involved with these kinds of companies. Thanks for helping me understand why. I'll stick with trying to reinvent business apps.

[Simon Cast]

True many of the interesting web apps to arise this year are driven by younger innovators. The single biggest problem many of these apps are that they are features and not companies. In fact that is the brillance of Facebook. Facebook is now providing a platform where these apps can be revenue generating "companies". Think of it as web app version of eBay's retailing micro-companies.

I don't see any big problem with founders that are older. What is more instructive is the mix of key employees (and not necessarily the ones with VP titles). You can argue that many of the older founders are the MBA/banking background founders and it is this that really effects the performance of the company not the age of the founder.

[Erik Schwartz]

I think it totally depends what you've been doing earlier in your career.

I've been building disruptive media paradigms my whole career. I got sued out of business by a record label for "misuse" of the fair use laws back in 1988. I was doing video on demand in 1990. I was putting the web on TV in 1995. I was making the web social, interactive and fun in 1998.

Now do I think someone who has spent 20 years at McKinsey or Oracle, playing the office politics game is likely to suddenly change their spots and start trying to tear down the status quo rather than maintain it? No I don't. I think those people become entrepreneurs because it's a hot market.

But if you start out being a rabble rouser when you're young, you're likely to stay a rabble rouser until you're finished working.

[Alex Iskold]

My take is that there is a big value in mixing new and old. You are right, younger guys think up of new ways of doing things, but patterns is something that exists in systems and time.

Often we see young guys running around claiming they invented this great new way of storing things only month later to discover that there are relational databases.

In other words, new guys make mistakes cause they do not know history. Wise guys know it and take advantage of the patterns in technology and business.

So I think pairing up youngsters with veterans gives you the most solid mix.

- Alex

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[bernard lunn]

I am 52 years old and very much in the start-up game. Alex is right, the combo of disrupting youngsters and experienced business builders has proved successful many times (Google comes to mind). Older entrepreneurs starting their own business tend to go for the solid singles and doubles, not attempting to hit the ball out of the park every time. No harm in that, how many real mega-hits are there in each decade? Erik, I totally agree with you. I love the intensity and intellectual buzz of a start-up and in my brief period in a big company (when the start-up got acquired) I went stir crazy.
The interesting debate I think is between VC and PE. You could say that is the debate between young and old but that is too simplistic. Rupert Murdoch is 75 and he was smart enough to buy MySpace even though I seriously doubt he hangs out there. You don't need to be a teenager to understand demographics. Murdoch acted like a VC and an entrepreneur not like a mature conglomerate or PE fund.
The PE fund works by looking at last 10 years cash flow and projecting that out for another 10 years to justify debt leverage. VC looks at these mature businesses as ripe for disruption. In an economy growing at 3% both PE and VC cannot be right. My bet is on VC and disruption. In 30 years I have never seen a business environment that is more scary for incumbents and more exciting for disrupters. Cheap money, cheap labor, cheap technology and the Internet changing all the rules in just about every market is an incredible playground for entrepreneurs and a worry for those counting on those cash flows just projecting out forever.
So my 50 year old head agrees with my 20 year old heart.

[Dan Cornish]

In architecture, your career does not start until you are over 50. Frank Gehry designed his best work when he was 70. Same for Frank Lloyd Wright. The point is there are two types of innovation. Disruptive flashes of brilliance and slow steady innovation. The reason why you are only seeing young kids is that your business model depends on the home run of a flash of innovative brilliance. 40 years olds are more likely to build a business growing 50%-100% a year where as a Google or a Facebook will give you 1000% a year. The difference being the large majority of 20 years olds will fail and the majority of 40 years olds will succeed. Slow and steady just has a different looking IRR. The slow steady approach is for investors in the stock market and angels. Over time we can argue which provides the better returns, but that is not the reason why you became a VC.

[DC]

In other words, this is a temporary peak in young web entrepreneurs. 10 years from now, the more seasoned "natives" will be preferred over the young ones.

[Bill]

In addition to the comments above about blending disruptive technology (younger) and managing it (older), there's also the target market component. I would expect start-ups focused on the consumer space to be founded by younger folks. Start-ups focused on enabling businesses are more likely to be started by older teams.

My 2-cents worth

[Erik Schwartz]

Just to follow up a bit on the blended team thing...

Filo and Jerry brought TK and Jeff in really early.

Would Larry and Sergey have screwed it up without Eric Schmidt?

The classic of course is Steve Jobs. Is there any question that he is a VASTLY superior entrepreneur now than he was in his 20s? Just compare the Lisa and the 128K Mac to OSX and the iPod/ITMS combo.

[angela penny]

I agree that 20 year olds have an advantage because they're not married to old paradigms. This same thing happened during Web 1.0 of the 90's, people in their 20's had an advantage because they just did things in the most pragmatic and innovative way. They became bureaucratic and weighed down basically because there weren't any models on how to grow without doing that and at some point the middle managers take over and the priority becomes saving one's job rather than accomplishing new goals.

I think this time around it's most evident on the creative side. 20 year olds pick up a camera or do a podcast while older artists are like what, where, when, why? The world seems a rosier place for folks just getting out of college now than it has been for quite some time.

I think older (like 30 plus) people have a place in providing basic strategic planning, accounting, etc. The fact that people of all ages are more internet savvy than they've ever been and people are living longer than ever should remind people that yes, it's good to focus on the younger market, but the older boomer market and people older than them have a lot of money to spend at this point in their lives and shouldn't be neglected.

[Mike Miller]

Word of advice, as this market becomes increasingly competitive developing hardened baseless beliefs like ageism will inhibit your success. Venture capitalists better be on the look out for the best businesses even if the founder is 50 or your going to get your lunch eaten by nimbler more forward thinking competitors.

[bernard lunn]

Older people backing youngsters to get home runs is not new. Think of the music biz. One score with the Beatles allows for tons of duds. The cost to start-up online is not much more than a couple of guitars and a set of drums. Facebook/MySpace is about entertainment. The backers make a short intuitive bet on energy and passion and then wait to see if the audience connects (crank up the presses) or not (drop 'em like a ton of bricks).

[kid mercury]

give it 6 years. the kids that are 19 or 20 years old now are the digital generation, the generation that laughs at the idea of paying for music and is aware that YouTube is a lot more interesting than propagandized television. most importantly, they've grown up on the new generation of video games (xbox, PSP), and will have a more intuitive understanding of how that's related to the web.

but they at least need to get a job, outgrow the frat party phase, and read a few books so they get an education before they come up with the real game changer. but once that happens....man, it's going to be very exciting.

[Matt]

It seems to me that as I've gotten older (32), I'm far less interested in outside funding. I would think that by 30 or so, you've established some form of residual income and do things at a slightly slower pace without all the overhead. Thus, VC isn't necessary.

[calvin]

I found your comment “When you read magazines on the train home from work” Really funny. I wonder what you propose as an alternative? I do read on my sidekick…but I’m really not happy with how the pictures look. Especially, if I am perusing an art site.

I think people read magazines and newspapers on trains because it’s a good use of personal time. Not because they are old…

oh wait, maybe those are the same thing!

[John Maxwell Hobbs]

You're making the mistaken assumption that the people changing the world are doing it in companies.

True innovation has nothing to do with the bottom line. If you can make a buck on it as an investor, it's not new, it's current.

[Rich Ziade]

I'm a 37-year old entrepreneur that started a boutique consultancy in NYC that is heavily focused on these emerging trends of the last few years. We're two years old and relatively successful (went from 2 employees to 25 in just over a year). (www.arc90.com).

I'm not sure if I'm the exception, but I don't think age has anything to do with it. The thing that starts to stunt creative thinking is the overwhelming inertia of a career path. You stop reading interesting stuff. You take less and less risks. Your brain hardens and stops changing.

A younger person hasn't been sucked into the vortex just yet - so they'll try stuff. As for me, I've made a conscious effort to ring the alarm as soon as things get too comfortable.

I talk some more about this very topic on my blog:

http://www.basement.org/2007/05/situps_for_the_brain.html

[retire VCs]

why just stop at entrepreneurs..more and more LPs should look for younger VCs to allocate their funds.. the barrier to entry is still high in VC field..otherwise we would have seen dramatic results in the investor domain as well.. Fred, when are you retiring?

[tomo]

This is nothing new. Microsoft was started by 20 somethings, Apple was as well. Netscape too, plenty more can be brought to light as evidence that nothing has changed in so much as coders are young relatively speaking. As they get older, they often find themselves managing others which takes them out of the game so to speak. Give me one example of a coder in his or her 40's who has god like status and I'll eat my words.

Perhaps Fred and the rest of us who may be over 30 are a generation older than the teens and 20 somethings, and WE now feel that, just as our first bosses did when we began our careers. Just because Fred now feels that generation gap doesn't mean this is new. Ask John Doerr how many 20 somethings he's funded this year, or ever for that matter. How many 20 somethings are CEO's of public companies? What 20 something is a CFO of any public, or venture funded company for that matter?

To only believe in funding very young entrepreneurs or give more credibility to 20 somethings vs 30-40 year olds is naive at best. Using Zuck as an example is like setting Tiger Woods' rounds at the US Open as the cut mark. Your population of viable options to fund just got reduced to one, and your too late to get in on it.

On the surface this seems like a sly way to distance oneself from the rest of the "suit and tie" Financiers that, for right or wrong, are often viewed as being out to screw you(the entrepreneur).

[Jonathan Peterson]

I guess the lessons of the dot-bomb have now been fully forgotten. 8 years ago VCs and investment bankers were telling everyone that would listen that the internet changed everything and that eyeballs were more important than earnings.

Just think of all the businesses that you AREN'T seeing because those of us who DIDN'T win the lottery prior to 2000 learned that shortcuts and brass rings are for chumps and that ensuring success with positive cash flow and keeping control of your company is preferable to buying a VC lottery ticket.

[ekzept]

i think there are plenty of people with disruptive ideas of all ages. i think a winnowing process as a function of age occurs when people with these ideas sucuumb to discouragement as they fail and fail and get neglected. people with experience KNOW that there are plenty of good ideas in that world of the 1970s+ which have been forgotten in the youthful push to use the Here And Now. yet, certain key ideas -- the lambda calculus being preeminent in my book -- are GROWING in dominance, as they should. yet that stuff has long been considered the material of the academics or the fringe crazies.

what i see is that this youthful exuberance, irrational exuberance, or as Adam Smith called it, "animal spirits", gives people of all ages confidence and enthusiasm that it is indeed possible to remake the world.

and we will.

[Ann Bernard]

I've been thinking about this topic a great deal lately and lo and behold I wrote a post on it today and then saw this post.

What I think isn't brought to light in the cases of all these young entrepreneurs who are striking it big with their concepts and ideas is the team that's behind them.

Being that I am in the process of raising funding, one of the most important aspect, besides an innovatice and scalable idea, is the strength, abilities and knowledge of the management team.

How come we don't hear more about the people behind the Mark Zuckerberg, Rob Kalin, all the ycombinator??

Management skills, but more importantly leadership skills and ability to impart a vision and motivate a team to carry-out that vision seems pretty critical. Do those 20 years old "guys and gals" have those skills? Who is really bringing the idea and concept alive??

[paul]

You wouldn't dare approach the gender question or the race question, but if you want to throw your money at young inexperienced nerds go right ahead.

[edutech72]

Hmmm...I'm not feeling old or uninventive. My sisters are 10 years younger than I am and I know FAR more about the internet and live MUCH more of my life online at 34 than they. I suspect that many over 30 have different financing needs, more professional contacts to draw upon for expertise and funding, different life needs, etc. and that may explain the demographics you see.