Senior entrepreneurship: the true face of business
Entrepreneurship is often associated with youth: college students starting successful businesses from their dorm rooms, teenagers pitching million-dollar ideas on Shark Tank, and social media influencers establishing multiple make-up and self-care brands are increasingly common exhibitions of entrepreneurship.
But, did you know that seniors in the United States own businesses at a higher rate than any other demographic? In fact, according to the 2017 Global Entrepreneurship Monitor (GEM) report on Senior Entrepreneurship, not only were more than half of all U.S. business owners aged 50 years and over in 2012, but they were also significantly more successful: 70 % of their start-ups last more than three years compared with 28% for younger entrepreneurs.
Therefore, while the image of a young graduate taking over silicon valley is an impressive one, it is by no means the norm. Instead, the sweet lady that proudly boasts about her grandchildren every time you pick up a dozen roses from her local flower delivery store and your dad’s college roommate that runs the catering business that serviced your cousin’s wedding are the true faces of entrepreneurship in America.
Where does the money come from?
While these senior entrepreneurs face unique challenges, such as a lack of awareness of entrepreneurial opportunities at the later stage of their lives, they like all business owners have to combat a significant barrier of entry: financing. Hence, senior entrepreneurs like all others feel a great affinity with the Swedish pop band ABBA’s desire for “all the things I could do if I had a little money.”
Unfortunately, ABBA’s solution of going “to Las Vegas or Monaco to win a fortune in a game” is not always a dependable financing option even though it undeniably sounds like a lot more fun. Alternatively, most senior entrepreneurs, according to a survey of over 2,600 entrepreneurs and small business owners published by Guidant Financial, finance their startups primarily through their own cash saving, getting a line of credit, family and friends, and obtaining an unsecured loan.
Moreover, a significant number of entrepreneurs – more than one fourth – also reported using the Rollovers for Business Start-ups (ROBS) financing option, which is a government scheme that allows entrepreneurs to withdraw funds from their retirement accounts, such as the 401(k) plan, to invest in a new business venture. While business owners who did not use this scheme on average accumulated $50,000 for their startup, those who used the ROBS scheme had between $100,000 and $175,000 to spend on their startup.
Raising capital during COVID
Furthermore, while raising capital through venture capital and private equity has presented itself as a viable source of financing for senior entrepreneurs in the past, in recent times it has become significantly more challenging to secure investment due to the COVID-19 pandemic.
The outbreak over the next two years, according to the International Monetary Fund, will cost a loss worth $9 trillion in the total global gross domestic product, resulting in an economic depression that has demotivated and scared even the most deep-pocketed investors.
However, even though times are difficult, startups can still make progress in their financing venture. For instance, Sidd Gupta, the founder of Houston based startup Nesh, said to Crunchbase News that even though investors are not eager to write checks, they are more accessible than ever; in fact, he has had more conversations with investors over the past three months than he did in the past year.
Gupta’s experience highlights that while funding is currently taking a back seat, investors are still actively considering future opportunities. Hence, instead of completely disqualifying this financing option from their larger plan, startups should adapt their approaches to finding investment by following three simple steps: first, research venture capital firms that are still seeking investment opportunities, look into their past investments and learn about the industries that they expect to grow in the future; second, reassess the viability of your business model in the current environment to see whether it is still profitable, scalable, and sustainable; and third, restructure your message to investors by focusing on the essential problem you are solving and how you plan to generate encouraging results in this post-COVID world.
As ABBA said “it’s a rich man’s world,” so even if it takes more time than expected and more changes that you would like, don’t take the rich man’s money off the table.
Fund your business with grants
While the more common forms of financing mentioned above play a key role in any senior entrepreneur’s journey, there are some alternative forms of funding as well.
Grants, for instance, can be a great source of financing, especially for older female entrepreneurs as there are many organizations that aim to support women in their startup journey. For example, the Women’s funding Network, which consists of more than 150 public and private foundations around the world, awards grants to women in small businesses as well as funds for them to attend business school if they choose to.
Moreover, there are various gender-neutral grants offered as well, such as the Small Business Innovation Research Program (SBIR): the Small Business Administration’s Office of Technology funds research and development taking place in companies with less than 500 people if its research meets the specific needs of the government.
The variety of different grants offered to small businesses is an encouraging sign for startups who may be finding it difficult to raise the type of money they need quickly given the present circumstances. Furthermore, the experience and knowledge of older entrepreneurs make them extremely competitive candidates for these grants, creating an opportunity for a parallel financing strategy.
Senior entrepreneurs need motivation and empowerment
While senior entrepreneurs, according to the Guidant Financial report, mention lack of capital as their top challenge, they do have opportunities, as outlined above, to raise the required funds. In order for them to do so, however, it is essential that they first recognize their own entrepreneurial ability – a key barrier preventing many older citizens from taking the first step towards their entrepreneurial dream.
It is essential that we empower these entrepreneurs for two key reasons: first, they contribute to the economy with their success; second, those who remain more engaged with the later-life star-up world have shown to embody a more positive self-perspective of their aging, contributing to their overall happiness.
Senior entrepreneurs, therefore, need and deserve as much recognition, encouragement, and support as any other entrepreneur.
