April 13, 2010
By: by Pam Allen, Portfolio.com
Ashook Sood started his first company at age 54. Seven years later, about the same time many of his former colleagues at Honeywell, Lockheed Martin, and Tyco were preparing to retire, he founded his second startup.
Sood could retire comfortably today and spend more time with his family, but that's not in the cards.
"Things are falling into place. We're just getting started," said Sood, CEO of Magnolia Solar Inc., a company that develops nanostructured thin-film solar cells. The company in March moved to Albany, New York, from Woburn, Massachusetts.
Sood, 62, is among the growing number of individuals who are forming early-stage businesses later in life.
Forget the twentysomethings who dominated the dotcom era in the late 1990s: Today, most company founders are between the ages of 55 and 64.
The 20-to-34 age bracket-once the hottest group for founding early-stage technology companies-has the lowest startup rate, according to a recent study by the Kauffman Foundation, a private organization that tracks entrepreneurship.
The number of people ages 55 to 64 who started businesses increased 36 percent in 2008. In all, more than 80 percent of all startups were by people over 40 years of age.
There are a number of reasons for the rise in middle-aged entrepreneurship.
First, recessions such as this one squeeze out higher-wage earners, who typically are the older, more experienced workers. Those individuals tend to have more savings and better access to funds than their younger counterparts, said Peter Pritchard, program director of venture programs for Albany's Center for Economic Growth.
"Older individuals might have a better credit history, or they might have money put away," Pritchard said.
Diminished retirement portfolios have also changed the game. For years, experts worried that baby boomers would tax the country's health system and other resources once that large bubble of workers exited the workforce. Instead, the American Association of Retired Persons has reported that 80 percent of baby boomers plan to work in retirement.
"The United States might be on the cusp of an entrepreneurship boom-not in spite of an aging population but because of it," said Dane Stangler, the senior analyst who wrote the Kauffman study.
Sood, who lives outside Boston, co-founded Magnolia Solar in 2008 with Rosh Puri, a finance professor at the University of Massachusetts who spent years in private industry. In March, Magnolia Solar became the first startup to occupy space at a new clean-energy incubator at the University at Albany. The startup employs four at its offices at the university's Albany NanoTech campus; Sood expects to increase staff to 20 over the next five years.
Magnolia Solar is the subsidiary of Magnolia Optical Technologies Inc., a company the two men founded in 2000.
"When I was thinking about starting a company, I was telling someone that I worked for Lockheed, had been kicked around enough, and wanted to be on my own," Sood said.
Magnolia Optical was financed by $100,000 from family and friends, and $200,000 from a vice president of the former First Albany Cos.
"The only money we ever took was from a guy on an airplane who overheard us talking," said Sood, referring to the $200,000.
Older entrepreneurs bring a level of knowledge and experience that comes from years of working in the corporate world, said Guy Cortesi, CEO of eSolve Solutions Inc., a business software company in Latham, New York.
"When you've worked for other companies, you understand what works and doesn't work. You understand limitations and issues-too many meetings, for example-and know how to avoid those issues," said Cortesi, a former employee of Bechtel Plant Machinery Inc., who left the Schenectady company three years ago when it moved most of its operations to a facility outside Philadelphia.
Cortesi was 52 when he and three friends each chipped in $5,000 to start eSolve in 2007. Since then, the three friends left the company. Cortesi, who now operates the business with the help of his wife and two sons, said eSolve is profitable and generated $2 million in 2009.
The software and gaming industries continue to attract younger entrepreneurs. Still, the majority of the startup owners at High Tech Rochester's two incubators are at least 35 or 40 years old, said James Senall, president of the nonprofit development organization.
"We're definitely seeing a lot of high-level talent, previous presidents of large companies that are wondering if they should find a new job or start a company. Today, you'll find people who know an industry quite well," Senall said. High Tech Rochester operates the Rochester Bioventure Center incubator and the Lennox Tech Enterprise Center, which together house 20 early-stage businesses.
A dim job market has also attracted college graduates who want to start software companies, mainly because software requires a small initial investment, Senall said.
"But the companies with more engineered products and systems are older folks," he said.
Older entrepreneurs are also motivated to venture out on their own as "lifetime employment" with a single company continues to diminish, and the potential for job security becomes less and less likely, said Woodward "Woody" Maggard, chairman of the Business Incubator Association of New York State Inc., and director of the University at Buffalo's incubator program.
"The day of the '30 years and a pension' are gone forever for most people," Maggard said.
He said people expect to work longer and are willing to invest time and effort into their own company, an inclination they may not have working for someone else.
Cortesi started a business briefly when he was younger, but decided it wasn't the right time to take such a risk.
"Full-time work better suited family rearing," Cortesi said.
Today, Cortesi would have a tough time working for someone else.
"I have learned more in the last three years than in all of the 20 years before that," he said. "The hardest thing is being able to say, ‘I'm done.' Otherwise, there's always something to do."