Middle age entrepreneurs left in the shade by dotcom generation

Younger entrepreneurs are more bullish on their companies’ outlook than older business owners, and are often taking greater risks to finance future growth.

According to a new survey from investment group Albion Ventures, 14 per cent of under-35s predict their firms will grow “dramatically” during the next two years, compared to just 8 per cent of 45 to 54-year-olds. On average, younger entrepreneurs are twice as ambitious about their growth prospects and four times more likely to hire new staff than the older generation.

Now in its third year, the Albion Growth Report also found a greater willingness among younger entrepreneurs to raise equity funding. In Scotland, this “generational shift” has been witnessed in the likes of Ryan O’Rorke’s Flavourly and Cally Russell’s Mallzee, both of which have raised substantial investments in recent months.

Patrick Reeve, managing partner at Albion Ventures, said younger business owners across Britain are “by far” the most ambitious.

“This pro-growth sentiment is excellent news for the UK economy as the under-35s will become increasingly influential over the years to come,” he said. “The greater willingness of younger business leaders to use equity rather than banks to secure the funds they need suggests we’re shifting towards a more entrepreneurial model as seen in the US.”

The survey of more than 1,000 SMEs found that 42 per cent of under-35s would raise external equity versus an overall average of 35 per cent. They are also more likely to seek finance to invest in research and development (14 per cent versus 5 per cent), hire new staff (13 per cent versus 3 per cent) or to bring about a change of ownership (13 per cent versus 6 per cent).

Nearly a third of millennial entrepreneurs have attempted to raise finance during the past year, compared to 14 per cent of their middle-aged counterparts.

However, firms run by younger people were five times more likely to have their applications rejected. As a result, they are taking greater risks to finance growth.

One in four has used a credit card to fund their business, compared to just 5 per cent of older business owners, while 15 per cent of millennials have mortgaged their property – an option that only 7 per cent of 45 to 54-year-olds have taken.

Although the younger generation is more ambitious, they admit that their skills shortages are holding them back. One in four cited a lack of mentoring as a major barrier to growth, while 23 per cent said they would benefit from better business planning.

Reeve said this could possibly explain why a higher proportion of under-35s would be willing to exchange equity for hands-on support.

“That younger entrepreneurs are honest about their skills shortages and are in most need of mentoring is a call of help that we shouldn’t ignore, as it’s in our collective interests to encourage their long-term success,” he said.