Quick Answer 🔍What percentage of startups fail in 2023?
Up to 90% of startups fail.
We’ve created this resource on what percentage of startups fail in 2023 and other important startup statistics.
Business is always a risk.
Aspiring entrepreneurs know this for a fact.
Steven Schussler, a successful restaurateur and the brain behind Rainforest Cafe–the world’s largest theme restaurant had his share of mishaps, including a failed nostalgia item shop and getting cut off by a gas company for electricity, before making it big.
But for the majority of startups in the world, there is no second chance.
Once you hit the breaks, that’s it. It’s time to pack the bags.
Why do they fail?
And what percentage of them actually fail?
Let’s find out.
What Percentage of Startups Fail in 2023?
Analysts estimate that the figure is between 80% to 90%, which means only a fifth or less of these unicorns make the cut.
Why Do Startups Fail?
Aside from operating in an overly competitive market, most startups fail because of a lack of monetary support to support growth.
Balance Sheet Problems
The early days of a new business are crucial to its growth. During that time, a company’s goal is not yet to make a profit but to stage growth.
Unlike big companies with a considerable sum of cash on their balance sheets, the majority of startups are founded by individuals who seek external monetary support to support their operational costs.
Without sales and support, most startups hit the breaks even before reaching their first birthday.
Lack of Prioritization
Poor management leads to poor business strategy, including loopholes in an enterprise’s prioritization.
For the most part, people behind startups are inexperienced entrepreneurs with little to no clue about the right way to navigate around the business world.
As mentioned, the early months of a new business are a crucial time for a startup’s long-term survival.
An ideal way is to spend these months building the enterprise’s foundation and funding expansion initiatives.
But many startups use such time with one goal in mind: to make a profit. This is exactly why they fail.
Inefficient Marketing Strategies
Having the greatest product or service in the market on the one hand and a bad marketing strategy on the other leads to nothing but loss.
The world’s largest companies reached their current success not necessarily because they have the best offerings but because they know how to sell.
Most startups fail because of a badly put marketing strategy that fails to get both investors and customers.
Moreover, there are events when the time is just not right–there is a lack of market for the product or service.
Percentage of Startups and their Common Mistakes
Aside from the factors mentioned above, these are the most common mistakes startups make that lead to their untimely demise.
- Product and market mismatch – 34% of startups fail because of this issue
- Bad marketing strategies and ill-fitting collaterals – 22% of startups fail because of this issue
- Poor role designation – 18% of startups fail because of this issue
- Lack of money and other cashflow-related issues – 16% of startups fail because of this issue
- Technological problems – 6% of startups fail because of this issue
- Inefficient operations – 2% of startups fail because of this issue
- Legal issues – 2% of startups fail because of this issue
Startups and their Average Life Span
How many startups fail after their first year in the market? After the second year? So on and forth.
Below is a piece of information detailing the average life span of startups globally.
- 1 year in the market – 10% of startups fail during this period
- 2 years in the market – 20% of startups fail during this period
- 3 years in the market – 45% of startups fail during this period
- 4 years in the market – 65% of startups fail during this period
- 5 years in the market – 75% of startups fail during this period
Here are the countries that have the highest startup population and their respective share of the total.
- United States – accounts for 65% of the total
- China – accounts for 14% of the total
- India – accounts for 4.1% of the total
- United Kingdom – accounts for 2.5% of the total
- Singapore – accounts for 2.2% of the total
- Sweden – accounts for 2.1% of the total
- Germany – accounts for 2.0% of the total
- Canada – accounts for 1.6% of the total
- South Korea – accounts for 1.5% of the total
- Russia – accounts for 1.0% of the total
Industries with the Highest Startup Penetration
Technology remains the most-priced startup destination today.
Nearly 21% of all unicorns operate in the financial technology industry, translating to more than a fifth of the entire startup population.
Moreover, the internet and software services industry accounts for another 19.1% of the total.
Coming in on the third spot is the e-commerce and d2c industry with more than 9% share.
Lastly, the health industry is also a startup favorite with 7.8% of new global enterprises building business in this area.
Startups and Angel Investors
If you have been tracking startups for a long, chances are you have already heard the term “angel investor.”
This describes a person with a considerably high amount of cash and assets under its name, a.k.a. a wealthy investor who is willing to give startups their needed financial resources in exchange for ownership equity in the company.
They give a one-time investment to unicorns they project will become big in the future.
As a guarantee for their investments, these investors get a portion of their money either through an initial public offering or sales proceeds from an acquisition.
This means that whether an enterprise does not take off as expected, angel investors will pocket something out of the deal.
Top Angel Investors in the World
Angel investors play a crucial role in a startup’s lifetime, especially during its formative years when it needs to exhaust a huge amount of cash to fund expansion and achieve future goals.
Here are the world’s top angel investors in the world and the number of startup investments they made thus far.
- Fabrice Granda – topped the list with 245 investments made so far including Xango.com, WiseStamp, and Spotflux
- Naval Ravikant – made 200 investments so far, including capital investments on Uber and Twitter. He has an estimated net worth of $60 million as of 2021
- Tamnadge O’ Neill – made 168 investments so far, including capital investments on Facebook and LinkedIn
- Saad AlSogair – made 158 investments so far, including on Buffer, Unsplash, and Notion
- Paul Buchheit – made 164 investments so far, including capital investments on Weebly and Wufoo
Startups generally show a high mortality rate, which explains why millions of young entrepreneurs keep their ideas secret instead of letting them be known to the world.
On top of this, there is huge competition in the market, especially in the technology industry.
Despite these hurdles, many unicorns make it–and they make it big! Such are the likes of ByteDance, the parent company of the popular short video sharing app, TikTok, which is now among the highest valued startups in the world.
Word of advice: just get it out there. Whether this leads to success or failure, the pursuit of a goal is what matters.
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