Startup Failures

Extracted Attributes

• Year 1 Failure Rate

  10%

• Current Market Focus

  Profitability over growth

• Year 2-5 Failure Rate

  70%

• Long-term Failure Rate

  90% of all startups

• Primary Cause of Failure

  Absence of product-market fit

• Secondary Cause of Failure

  Running out of cash / cash flow problems

• Venture-backed Failure Rate

  Approximately 75%

• Average Time to Potential Failure

  17 months for tech companies

Timeline

• Business failure rates begin a period of relative consistency across most industries that lasts for several decades. (Source: Exploding Topics / US Bureau of Labor Statistics)

  1990-01-01

• Wilbur Labs conducts an initial survey of 150 founders, identifying money and financing as top failure reasons. (Source: Wilbur Labs Blueprints)

  2020-01-01

• Wilbur Labs updates its founder survey, highlighting the impact of inflation and the macro environment on business survival. (Source: Wilbur Labs Blueprints)

  2023-07-01

• All-In Podcast Episode 151 discusses the dramatic rise in startup failures and the valuation reset in Silicon Valley. (Source: All-In Podcast Episode 151)

  2023-10-27

• Latest startup failure statistics are published, confirming the 90% long-term failure rate trend. (Source: Exploding Topics)

  2025-06-05

Startup company

A startup or start-up is a company or project typically undertaken by an entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship includes all new businesses including self-employment and businesses that do not intend to go public, startups are new businesses that intend to grow large beyond the solo-founder. At the early stages, startups face significant uncertainty and high rates of failure. However, a minority achieve notable success and influence, with some growing into unicorns- private companies valued at over US$1 billion. It is typically characterized by an innovative stance, a potential for rapid growth, external funding, and vulnerability.

Web Search Results

• Startup Failure

  This third and most common path—startup failure—receives little attention in the scholarly literature, yet it is a critical part of the startup and venture capital ecosystem. The ability of startups, and their participants, to fail efficiently and “with honor” helps sustain the system out of which also grows some of the largest successes in the history of U.S. business. My forthcoming article, Startup Failure, provides a theory of the law and culture facilitating failure and argues that it serves an important role in the startup and venture capital ecosystem. A range of options exists and has not before been explored in the big picture—as a system for dealing with the large number of failed startups that our venture capital ecosystem produces. [...] Most venture-backed startups, however, never reach either of these paths, or if they do it is in a state of distress. Approximately 75% of venture-backed startups fail – the number is difficult to measure, however, and by some estimates it is far greater. In general, a startup can be said to fail when it ultimately falls short of reaching an exit at a valuation that would provide a return to all equity holders. This can occur for a wide variety of reasons—such as running out of cash, problems in the team, shortcomings with product development or business model, getting outcompeted, a lack of market need, or changed circumstances. The participants may not expressly call this a “failure”—and indeed they may work mightily to find a “soft landing” that allows them to characterize it [...] What, then, happens to the great number of startups that are failing to achieve their founding dreams? A range of options exists and has not before been explored in the big picture—as a system for dealing with the large number of failed startups that our venture capital ecosystem produces. The alternatives to bankruptcy that venture-backed startups commonly use include M&A sales, acqui-hire transactions, and assignments for the benefit of creditors (ABCs). The low cost, speed, potential for private ordering, and light level of legal formality involved in these options allow venture-backed startup participants to “fail fast” and for assets and talent to be absorbed or redeployed without significant reputational harm.

• The 13 Top Reasons Why Startups Fail

  According to an examination of startup businesses (by which they mean new companies in general) in the United States conducted by Statistic Brain, almost all new companies fail: 50 percent after five years and 70 percent after 10 years. Their data found that 46 percent of all companies in the US fail due to “incompetence.” That category includes everything from “emotional pricing” to “no experience in record-keeping” to “nonpayment of taxes.” The next 30 percent failed due to “unbalanced experience or lack of managerial experience”, followed by 11 percent failing due to “lack of experiences in line of goods or services.” [...] But while the failure rate for new companies in general is high, they’re nowhere near the failure rates of startups. A commonly cited number is “90 percent of all startups fail,” but one study by Harvard Business School senior lecturer Shikhar Ghosh found that the number might be closer to 75 percent. The “real” number is probably somewhere in between the two. Regardless, it’s very high. So why is that? ## Why do startups fail? While we can all share anecdotes about why startups we know failed, let’s take a look at the one actual study examining why startups fail. CB Insights analyzed 101 startup “postmortems” — you know, those Medium posts Founders do when their company goes under — to determine what the most common causes of startup failure were. [...] ## 8. Poor Marketing (14%) No matter how great your product is, it’s going to fail if no one knows about it. Poor marketing is a major reason a lot of startups fail and one that I personally get a lot of questions about. While you don’t necessarily need a professional PR team at the beginning, learn from the failed startup pile and don’t ignore marketing. (Yes, even when you’re bootstrapping.)

• Why Startups Fail | Lessons From 150 Founders - Wilbur Labs

  Although the causes of startup failure changed significantly in those six years, challenges with money and financing remained the top reasons for startup failure. [...] ## Why Startups Fail 64% of tech founders reported that their company had faced a potential business failure. On average, tech companies encountered their potential failure after roughly 17 months in business. 75% of founders who faced potential business failures admitted that their company was not adequately prepared to be in business. Over half of all founders we surveyed believed that running out of money led to failure. Second to that, current founders attribute their failure to the residual effects of COVID-19, inflation, and the looming recession. In other words, the current macro environment has been extremely challenging, putting added pressure on entrepreneurs and their businesses. [...] Home / Blueprints / Why Startups Fail | Lessons From 150 Founders Blueprints # Why Startups Fail | Lessons From 150 Founders Phil Santoro · 11 min read In 2020, we surveyed 150 startup founders to find out what challenges they were facing, why their businesses were failing, and what advice they would give to other founders to ensure their success. After three years of ongoing challenges and amidst a very different economic climate, we conducted the survey again, asking 150 founders what their current reality is like, including what challenges they’re facing and how they would prevent business failure. (This article has been updated with the results from our July 2023 survey.) Why do startups fail, and what can founders do to prevent it?

• Startup Failure Rate Statistics (2025) - Exploding Topics

  ### Startup Failure Rate Statistics and Trends #### Startup Failure Rates: How Many Businesses Fail in the First Year? Approximately 10% of startups fail within the first year. According to the United States Bureau of Labor Statistics, the startup failure rate increases over time, and the most significant percentage of businesses that fail are younger than 10 years. Over the long run, 90% of startups fail. In other words, only one in 10 traditional businesses in the startup category ultimately survive. Business failure rates have remained more or less consistent since the 1990s across most industries. Knowing what percentage of businesses fail and why they fail can help startup owners manage risks and ensure that their new business succeeds. [...] Table of contents Back to top Startup Failure Statistics – Editor’s Choice Startup Failure Rate Statistics And Trends Startup Costs Statistics Why Do Most Startups Fail? Startup Funding + Investor Facts Failure Rate Implications For Entrepreneurs Failure Rate Implications For Startup Investors Startup Failure Rate By Industry And Sector Conclusion: Future Of Startups # Startup Failure Rate Statistics (2025) by Josh Howarth Last Updated: June 5, 2025 According to the latest data, up to 90% of startups fail. Across almost all industries, the average failure rate for year one is 10%. However, in years two through five, a staggering 70% of new businesses will fail. [...] ### Why Do Most Startups Fail? #### Top Reasons Startups Fail Why do startups fail? The relatively high startup failure rates are due to various reasons, with the most significant being the absence of a product-market fit, poor marketing strategy formulation and implementation, and cash flow problems. Why do entrepreneurs fail? In most cases, a business fails due to multiple reasons. For example, suppose the startup owner fails to draw up a comprehensive business plan or build a business model that seems sustainable over the long run. In that case, the startup might lose money, encounter operational issues, and run into legal problems.

• [PDF] The Top 20 Reasons Startups Fail - Amazon S3

  2 cbinsights.com After we compiled our list of startup failure post-mortems, one of the most frequent requests we received was if we could distill the reasons for failure down from all these posts. Startups, investors, economic development folks, academics and corporations all wanted some insight into the question: “Are there a few primary drivers of startup failure?” So we gave those post-mortems the CB Insights’ data treatment to see if we could answer this question. And so after reading through every single of the 101 post- mortems, we’ve learned two things. One – there is rarely one reason for a single startup’s failure. And two – across all these failures, the reasons are very diverse. [...] The Top 20 Reasons Startups Fail From lack of product-market fit to disharmony on the team, we break down the top 20 reasons for startup failure by analyzing 101 startup failure post-mortems.