How to be in the 10%, when 90% of startups fail | Startups Magazine (2024)

FAQs

Is it true that 90% of startups fail? ›

Approximately 10% of startups fail within the first year. According to the United States Bureau of Labor Statistics, the startup failure rate increases over time, and the most significant percentage of businesses that fail are younger than 10 years. Over the long run, 90% of startups fail.

The failure rate of startups is high at more than 90%. Over nine in 10 startups fail overall, and about 20% of those fail in the first year of operations.

According to business owners, reasons for failure include money running out, being in the wrong market, a lack of research, bad partnerships, ineffective marketing, and not being an expert in the industry. Ways to avoid failing include setting goals, accurate research, loving the work, and not quitting.

On average, 63% of tech startups don't make it, 25% close down during the first year, and only 10% survive in the long run.

If the startup fails, they will not only lose their original investment but also any potential returns that they might have earned had the startup been successful.

Transportation, construction, and warehousing have the worst failure rates with 30%-40% of these businesses surviving five years, while approximately 50% of all businesses make it to their fifth year.

The biggest mistake that startups make is scaling without having the proper growth strategy and allotted resources in place. “The biggest mistake a startup can make is not properly managing the growth,” explains Daniel Javor of Step By Step Business. “All parts of the business have to grow, not just sales.

Lack of Product-Market Fit

A study by CB Insights found that 42% of startups fail because of a lack of product-market fit (PMF). Startups need to identify a problem worth solving and then develop a solution that meets the market's needs.

88% of millionaires are entrepreneurs. You likely won't get wealthy putting money into a savings account or buying index funds. This is the lie you're sold so you never get wealthy.

Or to put it another way, there seems to be an 80/20 rule at play here: 80% of businesses survive their first year, 20% don't. 20% of businesses sustain themselves for over 20 years, 80% do not (they are closed or sold before then).

What is the #1 reason small businesses fail? ›

1. Financing Hurdles. A primary reason why small businesses fail is a lack of funding or working capital.

Top Startup Failure Rate Statistics (2024)

The Startup Failure Rate is currently 90%. 10% of the newly launched startup witnessed failure within its first year. Poor Product market fit is considered as the most common reason behind startups failing.

30% of startups fail within three years. 50% don't make it past five years. 70% close down in 10 years. Only 40% manage to turn a profit.

While it's not impossible, attaining unicorn status can be incredibly difficult. In fact, a business only has a 0.00006% chance of becoming a unicorn, and it takes an average of seven years for nascent startups to grow into unicorns. That being said, there are startups that beat the odds. How do they do it?

Startup Failure Rates

About 90% of startups fail. 10% of startups fail within the first year. Across all industries, startup failure rates seem to be close to the same. Failure is most common for startups during years two through five, with 70% falling into this category.

Depending on the study, between 75 and 95% of startups fail in the first 5 years. Only 1 in 10 will succeed. The #1 reason new businesses close shop according to CBInsights? A whopping 42% run out of cash and simply can't afford to stay afloat.

Approximately 75% of venture-backed startups fail – the number is difficult to measure, however, and by some estimates it is far greater.

Studies have shown that a staggering 95% of companies fail due to their inability to effectively implement data analytics strategies.