Why Entrepreneurs Over 50 Rock
Insights and tips from EIX entrepreneurship professor David Deeds
Boomers have proven to be prolific entrepreneurs because self-employment provides flexibility and a more gradual path toward retirement, according to a new paper from George Washington University’s Global Financial Literacy Excellence Center. But do older entrepreneurs have advantages as small business owners over younger entrepreneurs?
To find out, and to get smart tips for business owners over 50 as well as wannabes, I interviewed David Deeds, the Schulze Professor of Entrepreneurship at the Schulze School of Entrepreneurship of the University of St. Thomas in Minneapolis.
Deeds, the former co-founder and president of LightSpeed, is also editor-in-chief of EIX, the Entrepreneur & Innovation Exchange, a social-media learning platform designed to improve the success rate of new business ventures. (EIX, which features articles by noted entrepreneurship professors and videos about entrepreneurship, is funded by the Schulze Family Foundation. That foundation sponsors Next Avenue’s new America’s Entrepreneurs Special Report; I hope you’ll check it out.)
"It's a pretty good time to pursue a passion you think can turn into a viable business and do a little good in the process."
Highlights from our conversation:
Next Avenue: How would you rate the time we’re living in for starting a business after 50, and why?
David Deeds: I think it’s a pretty good time, depending on what you’re trying to do. The cost of development for building a site and reaching audiences has come down dramatically. You can reach a lot of people through social media and get feedback cheaply. Go back 15 years, and it was very expensive to build something and reach an audience.
If you’re looking to create the next Facebook or Oracle, who knows? But it’s a pretty good time to pursue a passion you think you can turn into a viable business and do a little good in the process.
And how are things for older entrepreneurs who need to raise money to start their businesses?
The availability of credit is pretty good and interest rates are very low. If you have a good credit score, loans are out there and they’re relatively cheap. A lot of people in their 50s and 60s have established good credit. If you’re looking for angel or venture capital, it’s a good, but not a great, time.
What advantages do you think someone has as an over-50 entrepreneur compared to entrepreneurs in their 20s and 30s?
As someone who just turned 55, I think there are a lot of advantages, and far more advantages than disadvantages.
In your 50s, you have experience, knowledge and wisdom. You’ve seen a lot of things while you’ve worked in your career, or in a multitude of careers or jobs. You probably have some financial wherewithal. You’ve established a network over your career that you can get feedback from — maybe potential customers or engineers or designers you can learn a lot from over a cup of coffee.
To be honest, the only serious disadvantage I see is societal perception that entrepreneurship is for wide-eyed twentysomethings. That is wrong. One thing we know about entrepreneurs: They are as diverse as the population. There’s no magic test that says you can or can’t be one.
Some people think older people aren’t as adept at technology as younger people. Is comfort with tech a disadvantage for entrepreneurs over 50?
Yes, my kids are better with apps and phones than I am. But on the flip slide, I can learn pretty much anything I need to know by spending a little time at it. And I can always hire a twentysomething; they’re readily available.
Also, the world of ventures is not limited to something that sits on a phone. We’ve gotten locked into this strange idea that entrepreneurship means a business has to fit on a phone and I think that’s craziness.
The Kauffman Foundation says 26 percent of new entrepreneurs in 2015 were 55 to 64 compared with 15 percent in 1997. Why is that?
I think it’s two things. You can’t deny the underlying demographics; more people are getting to that age group.
And a lot of it has to do with the recovering economy, housing prices rebounding and people in this age group getting to the stage in life where their kids are out of college. So they can look up and say: ‘I don’t want to go to this job anymore.’ They want to control something that’s theirs. The upside is you may create a lot of wealth for you, but more importantly, you’ll be doing something you love to do and enjoy and that will make the next 20 years of your life meaningful.
What advice would you offer people in their 50s or 60s who are thinking of starting a business full-time or part-time in retirement?
The most important thing: Do your homework. Talk to potential customers and people who have the problem you’re trying to solve with your business. Then start iterating simple prototypes. You’re not going to get it right at first and you don’t want to go all in until you’re close to getting it right. Don’t quit your day job until you’re ready. And don’t bet the farm.
The other thing I’d say is to put together solid financial plans. You’re in an age group that wants to have a nice retirement and travel. So plan for yourself and for your venture. As you start a business, your personal and venture finances will merge very rapidly.
A lot of people love to watch television’s Shark Tank. What can entrepreneurs, or would-be entrepreneurs, learn from that show?
If you look at Shark Tank, you’ll see those investors are almost always focused on the product, the market and the solution. They say: ‘We can fix the back-end and the execution.' But if there’s no demand or no solution to a problem, it ain’t gonna work.
Your EIX site is filled with articles about entrepreneurship. What are a few you’d recommend for people who want to start a business?
Phil Greenwood, a professor at the University of Wisconsin, has two pieces on the nuts and bolts of finances and they’re quite good: ‘How to Grow Your Firm the Right Way’ and ‘A More User-Friendly Way to Track Liquidity.’
If you’re involved in a family business, you’ll want to read the article by Ritch Sorenson, from here at the University of St. Thomas: It’s called ‘The Family Way: Entrepreneurial Values Help Businesses Thrive Over Generations.’
Dan Forbes, of the University of Minnesota, has a good one called ‘Managing Conflict in New Ventures.’ Ventures are rarely solo acts anymore; there will be conflict frequently.