Start up failure is not new. You might be astonished to find why so many startups fail within the first three years of launch.
We are living in the startup-era. Millions of new business applications come every year across the world.
In the U.S. alone, in 2010 the number of applications was 2.5 million, which reached 4.2 million by 2020.
This whooping number of startups is inspiring, but unfortunately, not everyone is successful. With an array of business challenges and unforeseen circumstances, it is not easy to survive in the market.
Related: Benefits of Newsletters For Your Business
Several businesses end up their journey within three years of launching.
Here is a list of stats that says how many startups fail within three years of their launch:
General Startup Failure Stats
- Nearly 20% of startups fail by the end of the 1st year of their launch. (U.S. Department of Labor; Fundera)
- Almost 30% of startups fail by the end of the 2nd year of their launch (Failory)
- Almost two-thirds of small businesses survive only for two years, while nearly half of them last for five years. (U.S. Small Business Administration)
- Startup companies are more likely to fail within two to five years, having a failure rate of 70%. (Failory)
- Until 2018, the startup from the tech industry has witnessed the highest business failure rate of almost 63%. (Failory)
- The business success rate decreases by 21% in the second year, and the failure rate keeps increasing with each consecutive year. (Failory)
- Businesses with 11 – 50 employees are more likely to fail compared to other companies with more employee count. (Failory)
- Almost 64% of failed startups shut down completely while companies with more than 20 investors are acquired. (Failory)
- Every year, 1 in 12 businesses end up. (Bls.gov)
- Startups that are venture capital-funded have a failure rate of 75%. (CompareCamp)
- One-third of all new businesses fail within two years. (U.S. Small Business Administration)
- Nearly 50% of startup companies in Europe go bust within the first three years. (igostartup)
Related: Best Tools For Early-Stage Startups
Causes Of Startup Failure (Stats)
- One of the primary reasons why a startup fails – 42% of the businesses miscalculate the market demand for the product or service. (CBInsights)
- The second big reason is 29% of the companies run out of funding and personal money. (CBInsights)
- Almost 23% of the organizations fail because they have a weak founding team.
- The cause for 19% of the business to fail is the tough competition they can’t beat. (CBInsights)
- Failure due to competition is common within startups that are active for three to five years. (Failory)
- Almost 19% of the time companies fail because of the choice of the wrong team. (Findstack)
- In 18% of the failed startup cases, wrong pricing is the major reason. (Findstack)
- The reason for 17% of the failed businesses is the poor quality of the products. (Findstack)
- In 17% of the failed businesses, the reason is the lack of a business model. (Findstack)
- Nearly 14% of the companies fail due to poor marketing. (Findstack)
- In 14% of startups failed cases, the company decision-makers do not consider customers’ needs. (Fundera)
- In 13% of the failed cases, the company shutdown because the product misses the right time of launch. (Findstack)
- In 13% of the failed cases, the company fail because of the lost focus. (Findstack)
- In 13% of the failed cases, there is disharmony in the team or investor. (Findstack)
- In 10% of the failed cases, the pivot goes bad. (Findstack)
- In 9% of the failed cases, company owners lose passion for their business and goals. (Findstack)
- The reason for 9% of the failed businesses is the wrong choice of location. (Findstack)
- The reason for the 8% of the failed companies is the lack of financial investor interest. (Findstack)
- In 8% of the failed cases, the reason is the legal challenges. (Findstack)
- In another 8% of the failed cases, the reason is the companies do not use network advisors. (Findstack)
- The reason for the 19% of the failed businesses is the choice of the wrong team. (Findstack)
- Around 82% of the startups failed due to cash flow mismanagement. (CompareCamp)
- Team issues caused failure to 23% of startups. (Entrepreneur)
Related: Best Big Data Analytics Tools For Businesses
Startup Failure Rate By Industry
- The information industry faces the highest startup failure rate of around 63%. (Failory)
- The transportation and utility industry has the second-highest failure rate with 55%. (Failory)
- In the third position, it is the retail industry with a 53% failure rate. (Failory)
- Next comes the construction companies that face 53% of the failure rate. (Failory)
- Manufacturing faces 51% of the failure rate. (Failory)
- With a 49% failure rate, mining comes at the next position. (Failory)
- The wholesale market witnesses a 46% of failure rate. (Failory)
- The companies offering services face 45% of the failure rate. (Failory)
- The startups from the agricultural industry encounter a 44% failure rate. (Failory)
- Startups from the education and health sector have a 44% failure rate. (Failory)
- New finance insurance and real estate companies face a 42% failure rate. (Failory)
