Coming of age: Watching young entrepreneurs become successful

Abstract

The primary goal of this paper is to show that a young entrepreneur, or one who first opens a firm in his or her mid-20s to early 30s, can learn and invest over time to run new, more successful firms with higher productivity and sales. It has been shown by other researchers that most entrepreneurs who are successful started firms in their mid-40s, but what about those founders who are under the age of 35 and are running 42% of all new firms? How successful do they become, and what factors are consistent with their success? Using newly available data from Denmark on firm sales from 2001 to 2016, this paper shows that young founders who become serial entrepreneurs see their sales revenues nearly double between their first and second firms. Commensurate with this sales increase are two underlying factors: (1) young founders become more inclined to register new firms as limited liability corporations (LLCs), which protects them from personal losses if the firm fails; and (2), young founders who are the most successful are portfolio founders, or those who keep their first firms open when they found their second firm. Furthermore, for small firms, the productivity of the firm is often also the productivity of the founder, so just as the personal productivity of wage earners rises with age over their lifecycles, so too does the personal productivity and implied income of young entrepreneurs.