Thinking of starting a business and curious about the odds of startup success?
Did you know every startup has a failure probability of 90%?
Nearly 70% of startups fail within their first five years.
Only 1 in 12 entrepreneurs succeed in building a successful business.
1 in 3 want-to-be founders said that “general anxiety and fear of failure” discourage them from starting a business.
Have you hired the right people?
14% of businesses fail because they have a poor team. And 20% of startups fail because they get outcompeted.
Equip your entrepreneurship journey with insightful startup failure statistics to defy the odds.
Top Startup Failure Statistics: Editor’s Pick
- Overall, about 9 out of 10 startups fail. [1]
- Approximately 20% of startups fail in the first year of operations. [1]
- All businesses have a 50% failure rate by the end of five years and 70% by ten years. [2]
- 38% of startups fail because they run out of cash and fail to raise capital. [3]
- 35% of businesses fail because there is no market need for the product. [3]
- It is generally noted that founders often overestimate the value of their intellectual property before product-market fit—by as much as 255%. [1]
- About 80% of e-commerce startups fail. [9]
- Only 0.05% of startups get VC funding. [3]
Startup Failure Rates And Trends
How many startups fail?
- Overall about 9 out of 10 startups fail. [1]
- The startup failure rate is almost higher than 90%. [1]
- About 20% of startups fail in the first year of operations. [1]
- All businesses have a 50% failure rate by the end of five years and 70% by ten years. [2]
- Only 1 in 12 entrepreneurs succeed in building a successful business. [2]
- It is generally noted that founders often overestimate the value of their intellectual property before product-market fit—by as much as 255%. [1]
- Finding the market fit of a new startup takes 2 to 3 times longer than many founders often anticipate. [1]
Why Do Startups Fail?
#1 reason why startups fail?
Money!
38% of startups fail because they run out of cash and fail to raise capital. [3]
Have you evaluated the demand for your product in the market?
It is a very crucial step as 35% of businesses fail because there is no market need for the product. [3]
20% of startups fail because they get outcompeted. [3]
19% of startups fail because they work on a flawed business model without proper research and evaluation. [3]
10% of startups fail because their product or service was mistimed. [3]
Is your team top-notch?
14% of businesses fail because they have a poor team. [13]
5% of businesses failed because the founder and team lost passion or felt burnout. [3]
Source: CB Insights
Startup Founder Concerns Statistics
1 in 3 want-to-be founders said that “general anxiety and fear of failure” discourage them from starting a business. [4]
93% of startup owners calculate a potential run rate of fewer than 18 months upon launch. [6]
While an average startup takes about 4 years to make money. [5]
81% of startup owners are comfortable going into debt for a business. [4]
Entrepreneurs spend around 40% of their time on tasks that don’t generate income. [7]
What Are Startup Failure Rates By Stage?
Here we have reviewed how many startups survived at different stages of business.
Source: BLS
- 1 in 5 startups (20%), fail by the end of the first year. [1]
- 30% of startups usually fail by the end of the second year. [8]
- Nearly 70% of startups fail within their first five years. [8]
- Only 30% of startups will survive more than ten years. [8]
60% of startups fail between the pre-seed and Series A funding stages, the average pre-seed stage startup usually gets between $50,000 and $200,000 within fundraising of 3 to 9 months. [9]
About 35% of Series A startups fail before Series B, this stage typically brings in between $500,000 and $3 million within a period of 12 to 18 months. [9]
After Series C, a startup’s chance of failing is low as only about 1 in 100 startups fail at this stage. [9]
Startup Failure Rate By Industry And Sector
Do the chances of startup failure depends on the type of industry?
Let’s find out!
- About 80% of e-commerce startups fail. [9]
- 48% of real estate businesses fail within four years. [11]
- The failure rates for tech startups are as high as 80%. [9]
- 63% of tech businesses fail within the first five years. [10]
- Breaking down further within the tech startups:
- More than 75% of fintech startups fail. [9]
- About 80% of health tech startups fail. [9]
- 60% of edu tech startups fail. [9]
- In the gaming industry, 50% of startups close down.
- 90% of disruptive startups fail. [2]
- Statistics suggest that a construction startup only has a 36.6% chance of surviving longer than five years. [12]
- 2 out of 3 construction startups fail within the first ten years. [12]
Source: SPD Load
VC Startup Failure Statistics
Only 0.05% of startups get VC funding. [3]
It is shocking to note that 75% of venture-backed companies never return cash to investors. [1]
25% to 30% of VC-backed startups still fail. [13]
Venture capitalists are investing more than $333 billion in startups. [14]
The average investment check from a VC firm is $2.6 million for seed-stage companies. [15]
Have you watched Shark Tank? Yes, the famous TV show!
It is interesting to note that only 6% of startups featured on the Shark Tank fail. [1]
Unicorn Startup Failure Statistics
99.9% of unicorn startups fail.
Only 0.00006 of startups reach unicorn status. [2]
As of October 2022, there were over 1,200 unicorns worldwide. [16]
North America has the maximum number of unicorn startups, about 312. [16]
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- Software Project Failure Statistics: Insights and Trends [2024]
FAQs
What are unicorn startups?
Companies that reach a valuation of over $1 billion, without going public on the stock market. Only 0.00006 of startups reach unicorn status.
What is the failure rate for startups over time?
Overall, about 9 out of 10 startups fail, with approximately 20% failing in the first year, and 50% by the end of five years.
What is the most common reason behind startup failure, and what percentage of startups face this challenge?
The leading cause of startup failure is running out of cash, affecting 38% of startups. Another significant factor is the lack of market need, leading to the failure of 35% of businesses.
How does the failure rate vary across different stages of a startup’s development?
Around 60% of startups fail between the pre-seed and Series A funding stages, while after Series C, the failure rate drops significantly, with only about 1 in 100 startups failing.
Are there specific industries with higher startup failure rates?
Yes, certain industries exhibit higher failure rates, such as e-commerce (80%), real estate (48%), tech (80%), fintech (75%), health tech (80%), edu tech (60%), and the gaming industry (50%).
Conclusion
Embarking on the startup rollercoaster? Starting a business is like embarking on an unpredictable adventure. Amid the challenges, these startup failure statistics act as guiding stars, helping entrepreneurs navigate the twists and turns.
Money troubles? Join the club- 38% of startups run out of cash. And finding the market fit takes 2 to 3 times longer than expected. While it’s true that about 9 out of 10 startups face hurdles, understanding why they stumble is key.
Sources
- Failory. Startup failure rate: How many startups fail
- Nanoglobals. Is it true that 90% of startups fail?
- CB Insights. Why startups fail: Top 12 reasons
- Lending Tree. 25% of Americans Thought About Starting a Business
- Earthweb. How many startups are created each year?
- Small Biz Trends. One-third of Small Businesses Start with Less Than $5,000
- Entrepreneur. Is It Time to Outsource Human Resources?
- BLS. Survival of private sector establishments by opening year
- SPD Load. Startup Failure Rate Statistics by Industry and Stage (2024)
- Ewing Marion Kauf. Education and Tech Entrepreneurship
- Embroker. 106 Must-Know Startup Statistics for 2024
- Pit & Quarry. The real reason construction companies fail
- The Wall Street Journal. The Venture Capital Secret: 3 Out of 4 Start-Ups Fail
- Statista. Value of venture capital investment in the United States in Q1 2021, by industry
- Fundable. Startup Funding Infographic
- Startup Genome. The State of Global Startup Ecosystems in 2022
Manisha is a digital writer providing guidance in career development and growth. She facilitates skill development and implementation of the right strategies for advancement. At Jobera, She documents content around the latest market trend analysis, insights, and career planning.