The startup failure rate remains a significant concern for entrepreneurs and investors alike. Studies indicate that about 90% of startups fail, with varying rates depending on their stage and industry.
Early-stage ventures are especially fragile, often struggling with a lack of product-market fit, insufficient funding, and ineffective marketing strategies. Alarmingly, 70% of startups close their doors within two to five years, and 10% don’t even survive their first year.
In this article, we will explore further details about startup failure statistics, reasons for startup failure, and more.
Startup Failure Rates 2024 (Top Picks)
- As of 2024, 90% of the startups fail.
- 1 in 5 startups fail within their first year of operation.
- 10% fail in their first year after launching.
- In the United States, 80% of startups fail.
- 65% of startups manage to survive for an average of 15 years.
- First-time entrepreneurs have an 18% success rate when launching a startup.
- 42% of startups fail because they fail to meet market demand with their product.
How Many Startups Fail?
- The latest data reveals that 90% of startups fail.
Of these, 10% fail within the first year of establishment. Companies with 11 to 50 employees face a higher risk of failure. Additionally, 70% of startups fail within two to five years of establishment.
The following table breaks down the startup failure rates by year of establishment:
| Until The End Of The Year | Failure Rate |
|---|---|
| 1st year | 20% |
| 2nd year | 30% |
| 5th year | 50% |
| 10th year | 70% |
- Only 6% of the startups that went over Shark Tank have shut down.
- 75% of venture-backed companies rarely return the cash to the investors.
- In 30 to 40% of cases of startup failure, investors lose their initial investment.
- Only 0.05% of the startups receive VC funding.
- 43% of entrepreneurs are concerned about the failure of their startups.
- 80% of e-commerce startups fail. The rest 20% succeed significantly.
- 80% of startups fail in the United States.
The following table displays the startup failure rates in different countries around the globe.
| Country | Startup Failure Rate |
|---|---|
| United States | 80% |
| Canada | 80% |
| United Kingdom | 70% |
| France | 80% |
| Germany | 75% |
| Switzerland | 65% |
| Estonia | 75% |
| South Africa | 86% |
| Hong Kong | 70% |
| Singapore | 70% |
| Australia | 75% |
- 70% of new businesses fail in a time frame of 10 years.
In the following table, we have highlighted the failure rates of startups at different stages.
| Business Type | Failure Rate |
|---|---|
| Startup | 90% |
| New business | 70% |
| Scaleup | 75% |
| Unicorn | 99.9% |
Sources: Forbes, Failory, Embroker, Small business trends.
What Are The Success Rates Of The Startup?
- Just 10% of the startups become successful in the long run.
- Small business owners starting a company for the first time have a success rate of 18%.
- The success rate of business owners who have failed in the past is 20%.
- Business owners who have started successful businesses in the past have a success rate of 30% for their new startup venture.
- Two founders increase the chances of a startup being a success by 30% due to more investment and growth rate.
- 40% of the startups are profitable.
- 70% of the startups in the US are launched from home.
- 66% of small businesses outsource tasks to other small businesses.
- Gaming startups have 50% of success rates.
- There are around 1000 unicorn companies around the world.
Sources: CB Insights, Forbes, Failory, Statista, Embroker.
How Much Does It Cost To Setup A Startup?
- On average, starting a new business costs the owners approximately $3,000.
- Retail, accounting, construction, and landscaping startups require an average startup cost of $5,000.
- The most expensive startups are in the healthcare, restaurant, and manufacturing companies industries. They require an investment of more than $100,000.
- The types of equipment required to start a startup can cost as high as $125,000. The costs may vary from industry to industry.
- $10,000 is the lowest average equipment cost required for a startup.
- Payrolls are the most crucial startup cost. It may require $300,500 on average per 5 employees.
- 58% of the small businesses in the United States need less than $25,000 to start their venture.
- 77% of the startups used personal funds to finance their businesses.
- Startups in the capital industry, such as Airbnb and Uber, require more than $1 billion.
Source: Small business trends, Failory, Pitchbook, Embroker, Findstack.
Startup Funding And Investor Statistics
- 26% of the startups in Europe depend on venture capital.
- A venture capital receives more than 1,000 proposals per year on average.
- 25% of the new businesses cannot collect the required investment amount. This affects their growth and slows down their progress.
- 75% of new businesses are financed from business loans, credit card debts, and personal cash flow.
- 30% of venture-backed startups are more likely to be failed.
- The capital for employees in 33% of the startups is less than $10,000.
- $250,000 is the startup capital for 12% of the employer firms
- In the year 2017, venture capital funding reached the amount of $155 billion.
- Only 1% of the startup emerges as unicorn startups like Uber, Slack, etc.
- In 2018, female founders brought in $2.86 billion in venture capital while male founders bought $109.36 billion.
Sources: Statista, Forbes, Fundera, National small business association, Failory.
What Are The Top Reasons For Startup Failure?
- 34% of the startups fail due to the poor fit of their product in the market.
The following table breaks down the reasons for the failure of startups.
| Reason | Percentage Of Startups |
|---|---|
| Team problems | 18% |
| Marketing problems | 22% |
| Lack of product-market fit | 34% |
| Legal Problems | 2% |
| Operations problems | 2% |
| Finance problems | 16% |
| Tech problems | 6% |
- 22% of the startups reported failing due to vague marketing strategies.
- 18% of the startups reported that they failed due to team conflicts, HR issues, etc.
- 42% of the startups failed due to not understanding the market demand.
- 16% of the startups failed due to financial issues, cashflow problems, and improper management of finances.
- 2% of the startups reported that they failed due to improper optimization of time and resources.
- 6% of the startups reported failure due to tech-related issues like improper security systems, outdated solutions, etc.
- 2% of the startups failed due to improper management of legal issues.
- After three to five years, the weak startups fail due to competition.
- In 2018, 82% of the startups were closed due to cash flow issues.
Sources: Failory, Investopedia, Business news daily, CB insights, Statista, Forbes.
The Failure Rate Of Startups By Industry
The failure rates of startups vary in different industries. Some industries have lower failure rates, while some have higher. In the following section, you will come across the failure rates of the startups observed across different industries.
The following table highlights the number of startup failure rates in different industries.
| Industry | Startup Failure Rates |
|---|---|
| Finance insurance and real estate | 42% |
| Education and health | 44% |
| Agriculture | 44% |
| Services | 45% |
| Wholesale | 46% |
| Mining | 49% |
| Manufacturing | 51% |
| Construction | 53% |
| Retail | 53% |
| Transportation and utilities | 55% |
| Information | 63% |
Fintech Industry
The fintech industry is one of the fastest-growing industries in today’s era. However, most startups fail in the industry due to immense competition and low success rates.
Here are a few stats related to the failure rates of startups in the fintech industry.
- 75% of the fintech startups fail if they are venture capital-backed businesses.
- The investment of venture capital firms in the global fintech businesses went from $1.8 billion in the year 2011 to $30.8 billion in the year 2018.
- The fintech industry receives $50 billion every year in the form of investments.
- 80% of the financial institutes in the United States are partners with fintech service providers.
- More than 8,775 fintech startups are there in the United States.
- $131 billion is the valuation of the largest fintech company in the world.
- $310 billion is the global value of the fintech company in the year 2022.
- At the start of the year 2018, blockchain and cryptocurrency startups raised around $3.9 billion in venture capital.
Sources: The Fintech Mag, Failory, McKinsey, Embroker.
Real Estate Startups
Starting a real estate business requires a large investment and determination. 42% of the startups fail in the real estate industry. The primary reason identified was a lack of cash flow. Let us take a look at some other interesting facts related to the failure rates of startups in the real estate industry.
- 48% of real estate businesses fail within the first year of establishment.
- $1.9 billion was generated by real estate startups in the year 2019.
- $62 million was generated by office-sharing startups in the year 2017.
- 31% of the prop tech investors consider investing in the real estate industry.
Sources: Embroker, Failor, Forbes, Tech, CrunchBase.
IT And Tech Industry
IT and the tech industry are the leading industries in today’s age. They work with other industries to make the world more automated and reduce human labor. But the start-ups in these industries have more chances of failing.
Here are some interesting stats related to startup failure rates in the technology industry.
- 63% of the tech business fail within the first year of establishment.
- Every year in the US, 20 tech companies launched are expected to make more than $100 million in revenue
- 39 years is the average age of tech startup founders.
- $1.6 trillion is the valuation of the technology market in the United States.
- $102,000 per year is the average pay of an employee in a tech company.
- There was a 78% increase in computer and electronics manufacturing startups from the year 2007 to 2016.
- 454 tech deals were made in the year 2018.
Sources: Forbes, Embroker, Failory.
Construction Industry
The construction industry has gained demand in the last decade. The startups in this industry are comparatively low due to a large amount of cash flow required to keep the startups growing.
Here are a few stats related to the failure of startups in the construction industry.
- 20% of construction startups fail within the first year of establishment.
- Within the first ten years of establishment, 67% of construction startups are out of business.
- The construction startups only have a 36.6% chance of surviving longer than 5 years.
- The fastest-growing sector in the construction industry is the residential housing sector.
- It is expected that the contribution of AI in the construction sector will increase profit by 71%.
Sources: Crunchbase, Small Business Trends, Accenture, Embroker.
Future Of The Startup
Most startups in the future will be powered by artificial intelligence, and technology will play an essential role in their growth.
With most businesses shifting online, technology has come to the forefront in handling the products of all startups. 92% of business owners have an opinion that a website is the best digital marketing strategy. Hence, all startups use websites to list their products for online sale.
On the other hand, startups can research businesses in the same industry that have been successful for more than five years. This research will help them to learn from others’ experiences and will assist them in making their business a success.
Conclusion: 90% Of The Startups Fail
Nearly 90% of startups fail, with 10% closing within their first year and 70% shutting down between two to five years of operation. In the U.S., the failure rate is around 80%, driven by key challenges like poor product-market fit, cash flow struggles, and ineffective marketing.
A striking 42% of startups fail because they don’t meet market demand, emphasizing how crucial it is for founders to deeply understand their customers’ needs and validate their products early in the process.
