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Millions of students will be graduating from college this spring, but not all of them are stressing out about job applications. Some are creating their own jobs.
Increasingly, new graduates are going straight into entrepreneurship. One in five Gen-Zers and Millennials say they were students before starting their businesses, according to a new American Express survey released on Wednesday. That compared to just 3 percent of Gen-X and Baby Boomer founders who reported as much.
Instead, nearly three-quarters of the older cohort of entrepreneurs held a traditional job in the public or private sector before starting their company, per the report, which polled business owners with 500 or fewer employees. Morning Consult conducted the survey for American Express and polled 1,127 small-business financial decision makers between March 15 and March 28.
While oftentimes working in a field can give founders more confidence when starting up, increasingly younger generations are eschewing the practice. "We have definitely seen that generational shift, and I hadn't seen that data before," says Gina Taylor Cotter, executive vice president and general manager of small-business products at American Express. "Millennials and Gen-Zs are forming small businesses at a much earlier stage in life."
So what's in the water? Here are three reasons why recent grads may be quicker to start up companies.
To some degree, it's easier to start a company as a younger person, as you may have fewer responsibilities. When Jake Danehy graduated from Colgate University in 2016, he turned down a job offer from then-buzzy athleisure brand Outdoor Voices, so he could devote his full attention to his own apparel startup, Fair Harbor, which he launched with his sister Caroline Danehy in 2014. He was a college junior and she was high school senior at the time.
"There is no better time to start a business, in my opinion, than when you're in college or just out of college. You have no responsibilities," says Danehy, whose New York-based company recycles plastic bottles into beachwear. "The opportunity cost of starting it right out of school is so much lower than when you're in your 30s or 40s."
Instead of signing up for a regular paycheck, Danehy moved back into his parents' house in Larchmont, New York, working out of the basement and packing orders in the garage. "If you are really serious about this, you have to do it full time," says Danehy, now 30. "If it becomes a side project, then no one's going to care about it." He adds, "Entrepreneurship, it's not something you can dip your toes in."
By the time Caroline, now 27, graduated college in 2019, working on Fair Harbor full time was, "a no brainer," she says. Within two years, the sibling duo landed on the Inc. 5000.
And even when it is hard -- that is, if you have a job offer already lined up -- betting on a business idea can still make sense. You're still young enough to recalibrate if your startup efforts sink. In the fall of 2016, Nathan Kondamuri started his senior year at Stanford University with a job offer from consultant Bain & Company. His friend and co-founder Sophia Edelstein earned her own offer from consulting firm McKinsey & Company, plus admission to medical school. Instead, the two classmates turned their idea for eyeglasses with interchangeable frames into a real company and launched the New York City-based Pair Eyewear.
In hindsight, that may look like a safe choice. Pair landed on the 2024 Inc. Regionals after notching 1,305 percent revenue growth over the past two years and raising $140 million to date. But as a college kid, Kondamuri, 29, says it was terrifying to say no to a full-time job. After graduation, the co-founders deferred their offers for a year before rejecting them for good, so they had the backstop if they needed it.
In the end, "we both decided -- even though we weren't really that far along -- to just take a leap of faith," says Kondamuri, who also serves as co-CEO. "As a founder, you invariably are going to have to learn on the job, regardless of if you've been in industry for some years or not. Time was on our side to be able to do that while we were young, while we obviously didn't have very much life responsibility."
The survey also found that technology and social media were some of the most important factors driving young people to start businesses. Millennial and Gen-Z founders were most likely to learn about entrepreneurship online or on social media, while Gen-X and Baby Boomers were most likely to have been introduced to entrepreneurship through a business owner they knew personally.
"People told us that we were too young to start a business and we didn't have enough experience," says Fair Harbor's Caroline Danehy, who landed on Inc.'s Female Founders list last year. "Technologies like Shopify, social media, it does give the individual person more power to start if they want to, rather than our parents' generation where it was so different to start a business."
She adds, "The world is at your fingertips right now."
For younger founders, digital tools also played a much larger role in day-to-day operations. Millennial and Gen-Z entrepreneurs are much more reliant on technology, according to the survey, with one-third of respondents citing it as a solution that helped them run their business, compared with 18 percent of Gen-X and Baby Boomers.
For Pair, social media provided an engine to spearhead early customer acquisition and growth. Videos of customers swapping their frames attracted millions of likes and views on TikTok.
"You could build a website and start selling products and running payments through a platform like Shopify very quickly. Then the social-media side allowed us to quickly gain access to consumers," says Kondamuri. "That also gives confidence to young people. If you see other young founders changing the world and various industries... you start to believe, 'Why can't we do that?' "
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