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I have seen this claim made in several popular websites that 90% of startups fail. Two examples:

When the founder of a startup company shuts down her or his business, it’s customary to pen an essay that tells the rest of the community what went wrong. Call it a failure post-mortem. Nine out of 10 startups fail, which is why the failure post-mortem has become so common that it’s practically a Silicon Valley cliché.

http://fortune.com/2014/09/25/why-startups-fail-according-to-their-founders/

..

Most entrepreneurs think they’re building the next big thing. In reality, over 90% of them fail.

https://medium.com/swlh/why-90-of-startups-fail-and-what-to-do-about-it-b0af17b65059

I found some statistics in smallbiztrends.com:

Of all small businesses started in 2014:

80 percent made it to the second year (2015);
70 percent made it to the third year (2016); 62 percent made it to the fourth year (2017); 56 percent made it to the fifth year (2018).

This stats are saying 44% of startups fail within the first five years. But these stats are incomplete.

My question is, do 90% of the startups fail?

  • 6
    What would it mean for a startup not to fail? How many years does it have to last? – called2voyage Jun 21 at 17:23
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    "Small business" and "startup" are absolutely not the same thing. It is perfectly reasonable for these to have different failure rates. – plasticinsect Jun 21 at 17:31
  • And what constitutes "success"? Companies like Uber and Spotify are running permanently on investment money. They keep making losses every single year, but investors keeps pumping new money in. Success for the founders, but I wouldn't call them successful companies. – pipe Jun 22 at 10:45
  • I think it's clear that "fail" means cease operations, or "shut down permanently". – fredsbend Jun 23 at 15:15
  • @fredsbend: I don't think it's all that clear. First of all, success or failure of a business can come in grades. For a VC investor, failures may include start ups that don't start up that much (so no buy out) but that reach a profitable state of "normal" (non-start-up) businesses. OTOH, a successful small business, say, a freelancer, may have a "buy out" in the form that the business owner is hired. So the business shuts down, but successfully so. If you'd look at my business, you'll see me switching back and forth between [part-time] employement and my business. This is solely because some.. – cbeleites supports Monica Jun 23 at 18:39
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TL;DR In the US, fewer than 90% of startups fail in the first 10 years. In India, more than 90% startups in India fail in the first 5 years. Failure rates depend on year and region. First-time entrepreneurs are more likely to fail.

According to IBM (emphasis IBM's and not mine):

More than 90% startups in India fail in their first 5 years. Lack of pioneering innovation (77%) is the topmost reason for the failure of most Indian startups.

...

The IBM study, “Entrepreneurial India” is based on interviews with more than 1,300 Indian executives, including 600 startup entrepreneurs, 100 venture capitalists, 100 government leaders, 500 leaders of established companies and 22 educational institution leaders to analyze the macro impact of startups on the economic growth of the country.

The Bureau of Labor Statistics (BLS) has a neat table showing survival rates of establishments (workplaces) from 1994 to now. For each year, the table shows the survival rate of all businesses founded a certain year. (At the time of founding, the business would be a startup. Thus, this table shows startup survival rate.) For example, 17% of businesses founded between March 1993 and March 1994 were still around in March 2018. These statistics show survival rates do vary year-to-year. Thus, it is reasonable to assume startup survival rates vary year-to-year.

The BLS also published a study analyzing the success and employment rates of Silicon Valley startups. This article uses "Silicon Valley high-tech firm" and "Silicon Valley startup" synonymously.

The majority of high-tech businesses born in 2000 did not survive past 2003. ... By 2009, fewer than 1 in 5 high-tech startups born in 2000 were still in business. The 2000 cohort’s highest annual survival rate, 93 percent, occurred in its first year. This finding is consistent with those from previous studies, which also show that businesses generally have higher survival rates in their first year. The reason is that new businesses often have enough initial reserves to survive for at least 1 year.

Chart 2 on page 4 of the pdf shows that in 2008, the survival rate of startups founded in Silicon Valley in 2000 was slightly under 20%. The datapoints for future years are not displayed, but the survival appears to have plateaued. Going back to the table, we see a 38.6 survival rate nationwide. Thus, perhaps unsurprisingly, survival rate varies by region as well. The BLS study further stated:

About 28 percent of a typical cohort of high-tech firms survive past 9 years; however, only 17.1 percent of the 2000 cohort survived that long.

Chart A-1 on page 13 shows ~15% of Silicon Valley startups survive for 15 years. From the table, ~25% of US startups survive for 15 years.

Less credibly, an article titled "Startup Genome Report Extra on Premature Scaling: A deep dive into why most high growth startups fail" coauthored by researchers from UC Berkeley & Stanford writes:

More than 90% of startups fail, due primarily to self-destruction rather than competition. For the less than 10% of startups that do succeed, most encounter several near death experiences along the way.

The timespan is unclear.

A Harvard Business School article titled "Performance Persistence in Entrepreneurship" writes:

52% of computer startups founded in 1983 eventually went public, while only 18% of computer companies founded in 1985 ultimately succeeded.

This demonstrates the high variability between year of founding and survival and reflects the concept of "market timing."

Later on:

The overall success rate on first-time ventures is 25.3%. Not surprisingly, serial entrepreneurs have an above-average success rate of 36.9% in their first ventures. It is more interesting that in their subsequent ventures they have a significantly higher success rate (29.0%) than do first-time entrepreneurs (25.3%).

Thus, the chance that your startup will fail (when you have not created other startups) is higher and the 90% statistic may apply to you and be sensible general advice.

Do 90% of startups fail?

The failure of a startup depends on many factors such as experience, timing, and location. According to IBM, 90% of startups in India do fail within 5 years. In the US, it is highly likely that fewer than 90% of startups fail in a 15 year period.

  • Looks like the number 17% and 18% came up more than once. So, it looks like it is reasonable to say 1 in 5 startups succeed in the US. For India, it is 1 in 10 I assume. – Sakib Arifin Jun 24 at 11:16

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