How Many Startups Fail: 7 Significant Statistics You Need to Know

Every year, around 305 million startups are funded globally. However, recent statistics show that 9 out of 10 startup businesses fail for various reasons. Only 10% could surpass the challenges, and 90% will likely fail.

If you want to know what percentage of startups fail, this article will provide you with 7 of the most recent startup failure statistics. Read on to learn more.

Editor’s Choice

• According to Investopedia, 90% of funded startups fail every year.
• 10% of startup companies fail within the first year, according to Exploding Topics.
• According to the Bureau of Labor, 65% of startups fail within the first ten years.
• Failory’s survey shows that 38% of startups fail because they cannot secure additional funding.
• Another 35% failed due to a lack of market demand.
• The Information Industries have the highest failure rates of 63% among the industries, according to Failory.
• On the other hand, Finance, Insurance, and Real State have the lowest with a 42% failure rate. 

How Many Startups Failed? 

Small business enterprises in the United States reached 31.7 million in 2022. Several enterprises were launched yearly, but the success rate is tremendously low. The startup failure rate rises over time. Currently, 90% of funded startups fail annually, and only 10% will likely succeed.

This article will give you an insight into the significant statistics on startup failure rates and why success rates are significantly low.

Recent Statistics on Startup Failures

90% of startups fail, constituting over 50% of all funded enterprises worldwide. The alarming statistics about the failure rates of these companies continue to grow over the years. These fail for many reasons - including lack of funding, few sponsorships, marketing strategies, etc. 

This section includes recent studies on the percentage of startup failures, their reasons, and the industries' failure rates.

1. According to statistics, 10% of startups fail within the first year. 

(Exploding Topics)

9 out of 10 new businesses fail within their first year of operation. This average failure rate is practical across all industries.

The first two years are critical since 20% of firms fail, and these situations continue to grow. Most entrepreneurs fail for various reasons, but poor business planning and management are the most prevalent. 

2. 65% of startups fail within the first ten years of commercial operation.

(Exploding Topics)

According to the Bureau of Labor, the startup failure rate increases over time. In their first ten years in the business industry, more than 50% of startups fail. Only 45% of new businesses survive past their fifth year. 

Most startups fail, even if they have been in the industry for a long time, since they need more investors to fund the business.

3. Only 1 in 12 business owners successfully create a profitable enterprise.

(LuisaZhou)

A 2019 research study shows that only 8.3% of entrepreneurs successfully create revenue-generating companies. This statistic equates to just 1 out of every 12 business owners. 

Despite the low success rate, more and more startup companies are up for the challenge and continue to strive to achieve their business goals.

4. 38% of businesses fail due to a lack of funding.

(LuisaZhou)

Failory’s recent study reveals that over 50% of startups fail during the first five years. And several reasons contribute to these startups' failures.

The fact that companies require more money yet cannot obtain further investment is one of the main reasons that over 30% of startups fail. 

5. 35% of startups fail as there is no market demand.

(LuisaZhou)

According to CB Insights, over 30% of startups fail because there is no demand for their product in the market. 

However, things like these could have been avoided if a feasibility study had been conducted before launching the product. Studies or surveys like this are crucial to understanding your target market and determining your competitors. 

6. Information, transportation and utilities, retail, construction, and manufacturing are among the top 5 industries with failure rates above 50%.

(Failory)

Facebook and Google were formerly startups before they became well-known today. But just like other industries, entering the IT industry is full of risks and threats.

Information industries have a 63% failure rate; transportation and utilities have a 55%; retail and construction industries 53%; and manufacturing has a 51% failure rate. 

7. Finance, Insurance, and Real State Industries have the lowest failure rate.

(Failory)

Mining Industries have a 49% failure rate, wholesale Industries have 46%, and service industries have 45%. Agriculture, education, and health industries have a 44% failure rate, while finance, insurance, and real estate have a 42%.

These industries have lower failure rates than the information and manufacturing industries but are risk-free.

Conclusion

More than 4,000 startups are looking for funds annually. Still, only 20 aspiring enterprises will likely succeed and generate income in the coming years, and the remaining 90% will likely fail. 

Factors such as lack of funds and market instability contribute to such failures. These statistics are not meant to discourage aspiring business enthusiasts or the business industry in general but warn of the risks and challenges. Businesses and enterprises can use these statistics to motivate them to strive for more and be wiser.