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Athletes have a limited window to make their mark before their physical abilities and performances are dulled by the effects of age.
Could venture capitalists, who compete in Silicon Valley’s fast-paced tech arena, also be in a race against time?
One prominent venture industry figure says an analysis of industry data suggests a close correlation between VC investing results and age.
VCs who invest in early stage companies are at their prime before the age of 47 or 48, according to a study conducted by The Social+Capital Partnership, the venture firm founded by ex-Facebook executive Chamath Palihapitiya.
After age 48, a VC’s ability to spot and invest in successful tech companies declines considerably, Palihapitiya said in a recent interview with longtime tech entrepreneur Joe Beninato on the FounderLine webcast.
Thirty years of data
Palihapitiya said the age-rule is the result of an exhaustive 3-month study his firm conducted that examined 30 years worth of venture capital industry data. The findings apply to early stage venture capital, in particular the first Series A and B funding rounds that companies raise.
“Almost 85 to 90 percent of all series A and series B successful outcomes have always been done by a venture capitalist under the age of 47 to 48,” Palihapitiya said.
“What that really says is that in the Series A, Series B investing game, it’s really a kind of young person’s gig,” said Palihapitiya, who is also an owner of the Golden State Warriors basketball team.
Palihapitiya couldn’t say for sure why age is so critical to success in the business, but he reckons younger VCs could simply be more likely to have their fingers on the pulse about the latest up-and-coming web and mobile services – an important factor for spotting the next Snapchat. A bigger appetite for risk may also be a factor.
“I suspect it’s probably because the life stage is such where they’re closer to the ground of what the services would be that they use, there’s more empathy around the founder situation, they’re probably not married or just married,” Palihapitiya said.
“I could see how once you’re in your fifties you’ve probably been somewhat successful you have a little bit more wealth, you’re also thinking about ‘How do I want to spend the last twenty to thirty years of my life,’ and so you’re going to make different sets of decisions.”
The findings about age are among several that Palihapitiya’s firm discovered in the study of the venture industry, which he published recently in The Information.
One of Palihapitiya’s main takeaways from the study is the importance of diversity and “intellectual conflict” in successful VC firms. But given the reports of ageism in the tech industry, the contention that the best results come from younger VCs seems likely to raise questions about the industry’s attitude towards the topic of age.
You can watch Palihapitiya discuss the findings in the video below: