Do Investors Discriminate Against Older Entrepreneurs?
QUESTION: I’ve been working on a startup business on the side and am about to quit my job and really go for it. What holds me back is I will need to raise money from investors. I’m 52. Will I get a fair hearing? Seems like investors only like to fund the college drop out.
ANSWER. I’ve got the good news that you are looking for! Yes, you will get a fair hearing from investors provided, of course, that your business concept and strategies offer more financial upside than downside to investors.
Smart investors are highly opportunistic. They know that the most innovative companies are not just born by twenty-something entrepreneurs, but older ones too who have a deep understanding of their industries and how to make money with the least amount of guess-work. Investors also like to back entrepreneurs who have already made their share of beginner’s mistakes on someone else’s dime and time.
One of my closest friends started her company in her late fifties. She didn’t have an MBA. Her office was not in the heart of Silicon Valley. And, she wasn’t wired into networks of lawyers, head hunters, board members or incubators. Yet, she raised funds from the big boys of venture capital: Khosla, Kleiner Perkins, Google Ventures, Vulcan and more.
How did she do it? She had deep-dive technical expertise in an industry that was about to explode. Investors respected her opinion and her ability to get things done fast. She didn’t have to cold-call key distribution partners and customers because she already knew them, and they already knew her. Most important, her technology did offer meaningful, cost-saving benefits to her target customers.
There is another reason why investors are writing checks to entrepreneurs who are over the age of 40. It’s demographics. Today the majority of new companies are formed by entrepreneurs who are over the age of 40. So you are in good company!
Still, there is a potential gotcha that could undermine all your efforts to raise capital from deep pocket investors. Whenever I hear that technologists have been incubating new companies while employed by another company, I get concerned. And when I get concerned, it means that investors will get concerned too.
When you present your company to investors, be prepared to get grilled on where and when you developed your technology. Hopefully, you developed your business concepts and intellectual property off-site, without relying on your employer’s property or proprietary know-how. Investors will also look closely at any agreements that you may have signed with your employer regarding the ownership of intellectual property developed during your tenure at the company.
Simply stated, if you own all the rights to your concept or technology, then investors will keep an open mind. It’s not about age that matters most; it’s about owning something that can increase in value in a big way. You can do it!
Send your questions to Susan through Twitter @StartOnPurpose or check out Susan’s latest book , Start On Purpose for action steps on how to raise capital and build the value of your new business with precision and purpose.