Wednesday, May 4, 2011

Why 30 year old entrepreneurs are not over the hill


A recent Tech Crunch article by Michael Arrington said that Consumer Internet Entrepreneurs are over the hill at 30. A VC close to Arrington said this because younger entrepreneurs are more creative and imaginative.

“It’s not a guess, this is a data driven observation,” said the VC.

I can understand the perception that there are more 20-something people being successful in consumer Internet, but I don't think that it's because as you age, you become less creative and imaginative. Without more public data available, my belief is that 20-somethings are more successful in consumer Internet because there are more of them taking the chance and therefore a few will come out successful. My belief is that if more 30-somethings took the plunge, they would be as successful, if not more successful in the entrepreneurship game.

So what's the problem in getting more 30-year-olds to take the risk? Well... they have much more to lose. I think 20-year-olds have an advantage because they can easily adapt to "ramen" as opposed to a 30-something who for whatever reason cannot grasp nor do they want to experiment with "ramen".

The word "ramen" is starting to become as cliche as the word "pivot" in the Valley. I go to talks and read blogs where founders say they are "ramen profitable" or "we barely got by on ramen". But what exactly does "ramen" mean to the young kid out of school versus the mid-level manager.

"Ramen" takes a much different turn when applied to these two different groups.

I understand the jist of it - ramen is just enough money to cover basic living expenses. However, each person's monthly living expenses in the Valley could range from a few hundred dollars to thousands. I want to break it down to see what it would take to live on "ramen" from two different people.

Let's get into the head of the two groups: fresh grad out of college and the tenured 30-year-old who has done his time. Let's assume they aren't starting a start-up and they're just living life:

Fresh grad expenses per month:
Rent: $600
Utilities (mobile, electricity water, Internet): $200
Insurance (car, health, etc.): $200
Transportation (car): $300
Gas: $300
Food: $800
Fun: $200
Clothing: $200
Grand Total: $2800

30-year-old expenses per month:
Rent/Mortgage/Prop Tax: $2000
Utilities: $300
Insurance (car, health, etc.): $300
Transportation: $500
Gas: $400
Food: $1000
Fun: $400
Clothing: $300
Grand Total: $5200

The assumption here is that the fresh grad makes about $50,000+ per year (this may be low given today's rates), the 30-year-old is making about $100,000+ per year (this too may be low given today's rates) and they are not saving any money for the future (live paycheck to paycheck). I think that these numbers are fair for our discussion.

So now let's assume that a 20-year-old and 30-year-old have the next big idea and want to go for it. Let's "ramen" their budget:

Fresh grad expenses per month:
Rent: $400 (he moved to a dump or got more roommates)
Utilities: $100 (went to Boost Mobile)
Insurance (health, etc.): $150
Transportation: $300 (train/BART pass)
Gas: $0
Food: $500
Fun: $100 (we still need to stay sane)
Clothing: $25 (we'll replace the socks with the holes in it)
Grand Total: $1575
Difference of $1225 (~44% slash)

30-year-old expenses per month:
Rent/Mortgage/Prop Tax: $1000 (maybe he rents out a few rooms)
Utilities: $200 (no NFL Sunday Ticket this year)
Insurance (health, etc.): $150
Transportation: $400 (we sell the car but we still need Zip Car every once in awhile)
Gas: $50
Food: $500
Fun: $100
Clothing: $50
Grand Total: $2450
Difference of $2750 (~47% slash)


I slashed the budgets about the same (44% & 47%). It's obvious from the fresh grad's perspective that it's a little easier to make the transition especially if you don't own a house or have a car payment. You're haven't gotten into a certain lifestyle and you can easily adapt. Whereas a 30-year-old has been in the workforce for about 10 years and they are starting to accumulate property, a nicer car, nice clothing to keep up with their friends, or they possibly have a family that they must support so getting by on "ramen" in a single-income household is near impossible.

Getting back to my point, it's not that 30-something lose creativity - in fact I think 30-something are more creative given their experience in the work world. The biggest barrier entry for a 30-year-old to become successful in the Valley is that they are too comfortable getting their twice-a-month paycheck and they would rather climb this mythical corporate ladder or get their MBA in order to take home a little more bread.

What are you thoughts? I'd like to hear views from the 20-year-old and the 30-year-olds and beyond.

(Image by coolmikeol under the Creative Commons License)

12 comments:

  1. Well, I'm 37, and still single, and I think that the VC mentioned above is an idiot. But that's not just an opinion, that's a data driven observation.

    That said, you're mostly on the money. Your lifestyle does change as you age, and as things happen in your life. A guy my age who has a wife, two kids, and a house, has a lot more at stake and is less likely to take the plunge of doing a startup. Me, I still rent an apartment, and my only other major bill is a car payment. And I don't see being 37 has serving as any kind of impediment... if anything, I have more good ideas now than I had when I was 27, just because I have more context and experience to seed ideas from.

    At the end of the day though, it's all down to the individual, and all generalisations are rubbish.

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  3. You're spot on -- 30-somethings have had more opportunity to develop their perspective, which could enable them to see certain opportunities that the 20-somethings just don't see.

    I believe Arrington is referring to the "beginner's mind," which is "openness, eagerness, and lack of preconceptions" (http://en.wikipedia.org/wiki/Shoshin), but this has more to do with a state of mind than it does age, and 20-somethings don't have a monopoly on it.

    Indeed many 30-somethings' priorities have shifted to family so their tolerance for risk is lower, and they aren't willing to devote the time it takes to immerse themselves in a startup.

    But, pay close attention to the 30-somethings that do get in the game because they may have developed a rare and valuable perspective that is so significant that they couldn't help but to act on it.

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  4. I'm a 31 yo working on a start, been working on various startups since I was 25. I think the distinction you make is much more about a commitment to a lifestyle than an ability to pursue start-ups or reduce living expenses. Those commitments are different for every individual.

    In my case, my budget is barely more than when I was 25. I party less, but my rent is more, having more to do with my city than my desire for luxury living.

    The main differences from my 25 year old self are these:

    -more maturity
    -better able to frame ideas in realistic terms, better able to gauge chances for success
    -less enthusiasm
    -less willingness to work 20 hours a day, 7 days a week. Now I only work 12 hours a day 6 days a week.
    -more aware of personal health and how to manage my body to achieve higher productivity
    -more productive

    Other 25yos have the skills I lacked when I was 25. It's not the same for everyone.

    Besides, according to research, most entrepreneurs are older. http://ecopreneurist.com/2009/09/21/the-average-age-of-an-entrepreneur-is-older-than-you-might-think/

    -Mario

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  6. I think you're on point. As you age, the opportunity cost to take the plunge increases which makes it much more difficult later on in life.

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  7. Just that community has a younger average age, which doesn't really correlate to less creativity in someone who is older AND part of that community.

    Arrington strikes again.

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  8. I've been freelancing, working as a consultant or building startups since my late 20's. I am now 53. Yes, my expenses are higher (I have a wife, 4 kids, a mortgage) which means that I have to be a lot more careful about what I do and how I do it. I have two early-stage startups on the go, plus a reasonably successful consulting company.

    My ideas are not as wild as the young folk (mostly scratching itches that I have accumulated over my lifetime), and I don't work as obsessively. However, (I hope that) I work somewhat smarter, and I try to aim at some sort of greater good.

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  9. I'm 34, and quit my job to start a web company last year.

    In my case, the timing was right -- the last 15 years have been for grad school (I found getting my PhD to actually be good preparation for entrepreneurship) and a "first job" at a "big company" (which helped, both from learning business and from seeing the down side to working at a big company). So, obviously, I think the "over the hill" comment is silly.

    But, ultimately, I can't get worked up over it. It's cargo cult science, and anyone who can't see that is probably building bamboo air control towers ...

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  10. If one actually reads 'Zen Mind: Beginner's Mind' it should be abundantly clear that enlightenment can come to anyone at any age. That said the primary reason why the 30 year old is not over the hill is that he or she can still see the 60 year old just short of the summit (and neither can see that there are an endless number of summits to come...)

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  11. I'm 31 and I definitely feel like things would be easier if I was in my early twenties again. I look at my friends and they are all getting married, having kids and buying houses. It's hard to resist the corporate job. I haven't yet got kids so I figure I've still got one or two roll of the dice left.

    I'm now in an MBA course and trying to launch an Internet startup (which might be a bit of a paradox actually).

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  12. As someone who was an entrepreneur in my 20's and am now in my 30's, I think this post is right on the money; when I do start my next startup, I do plan to look for co-founders within my age group; however, I agree - by the time you're in your 30's, you are accustomed to a certain quality of life. And I'd like to add that in your 30's, you are (unfortunately) forced to be more aware and mindful of your health; when I was 22, I could pull a week of 20 hr work days, subsisting on ramen + cheerios + soda, followed by a night of unwinding over 8 beers; at 31, half that intensity would land me up with a 2-day hangover, bad cold, or worse. But that's more about time than money.

    I'd also like to appreciate that you didn't blame the 30-year-old budget on a "wife"/kids. A wife and kids are not inherently expensive; it's just that you have more people who are accustomed to your current lifestyle, and maybe you have to lobby harder to get them to get behind a new budget. In my case, being half of a couple (and representing a fair half of the earning power), actually helps my risk profile; I *can* take the financial risk and know that my other-half can support the family (insurance, etc.). Same goes for my husband; if he chooses to jump back into the start-up game, I can be the enabler. If we decide to co-found another startup together; maybe our daughter will have to give up her nanny and go to daycare. Maybe we'll have to sell our MacLaren stroller and get the $15 Walmart option. Big deal; it'll be fine.

    But one last word of advice (imho); if anyone is serious about becoming an entrepreneur in the near future, be very careful when you're buying property. Only buy if you're confident that you can easily rent it out (and cover costs) or sell in a hurry. Embracing a new lifestyle and cutting costs hard enough; you don't want to be thwarted by logistics!

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