Testimony of Dane Stangler

Vice President, Research and Policy

Ewing Marion Kauffman Foundation
Before the
U.S. Senate Special Committee on Aging & the Senate Committee on Small
Business and Entrepreneurship
In Search of a Second Act: The Challenges and Advantages of Senior
Entrepreneurship
February 12, 2014
Chairman Nelson, Chair Landrieu, Ranking Member Collins, Ranking Member
Risch, and members of the Aging and Small Business and Entrepreneurship
Committees, thank you for the opportunity to present data gathered by the Ewing
Marion Kauffman Foundation on senior entrepreneurship.
Founded by late entrepreneur and philanthropist Ewing Marion Kauffman, the
Kauffman Foundation is a private, nonpartisan foundation based in Kansas City,
Missouri that aims to foster economic independence by advancing educational
achievement and entrepreneurial success. At the Kauffman Foundation, we
believe in the power of entrepreneurship to not only change individual lives, but
to also create economic opportunities for many others in society. With the goal
of creating new knowledge about entrepreneurship, the Kauffman Foundation
conducts and supports research that informs policymakers and the public about
pro-entrepreneurship policies at all levels of government. Our research
contributes to a more in-depth understanding of what drives innovation and
economic growth in an entrepreneurial world.
Contrary to popular perception, entrepreneurship is not exclusive to the young
and hip. Entrepreneurs of all ages start businesses and create economic
opportunity for themselves and others. Last year, for example, businesses
started by those ages 55 to 64 accounted for nearly one-quarter of all new
businesses started.1 That share has risen from 14 percent in 1996, according to
the Kauffman Index of Entrepreneurial Activity, which captures business owners
in their first month of significant business activity. 2
1

Robert W. Fairlie, The Kauffman Index of Entrepreneurial Activity: 1996-2013, Kauffman

Foundation, forthcoming.
2
Robert W. Fairlie, The Kauffman Index of Entrepreneurial Activity: 1996-2013, Kauffman
Foundation, forthcoming.

In the context of Americas aging population, an increasing share of

entrepreneurship among this population is perhaps not surprising. What might be
more startling to many observers is that Americans in the 55-64 age group start
new businesses at a higher rate than those in their twenties and thirties.3 This
has been true, by the way, in every single year from 1996 to 2013.
While senior entrepreneurs make up a sizeable portion of all entrepreneurs and
tend to start businesses at a rate comparable to or higher than younger
entrepreneurs, there are possibly some reasons to temper our enthusiasm about
this phenomenon. First, we are unsure of the types of businesses being founded
by older entrepreneurs or their hiring practicesmore cynical observers say that
this group only starts consulting companies or use self-employment for
supplemental income. This is undoubtedly true for some share of older
entrepreneurs. Yet other evidence indicates that we find founders of technology
companies in their fifties and sixties as well: one study found more tech founders
over age 50 than under age 30.4
Of more concern perhaps is the lingering effect of the Great Recession and the
decimation of retirement plans and housing wealth. To the extent this damage fell
on Americans over age 55, self-employment may be seen as a way to recover
nest egg losses. Finally, with concern about Americans over age 55 permanently
leaving the labor force after the recession, it is possible that older
entrepreneurship rates could be suppressed.
Nevertheless, there are more reasons for optimism than pessimism about
entrepreneurship among older Americans. First, senior entrepreneurs are likely
to have greater experience than younger entrepreneurs. That experience,
whether professionally or personally, can prove valuable when starting a new
business. Secondly, perhaps paradoxically, senior entrepreneurs may have
fewer concerns about setting up a business. In their paper on entrepreneurs over
the age of 50 in the United Kingdom, Ron Botham and Andrew Graves found that
older entrepreneurs were less likely to worry about risks, experience, or family
life than younger founders.5
Third, despite the effects of the recession, senior entrepreneurs may be more
financially secure than younger entrepreneurs and may have an alternative
3

Robert W. Fairlie, The Kauffman Index of Entrepreneurial Activity: 1996-2013, Kauffman

Foundation, forthcoming.
4
Vivek Wadhwa et al, Education and Tech Entrepreneurship, Kauffman Foundation, May 2008,
at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1127248.
5
Ron Botham and Andrew Graves, The grey economy: How third age entrepreneurs are
contributing to growth, Nesta, August 2009.
2

source of incomeeither from retirement savings, a pension, or Social Security.

This added financial security can make the financial risks of starting a business
less salient. Finally, we might expect a higher preponderance of serial
entrepreneurs among those in their fifties and sixties, which could mean greater
success rates. A 2012 Kauffman Foundation and LegalZoom survey of 1,400
business owners who incorporated their business through LegalZoom in 2012
found two-thirds of respondents over age 60 had previously started a company
and ten percent of these entrepreneurs had started 5 prior companies.6
Research suggests that there are several ways policymakers could support this
very important phenomenon of older entrepreneurship. Lower barriers to entry in
general, for example, would make business creation easier. Licensing barriers in
several sectorswhich exist mostly at the state and local levelalso suppress
business creation. The complexitythough not necessarily the levelof taxes
can also act as a barrier to entrepreneurship. These, of course, apply to
entrepreneurs of all ages.
For senior entrepreneurship, flexible labor markets are especially important. The
idea of spending forty years at one job and retiring with a gold watch is quickly
fading in the United States. Even when Americans retire at age 65, they can
expect to live healthily for another two or three decades. Moving easily between
self-employment, wage-and-salary employment, and entrepreneurship requires
flexible labor markets. This may be especially important for senior
entrepreneurship as research has shown that senior entrepreneurs are much
more likely to start a business if moving from a job.
In addition, fostering more senior entrepreneurship as the American population
ages will require careful attention to specific sectors in order to foster innovation.
In particular, we will likely need more financial innovation to support continuously
changing forms of entrepreneurship.
Finally, policymakers can foster senior entrepreneurship by encouraging
intergenerational networks where entrepreneurs of different ages can interact
and learn. The Kauffman Foundation started a new entrepreneurial support
program called 1 Million Cups in Kansas City that has spread to more than two
dozen cities across the United States. Each week, the 1 Million Cups program
offers local entrepreneurs an opportunity to present their startups to a diverse
audience of mentors, advisors, and entrepreneurs. Presenters prepare a short
6

LegalZoom and Kauffman Foundation, Startup Environment Index, February 2013, at

http://www.kauffman.org/newsroom/2013/06/new-kauffman-foundation-legalzoom-surveycaptures-rare-picture-of-americas-startups.
3

educational presentation and engage in 20 minutes of feedback and questioning

after they present. Entrepreneurs gain insight into possible ways they can
improve their businesses, gather realtime feedback, connect with a community
that truly cares about their progress, and walk away feeling like they have
advanced their business. These community gatherings provide opportunities for
individuals of all ages to connect around entrepreneurship.
In conclusion, older Americans are active entrepreneurs whose new businesses
provide self-employment and employment opportunities to others. As the
American population ages, we should expect a greater share of entrepreneurs to
be seniors. Policymakers can support these third age or encore
entrepreneurs by pursuing policies that lower barriers to entrepreneurial entry,
maintain flexible labor markets, and encourage intergenerational interaction.
Thank you, again, for the opportunity to testify.