| SAN FRANCISCO
SAN FRANCISCO Dec 7 When he started looking
around for start-ups in which to invest, Dan Scheinman noticed
something: twenty-something entrepreneurs building Internet
companies usually had a much easier time lining up early
financing from venture capitalists compared to their forty- and
fifty- something counterparts.
Age bias, increasingly acknowledged as a widespread
phenomenon in Silicon Valley, has created
"I was so excited you would not believe when I saw the
pattern," Scheinman, the former head of mergers and acquisitions
at Cisco Systems, recalls.
Many start-up investors claim they look for offbeat ideas
put forth by gifted entrepreneurs, but in reality they often
gravitate toward businesses that resemble past successes. In an
era dominated by erstwhile start-ups -- including Apple
, Microsoft, Google, and Facebook
-- that were founded by twenty-somethings and teenagers,
a veritable cult of youth has many investors looking for the
But Scheinman, 49, claims good outcomes are possible -- with
less competition -- by doing the opposite.
Scheinman has invested directly in eight companies since
2010, all with chief executive officers age 35 or older. On
several occasions, he says he has heard the comment, "He doesn't
look like the traditional Internet CEO."
The companies range from Think Big Analytics to free mobile
video-calling service Tango to cloud-computing services company
Arista Networks. Scheinman generally invests $50,000-$250,000 as
part of a $1-$2 million funding round. He takes an active role,
helping to line up other investors, generally taking a board
seat, and providing strategy advice.
Of course, the true merits of Scheinman's strategy will be
clear only after a few years, when the companies in which he has
invested have either failed, been acquired or gone through
initial public offerings.
Little data exists on the average age of entrepreneurs that
succeed in raising money.
But in a 2008 paper, "Education and Tech Entrepreneurship,"
academics from Stanford, the National Bureau of Economic
Research, and the Massachusetts Institute of Technology showed
that the mean and median age of successful entrepreneurs was 39
at the time of company founding. The authors looked at companies
with more than $1 million in sales and at least 20 employees.
Scheinman says he is pro-entrepreneur, no matter the age,
but finds it easier to invest off the beaten track.
Another bonus: he manages to avoid the brazen ageism that he
has often encountered among younger entrepreneurs. "I'd hear
'Cisco is irrelevant, you're old, you're stupid,'" he says. "The
level of hubris among the 25-year-olds, the ones who are getting
funding, is very high."