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Most new U.S. businesses founded by people 40 and older: survey

02/28/2013
Reuters

(Reuters) - The word "startup" might convey a technology-oriented company founded by a 20-something, but the reality is very different, according to a report from the Kauffman Foundation and the online service LegalZoom.

Most new businesses are founded by people aged 40 and older, and consulting is the single biggest business category, according to the report issued on Thursday, which was based on a survey of new business owners.

"Most of the startups are not the kind of startups spawned in Silicon Valley," said Dane Stangler, director of research and policy at the Kauffman Foundation, a Kansas City, Missouri- based organization that promotes entrepreneurship. "I don't want to use the word mundane, but they're run of the mill."

Entrepreneurs between the ages of 30-39 and between the ages of 40-49 founded around a quarter each of the new companies, the survey shows. Entrepreneurs age 50-59 founded just over one-fifth, and those age 18-29 just under one fifth. Age 60 or more represented the balance.

While the image of the founder who dropped out of college looms large in the popular imagination - think Mark Zuckerberg of Facebook or Bill Gates of Microsoft - 37 percent of founders of new companies hold at least a bachelor's degree, with another 25 percent holding a master's or PhD, the survey shows.

About 70 percent of the new businesses reported no employees other than the owner. Of those that have more than five employees, the most common business activities are food and beverage services; business services; consulting; and entertainment, the report says.

More than four-fifths of the businesses said their revenues fell below $50,000. About 8 percent said their revenues totaled more than $100,000 and 1 percent said more than $1 million.

Some two-thirds of respondents used their own money to start their businesses, 10 percent used credit cards, and six percent borrowed against retirement savings. While raising money from outside investors is the norm in Silicon Valley, just 6 percent of survey participants said they went that route.

About 60 percent said they spent more than six months working on their business idea before starting their entity. But 9 percent said they spent less than a month.

The survey was based on 1,431 business owners who used LegalZoom to form their companies in 2012. It did not include any businesses that instead used traditional law firms, or did not file incorporation documents.

About one-third of the business owners were women.