The world of startups is fascinating. Reading startup success and failure stories are binge-worthy. Yet, a lot of mystery lies around the rise and fall of startups. To clear the air, here is a list of facts and statistics about the startup industry.
What is a startup?
- The startup industry is defined by how quickly a company grows. Paul Graham, a co-founder of Y Combinator, believes the initial phase of growth for a startup is 5-7% per week. (Graham)
- Startups are also referred to as “high-growth businesses”, per the Kauffman Foundation, a leading organization in reporting small business, entrepreneurship, and startup data, as of 2016. (Kauffman)
How many startups are in the United States?
- There are over 179,000 startups in the United States, as of 2020. (AngelList)
What is the startup failure rate? Success rate? How many startups fail every year?
- The first year business failure rate is an average of 21.3% since 1994. (Bureau of Labor and Statistics)
- The fifth year business failure rate is an average of 51.2% since 1994. (Bureau of Labor and Statistics)
Why do startups fail?
- The number one reason startups fail is their product or service has no demand, as of 2019. (Small Biz Trends)
- 29% of startups fail because they run out of cash, as of 2019. (Small Biz Trends)
- 23% of startups claim they do not have the correct team, as of 2019. (Small Biz Trends)
- One in seven, or 14%, of startups, fail due to poor marketing, as of 2019. (Small Biz Trends)
Why do people create startups?
- Most people start a business to become their own boss. 26% of founders fall into this category, as of 2020. (Guidant Financial)
- 23% of founders want to pursue their passions, as of 2020. (Guidant Financial)
- 19% created a startup because the opportunity fell into their lap, as of 2020. (Guidant Financial)
- 12% were dissatisfied with a classic, 9-5 job and were tired of corporate America, as of 2020. (Guidant Financial)
- Interestingly, 6% of founders start their company because they are not ready to retire, as of 2020. (Guidant Financial)
How do startups get their funding?
- Using personal funds as seed money is how most startups begin their journey, at 77%, as of 2018. (Small Biz Trends)
- Startups use bank loans at 34% and borrowing from friends and family at 16%, as of 2018. (Small Biz Trends)
Does having a business plan change startup funding?
- 36% of founders with a business plan receive a business loan, 36% use investment capital, and 64% grew their company, as of 2010. (Small Biz Trends #2)
- 18% of founders without a business plan receive a business loan, 18% use investment capital, and 43% grew their company, as of 2010. (Small Biz Trends #2)
Which U.S. cities have the most startups?
Using statistics for the percentage of workers employed by startups, cost of living, and startup density, these are the top U.S. cities to move to in order to work for a startup as of 2019. (Volusion)
- Seattle, Washington
- Austin, Texas
- San Jose, California
- Nashville, Tennessee
- Denver, Colorado.
Other interesting startup facts
- Startups with more than one founder usually raise 30% more capital and have almost 3 times the user growth, as of 2019. (Small Biz Trends)
- Small Biz Trends
- Small Biz Trends #2
- Guidant Financial
- Bureau of Labor and Statistics
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