The substrate of the start up business plan is that the nascent business will reach $50 million revenues per year after 5 years. Venture Capitalists seem to expect that every pitch will have a revenue graph with a hockey-stick shaped revenue line that shows the business at $50M in 5 years. Naturally, this means that constructing a financial model for a startup involves tweaking the spreadsheet to get $50M in 5 years. All of the other predictions of the model are secondary.
When have we asked if this is a reasonable goal? Are any Entrepreneurs bold enough to ask VC how many of their portfolio companies have actually his $50M in 5 years?
Fortunately, Christian Chalbot of IPO Dashboards has done some analysis to determine how long it takes technology startups to reach $50M. His answer is about 8 years, but that value is determined from studying the top 100 technology companies in the US, ranked by revenue. The number is certainly a gross underestimate, because it doesn’t include any of the companies that did not IPO, failed, or were not in the top 100. In short, even among the most successful US companies, it still takes and average of 8 years to reach $50M in revenue.
So, Entrepreneur, next time you are showing your hockey-stick graph, what you are really saying is: “My company will be more successful that Microsoft, Adobe or Novell. ” Really, why should anyone believe you?
Today, Techcrunch summarizes additional proof that, despite the popular image of the scrappy young entrepreneur, most entrepreneurial activity, and the most successful startups, is run by grey-hairs. This report from the Kaufmann Foundation puts Techcrunch’s hunches to numbers.
The average and median age of U.S.-born tech founders was thirty-nine when they started their companies. Twice as many were older than fifty as were younger than twenty-five.
So, while I can be happy that for the last two companies, I was a “young entrepreneur” for the next one I will be firmly in the norm. And that path is probably also very typical, since entrepreneurs are likely to start more than one company.
Here is the distribution of startup-founder’s ages fro the Kaufmann report:
To be fair, Venture Capitalists don’t seems to have a consistent age prejudice, but the younger founders to seem to get more attention.
Here is one more study that presents the demographics of entrepreneurs.
It finds that most founders came from middle-class or upper-lower-class backgrounds, are well-educated and married with children. The strongest motivation for starting a company was to “build wealth”. Other popular motivators included capitalizing on a business idea; the appeal of a startup culture; a desire to own a company; and a lack of interest in working for someone else.
So, not only are entrepreneurs middle aged, they aren’t typically rich or single. So, not only do Old Guys Rule, but the old, pasty, middle-class ones start companies.