STARTUP STATISTICS – The Numbers You Need to Know

The road to startup success is paved with frustration, dejection, and repeated failures. And the latest startup statistics prove this point.

Why do startups fail? What is the current startup failure rate? And how do startup owners perform in various industries? To answer questions like these, we have compiled the latest startup stats to help you understand the current startup world.

Benefits and Challenges of Starting a Business

Starting a startup can be both challenging and rewarding. Here are some of the benefits and challenges to consider:

Benefits:

• The opportunity to be your own boss: As a startup founder, you have the freedom to set your own hours, work from anywhere, and pursue your own vision.
• The chance to make a difference: Startups have the potential to solve real-world problems and make a positive impact on the world.
• The potential to earn a high income: If your startup is successful, you could earn a significant amount of money.
• The joy of creating something from scratch: Witnessing the growth and success of your startup brings immense satisfaction.

Challenges:

• The high risk of failure: According to the U.S. Small Business Administration, only about 50% of startups survive for five years.
• The long hours and hard work: Starting a startup is a lot of work, and it can be difficult to balance work and personal life.
• The lack of financial resources: Startups often struggle to raise capital, which can make it difficult to get started.
• The competition: There is a lot of competition in the startup world, and it can be difficult to stand out from the crowd.

Here are some tips for starting a startup:

• Do your research: Before you start your startup, it is important to do your research and understand the industry you are entering.
• Have a clear vision: What is your startup’s mission? What problem are you trying to solve?
• Build a strong team: Your team is your most important asset. Make sure you surround yourself with talented and passionate people.
• Be persistent: Starting a startup is not easy. There will be setbacks, but you need to be persistent and keep moving forward.
• Be adaptable: The startup world is constantly changing. You need to be able to adapt to change and be willing to pivot if necessary.

General Startup Statistics

Are you considering launching your startup but unsure of how to begin? Starting a company is the best way to learn about entrepreneurship.

The following startup statistics from Digital.com will help you understand how people enter the startup world:

• First-time entrepreneurs launched one-third of new startups in 2023
• 62 percent of Americans cited a desire to earn more money as the top reason to launch a startup
• Retail, business, finance, computer, and I.T. are the most popular sectors to start a new business

If you’re wondering how many entrepreneurs start their startup companies from home, the answer is 69 percent.

Small Business Owner Statistics

The following data from Guidant will help you understand the small business landscape in the U.S.

Gender

• 78 percent of business owners identify as male
• 23 percent of business owners identify as female

Age of Small Business Owners

• Gen X (52-42 years old): 47 percent
• Boomers (58-76 years old): 46 percent
• Millennials (27-42 years old): 7 percent
• Gen Z (12-26 years old): 0.5 percent

Ethnicity

• White or Caucasian: 85 percent
• Asian or Asian American: 4 percent
• Hispanic/Latino: 4 percent
• Black or African Americans: 4 percent
• Other: 3 percent

Happiness Index

• Very happy: 39 percent
• Somewhat happy: 36 percent
• Neutral: 10 percent
• Somewhat unhappy: 10 percent
• Very unhappy: 5 percent

Age of Businesses

• 20+ years: 5 percent
• 16-20 years: 3 percent
• 11-15 years: 11 percent
• 6-10 years: 23 percent
• 0-5 years: 53 percent

How many small businesses are profitable in the U.S.? The answer is 65 percent of small businesses.

Statistics About Why Startups Fail

Startup failure is a hard reality. If you’re considering taking the plunge into the startup world, you should know about startup failure rates.

Of newly started businesses, according to LendingTree research:

Percentage of Businesses That Fail	Year
18%	fail within one year
31%	fail within one year
38%	close after three years
45%	stop functioning after four years
50%	fail after five years

• 18 percent of businesses fail within one year
• 31 percent of businesses fail after two years
• 38 percent of businesses close after three years
• 45 percent of businesses stop functioning after four years
• 50 percent of businesses fail after five years

Here are the top 12 reasons why startups fail:

Reason	Percentage
Ran out of cash	38%
No market need	35%
Got outnumbered	20%
Flawed business model	19%
Regulatory challenges	18%
Pricing issues	15%
Not the right team	14%
Product mistimed	10%
Poor product	8%
Disharmony among investors	7%
Pivot gone bad	6%
Burned out	5%

• Ran out of cash: 38 percent
• No market need: 35 percent
• Got outnumbered: 20 percent
• Flawed business model: 19 percent
• Regulatory challenges: 18 percent
• Pricing issues: 15 percent
• Not the right team: 14 percent
• Product mistimed: 10 percent
• Poor product: 8 percent
• Disharmony among investors: 7 percent
• Pivot gone bad: 6 percent
• Burned out: 5 percent.

Though the unavailability of cash is a leading reason for business closure, VC-backed businesses also fail. In fact, 75 percent of VC-backed businesses fail.

The Four Main Startup Failure Reasons

The reasons behind startup failures are as varied as the startups themselves, but certain patterns have emerged over the years. Understanding these can provide valuable lessons for new entrepreneurs.

• Market Fit and Demand Issues: A significant number of startups fail because they do not adequately address a real market need. This is often due to insufficient market research or misinterpreting customer demand. Startups that succeed typically spend considerable time validating their idea in the real market, adapting based on feedback.
• Cash Flow Management: Cash flow challenges are a common pitfall. Many startups struggle with balancing their expenses against their revenue, especially in the early stages. Effective financial planning and prudent spending are crucial for survival.
• Team Dynamics and Management Issues: The importance of a well-coordinated team that can efficiently execute the business plan cannot be overstated. Internal conflicts, lack of relevant skills, or poor leadership can derail a startup.
• Scaling Prematurely: Scaling too quickly without establishing a sustainable business model is a frequent reason for failure. Startups need to achieve a product-market fit and ensure operational efficiencies before scaling up.
• Adaptability to Change: Failing to adapt to market shifts, customer feedback, or technological progress frequently results in failure. Successful startups stay agile and are willing to change their direction when needed.

So, learn from these startup failures. Do proper market research, hire the right team, and implement aggressive marketing strategies to ensure that your startup succeeds.

Startup Funding Statistics

Here are essential stats pertinent to startup funding:

• The I.T. sector tops the list when it comes to the highest average investment amount, followed by wholesale trade and agriculture
• The retail industry has the largest percentage (around 28 percent) of all funding issued to business owners
• Byte Dance is the highest-valued startup, with over $140 billion in valuation
• One-third of businesses start with less than $5,000

If you are curious about funding approval rates for businesses in different sectors, here are key pointers from the Biz2Credit report:

• Information technology (41 percent)
• Accommodation and food services (38 percent)
• Health care/social assistance (38 percent)
• Manufacturing (36 percent)
• Retail trade (34 percent)

Getting business loans is often challenging, especially when you have just started. So, it is no surprise that 39 percent of small business owners use cash as startup capital to start their business ventures, according to Guidant.

The following are some additional findings from Guidant research:

• 20 percent of business owners utilize rollovers for business startups (ROBS), also known as 401(k) business financing, to start businesses
• 10 percent of business owners rely on family and friends for financial support to start their businesses
• 9 percent of businesses use SBA loans and lines of credit to initiate their businesses
• 5 percent of businesses utilize unsecured loans to start their ventures

Fintech startups and health startups are on the radar of venture capitalists. According to a report, the fintech startups got around $54 billion in funding, and the health startups received 59 billion in funding.

Do you know when a startup is known as a unicorn startup? To earn the title of a unicorn, a startup needs to have a valuation of 1 billion or more without being listed on the stock market.

Statistics About Venture Capital Firms

Here are key statistics from NVCA you should know to understand the venture capital funding landscape:

• The U.S. venture capital funding reached 49 percent of the total funding of $683 billion invested by venture capital firms worldwide
• 80 percent of investment partners at V.C. firms are white, and 14 percent of investment partners are women
• VC-backed IPOs contributed to around 20 percent of the total US IPOs
• 296 VC-backed listings generated $681.5 billion in exit value

Are you interested in knowing the U.S. venture capital industry’s market size?

As of 2023, the market size of the venture capital industry amounts to $63 billion. And there are around 1000 active individual venture capital firms in the U.S. If you look at the global venture capital industry, it is expected to grow at a CAGR of 20 percent through 2027.

Fastest-growing Small Business Industries

The owners of successful startups and accomplished business owners acknowledge that they frequently capitalize on opportunities at the right moment.

Here are the fastest-growing industries in the U.S. you can choose from to increase the chances of your startup’s success:

• Oil drilling & gas extraction (87 percent revenue growth)
• Cruise and travel agency franchise (76 percent revenue growth)
• Wedding planners (76 percent revenue growth)
• Internation airlines in the U.S. (64 percent revenue growth)
• Tour operators (57 percent revenue growth)

Technology Startup Statistics

Here are the top tech startup statistics to help you understand the tech startup industry better:

• The most funded tech startup, as of 2021, was JUUL Labs in the U.S
• America has 10,755 fintech startups as of November 2021, making it the leader in the fintech startup world
• Vir Biotechnology, Inc. has topped the list of the 2022 Deloitte North America Technology Fast 500
• As of July 2022, Byju was the highest-valued unicorn with a valuation of 21 billion dollars

Technology continues to be a driving force in the startup ecosystem, impacting various aspects of business operations, market reach, and product development.

• Artificial Intelligence and Machine Learning: These technologies are revolutionizing how startups analyze data, automate processes, and personalize customer experiences. AI-driven insights are helping startups make more informed decisions and innovate rapidly.
• Blockchain Technology: Beyond cryptocurrency, blockchain is finding applications in supply chain management, digital identity verification, and secure transactions, offering startups opportunities to innovate in these domains.
• Internet of Things (IoT): IoT technology enables startups to develop interconnected products that can gather, analyze, and act on data. This is particularly influential in sectors like healthcare, home automation, and smart city initiatives.
• Remote Work Technologies: As remote work becomes more prevalent, startups are leveraging cloud computing, collaboration tools, and cybersecurity solutions to facilitate efficient and secure remote working environments.
• Sustainability and Green Tech: There’s a growing trend towards sustainability in technology. Startups are increasingly focusing on green technology solutions, renewable energy, and sustainable practices, aligning with global environmental goals.

Statistics for Healthcare Startups

• With 324 percent growth in venture capital, 2021 saw record investment in digital health startups.
• Digital health startups focusing on diabetes raised 1.8 billion U.S. dollars in 2021
• The Apple AppStore had 41,517 mHealth apps in Q3, 2022
• The digital health market is expected to touch 90 billion U.S. dollars in 2022

Industries with the Best Startup Stats

Successful startup founders often enter niches with low startup costs. This is because most entrepreneurs initially utilize personal funds to get started.

Here are the top five industries with the highest profit margins in the U.S., according to IBISWorld:

• Trusts & Estates in the U.S. (55 percent profit margin)
• Tax preparation software developers (54 percent profit margin)
• Maids, nannies, and gardeners (52 percent profit margin)
• Land leasing (51 percent profit margin)
• Industrial banks (51 percent profit margin)

Industries with the Worst Startup Stats

If you are starting your journey as an entrepreneur, you should be extra careful while venturing into industries with the worst survival rates.

According to research, here are the sectors having the highest failure rates within one year:

• Industry, including mining and geological engineers, first-line supervisors, and extraction workers, has around 26 percent failure rate
• Administrative and waste services have a 21 percent failure rate
• Information businesses (such as customer service representatives and telecommunications equipment installers) have around a 21 percent failure rate
• Art and recreation businesses witness a 19 percent failure rate

Additionally, being aware of declining industries in the U.S. will assist you in more effectively identifying a niche to pursue.

The top five declining sectors in the United States:

• Health and welfare funds (-35 percent)
• Iron and steel manufacturing (-21 percent)
• Scrap metal recycling (-15 percent)
• Prefabricated home manufacturing (-14 percent)
• Real estate appraisal (-13 percent)

Are you curious about the least profitable industry in the U.S. right now? As of January 2022, the hotel and gaming industry recorded a net profit margin of -29 percent.

Startup Trends

Here are key startup trends you should watch out for:

• Digital Advancements: Thanks to AI, the Internet of Things (IoT), blockchain, cloud computing, and 5G, 2024 will see an accelerated digital transformation. So, you will find more players entering this field.
• Supply chain security: The coronavirus has disclosed loopholes in the global supply chain. And the ongoing war in Ukraine has made things worse. So, you can expect more startups to surface to work towards building supply chain security.
• Immersive customer experiences: More startups will enter the market to help companies offer immersive customer experiences.
• Sustainability and Social Responsibility: Consumers and investors are placing greater emphasis on environmental and social governance (ESG). Startups that prioritize sustainability and ethical practices are likely to attract more attention and funding.
• Shift in Consumer Behavior: The pandemic has altered consumer behavior significantly. Startups that can tap into the new consumer mindset with innovative products and services, particularly in health, e-commerce, and remote services, will have a competitive edge.
• Increased Focus on Mental Health and Wellbeing: There’s a growing market for products and services that support mental health and wellbeing, opening opportunities for startups in these areas.
• Rise of Decentralized Finance (DeFi): The financial sector is likely to see more disruption with the rise of DeFi, offering more democratic financial services outside traditional banking systems.
• Advancements in Quantum Computing: Although still in its early stages, quantum computing has the potential to revolutionize data processing. Startups that can leverage these advancements will lead in innovation.
• Hybrid Work Models: The future of work is likely to be a hybrid of remote and in-office arrangements. Startups that create solutions to support these models can tap into a growing market.

These trends point towards a future where agility, technological adoption, and a strong alignment with social and environmental consciousness will be key factors in startup success.

Also, you can expect to see more startups coming into existence in cybersecurity, fitness, and education.

Having startup teams with extensive experience doesn’t guarantee success. So, more startups will hire for shared entrepreneurial passion and shared strategic vision.

FAQs

How many startups are there in the world?

According to a recent report by Startup Genome, the global startup ecosystem includes more than 600,000 startups. The United States leads in the number of startups, with China and India following closely behind.

What are the most popular industries for startups?

The most popular industries for startups are:

• Technology: This includes software, hardware, and other technology-related businesses.
• Healthcare: This includes businesses that are developing new healthcare products and services.
• Finance: This includes businesses that are providing new financial products and services.
• Retail: This includes businesses that are using technology to disrupt the traditional retail industry.
• Education: This includes businesses that are using technology to improve education.

What are the most common challenges faced by startups?

The most common challenges faced by startups are:

• Raising capital: Startups often struggle to raise the capital they need to get off the ground.
• Acquiring customers: Startups need to find a way to acquire customers in order to be successful.
• Competition: The startup landscape is increasingly competitive, making it difficult for startups to stand out.
• Regulation: Startups need to comply with a variety of regulations, which can be a challenge.
• Managing growth: Startups need to be able to manage growth effectively in order to avoid becoming overwhelmed.

What are the most important factors for startup success?

The most important factors for startup success are:

• A strong team: A strong team is essential for any startup’s success.
• A clear vision: Startups need to have a clear vision for what they want to achieve.
• A differentiated product or service: Startups need to offer a product or service that is differentiated from the competition.
• Execution: Startups need to be able to execute their vision effectively.
• Adaptability: Startups need to be able to adapt to change in order to be successful.

What are the most promising startup trends?

Some of the most promising startup trends include:

• Artificial intelligence: AI is becoming increasingly important in a variety of industries, and startups that are able to leverage AI will have a competitive advantage.
• Blockchain: Blockchain is a disruptive technology that has the potential to revolutionize a variety of industries. Startups that are able to understand and use blockchain will be well-positioned for success.
• Cybersecurity: Cybersecurity is becoming increasingly important as businesses become more reliant on technology. Startups that are able to provide innovative cybersecurity solutions will be in high demand.
• Sustainability: Sustainability is becoming increasingly important to consumers and businesses alike. Startups that are able to develop sustainable products and services will be well-positioned for success.

What are the best resources for startups?

There are a number of resources available to startups, including:

• Government programs: Many governments offer programs to help startups succeed.
• Accelerators and incubators: Accelerators and incubators provide startups with the resources they need to grow.
• Coworking spaces: Coworking spaces provide startups with a place to work and collaborate.
• Online resources: There are a number of online resources available to startups, including blogs, articles, and forums.

What is the future of startups?

The future of startups looks promising. As the global economy becomes more entrepreneurial, several exciting startup trends are emerging. Startups that can adapt to changes and capitalize on opportunities will be well-equipped for success.

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This article, "STARTUP STATISTICS – The Numbers You Need to Know" was first published on Small Business Trends