Startup statistics offer an essential insight into the business world to aspiring entrepreneurs looking to take the world by storm with their inspiring ideas. Most people take the entrepreneurship route without fully appreciating how difficult it is to establish a company and make it successful.
Several factors determine whether your business will thrive. Knowing the startup trends and how they evolve would help you understand what to imbibe and what to avoid. To this end, we’ve put together relevant statistics to help you make informed decisions about your business.
Significant Startup Statistics 2020 (Editor’s Pick)
Startups are usually innovative businesses, and they have many baseless myths surrounding them that we hope to debunk in this article. Here are some significant statistics about startups:
- The number of small businesses in the United States stands at 31.7 million in 2020.
- 50% of startups fail after five years in business.
- Startup success statistics show that 85% of small businesses in the healthcare and social assistance industry survive their first year.
- The number of Americans wanting to start their business because of corporate dissatisfaction grew by 27%.
- A 50-year-old business founder is 1.8 times more likely to succeed than a 30-year-old.
- 42% of small business startups fail because there is no market need for their products or services.
- The information industry has the most significant failure rate.
- $3000 is the startup cost for most small businesses.
Small Business Startup Statistics
People have a lot of misconceived ideas about small businesses. Some believe the term applies to ventures with a single employee or no more than five of them. While that is partly true, the term entails so much more.
1. The number of small businesses in the United States stands at 31.7 million in 2020.
The challenges of 2020 caused the failure of several small businesses in the United States, but some of them remained standing. Moreover, those businesses employ 60.6 million people, which is 47.1% of the private workforce. Out of that number, 5.2 million are self-employed minorities.
2. 50% of startup businesses will survive their fifth year in business.
Out of the total number of startups in the US, only 50% survive the first five years. Moreover, 20% of small businesses don’t survive their first year, and a third of all new businesses fail during their second year. Only those with resilient business plans and strategies will survive their 10th year in business, meaning that your products or services must be able to stand the test of time.
3. 85% of small businesses in the healthcare and social assistance industry survive their first year.
If you have plans to start a business in the healthcare or social assistance industry, you are on the right path. Because the two cater to the daily needs of people, they have a high survival rate. Moreover, 75% of businesses in this industry survive their second year, while about 60% make it through their fifth year.
4. Entrepreneurship stats show that 73% of small business owners are men.
While a lot of women have pioneered businesses, men continue to be the majority owners of startups. Women have experienced about 4% growth in the past year, and although it appears slow, it is pretty consistent.
5. The number of Americans wanting to start their business because of corporate dissatisfaction grew by 27%.
The number of people who wanted to start their own business because of corporate dissatisfaction rose by 27%. Becoming self-employed without having to answer to a boss or work a 9-to-5 schedule remains the main reason people choose to become entrepreneurs.
6. Mentored startups have a lower entrepreneurship failure rate.
Entrepreneurs who have mentors are more likely to succeed than those without one. Mentored businesses are 3.5x more likely to grow and 7x more likely to generate profit than non-mentored businesses. The support of the right mentor amplifies a startup’s presence; it gives the founder a roadmap to follow and allows them to focus more on the company.
7. A 50-year-old business founder is 1.8 times more likely to succeed than a 30-year-old.
When it comes to startups, age and experience play a significant role in the success or failure of the business venture. The longer a person stays in a particular field, the more experience they get to execute a business strategy properly.
8. 81% of startup business owners work nights, per latest statistics.
Business owners usually work harder than an average worker — 89% of them work weekends and 81% work nights. This debunks the belief that owning a business means totally flexible working hours. Most founders work overtime to keep up with their competitors.
9. 75% of businesses in the construction industry survive their first year.
Startup and small business growth statistics show that most people who venture into the construction industry don’t always succeed. Some of the reasons for this are insufficient cash flow, excess overhead, employees, and the insufficient number of profitable sales. Moreover, 65% make it through the second year, and 35% make it through the fifth year.
Global Startup Statistics
Startups are a global phenomenon that cuts across different continents. In this section, we bring you various statistics and facts on startups from a worldwide standpoint.
10. The most valued startup in the world is worth $125 billion.
Ant Financial, a Chinese Fintech company, is the most profitable startup and valued unicorn company worldwide. Unicorns are privately owned companies with a market valuation of at least one billion dollars. As of January 2020, over 600 unicorns have existed globally, with most of them based in the United States and China.
11. In Canada, businesses in goods-producing sectors are more likely to survive the first 10 years than those in service-producing sectors.
Canada’s startup statistics show that new businesses in the goods-producing sector survive more often than those in the service-producing sector. Data released by the Canadian government in 2019 showed that companies in these two sectors had similar survival rates in the first two years of existence, but they started drifting apart in the third year.
By the fifth year, 66.8% of those producing goods were still operating, compared to 63.3% in the service sector. After 10 years, the business survival rate for goods-producers was 47.8%, compared to 42.9% of the service-producing sector.
12. In March 2020, the number of startups in the US less than one-year-old was 804,398.
The number increased from March 2019 when it was 770,609. These startups get their funding from personal savings, family and friends, venture capital, private equity firms, entrepreneurship programs, angel investors, banks, incubators, and crowdfunding.
What percentage of startups succeed?
Figures floating on the internet about the startup survival rates are less than encouraging.
However, it’s crucial to have a clear and full picture of the business market if you’re contemplating entering it yourself. Let’s take a look at the numbers.
13. 42% of startups fail because there is no market need for their products or services.
If there is no market need for your products or services, chances are your startup will fail even if you have a bulletproof business plan—close to half of small business startups fail due to the lack of market necessity.
However, keep in mind that no market is ever ready for an innovative idea; it’s the founder’s duty to show customers why they need their products or services.
14. Startup failure rate statistics show that 82% of businesses fail because of poor cash flow.
Cash is essential to fuel a business and keep it afloat for as long as possible before making a profit. Around 79% of companies fail because founders start with insufficient funds—startup funding statistics indicate—77% close due to improperly set prices while 73% overestimate their sales projections.
15. The information industry has the most significant failure rate.
When looking for an industry to launch a startup, keep in mind that the greatest percentage of businesses that fail in the first five years are from the information sector — 63%. They are closely followed by the construction (53%), manufacturing (51%), and mining (49%) industries.
16. 85% of food business startups survive the first year.
There’s a myth that most food businesses fail after their first year, but this is not true. Although the restaurant failure rate statistics show the failure rate of 15%, 70% of restaurants survive their second year, 50% make it past five years, and 35% get to celebrate 10 years in business.
17. Founders of failed businesses are likely to succeed in their next business venture.
Startup failure rate statistics reveal that entrepreneurs have a 20% chance of succeeding in their next business venture if the first one fails. If your first business venture fails, that’s not a reason to give up; use the experience to build the next one, keeping in mind that most startups begin making a significant profit after ten years in business.
18. Startup failure rate by stage shows that more than 90% of new businesses fail.
About 20% of businesses launched each year do not make it to their first anniversary. Around 34% fail within two years, and only 25% make it to 15 years. This means that 1 in 10 startups survives in the long run, and the failure rate increases over time.
19. According to the business failure rates by industry, 25% of businesses in the construction industry fail during the first year.
Despite the failure rate, the construction industry is still expected to grow by 13%. The transportation industry has the same failure rate — in both industries, 35% of businesses fail by their second year and 60% of them close by their fifth year.
Businesses in professional, scientific and technical services also have a high failure rate of 19.4%.
20. Entrepreneurship statistics show that tech problems are responsible for a startup’s failure in 6% of cases.
One of the most significant mistakes startups make is investing in expensive technology (developer time) before validating the marketing assumption. Note that, though it rarely happens, it is a business killer.
Common causes of startup failure are lack of product-market fit (34%), marketing problems (22%), team problems (18%), and finance problems (16%). On the other hand, some less common reasons are legal issues (2%) and operations problems (2%).
21. The failure rate of health and fitness businesses stands at 81%.
Even with a franchising route, health and fitness businesses have a failure rate of 81%. It results from low capital, lack of business know-how, and failure to implement sales and marketing strategy adequately. The best way to enhance chances of success is by using proven concepts and getting a technology partner.
22. 75% of businesses in the transportation and warehousing industry make it through the first year.
While many expect startups in the transportation industry to be among the businesses with the highest success rates, it isn’t so, and the same goes for the warehousing industry. Moreover, the success rate drops over time, with 65% surviving the second year and 40% making it through the fifth year.
23. Robotics startup businesses have a 99% failure rate.
According to tech startup failure rate, robotics startups have a failure rate of 99%, meaning that only 1% of those who start a business in this sector succeed. Among many reasons for this, the most important one is that robotic startups tackle challenging technical problems.
What Else Startup Statistics Show
24. $3,000 is the startup cost for most small businesses.
(Business News Daily)
Startup costs are the expenses incurred during the creation of a new business. They usually cover business plans, research expenses, borrowing costs, and technology expenses. Most companies that start with funds insufficient for covering startup costs are likely to fail.
25. The average time for a business to become profitable is two to three years.
The estimated average time for a business to start making profit is two to three years, depending on the industry. However, note that each startup has a different budget, costs, and parameters for profit measurement.
26. The startup growth rate for the real estate and finance insurance sectors is 58%.
The finance insurance and real estate industries are the best places to launch a startup. The two have a 58% success rate and offer a more considerable profit margin than other industries.
On the other hand, construction, plumbing, and local trucking have the lowest success rate. Manufacturing and mining industries are especially challenging, as is the information industry.
27. 62% of adults consider entrepreneurship the right career path.
Despite the high percentage of startups that fail, many adults still believe that becoming an entrepreneur is the way to go. Out of that number, 40% believe that starting a business is easy, and 49% think that they have all they need to make it work.
28. 44% of small business owners are from Generation X.
The entrepreneurship success rate has encouraged a lot of people to start their own business. The greatest number of small business owners is from Generation X (39–54 year-olds), followed by baby boomers (53–73-year-olds) at 41%, and millenials (23–28-year-olds) at 12%. Only 2% of business owners are 74 years old or older.
29. Venture capital firms are mainly interested in businesses that require a $250,000 investment.
Venture capital firms invest in emerging companies in exchange for equity stakes in the business. Therefore, they tend to be highly selective when choosing businesses they want to invest in. Although VC firms receive about 1000 proposals a year, they are usually interested in investing in startups that show potential for explosive growth.
Startup industry statistics encourage anyone wishing to start a new business. While several odds are stacked against an entrepreneur, the chances of success are high if combined with the necessary skills, workable market strategies, and a resilient spirit.
Keep in mind the statistics discussed here, and do away with the myths involving startup trends. Accept capital only from trusted sources, minimize start-up costs, develop a perfect business plan, and postpone having an office and staff until the profits start coming in.
Frequently Asked Questions (FAQ)
Only 10% of startups are successful. Moreover, only 40% of the businesses turn a profit, and only 33% survive past the 10-year mark. The failure rate grows progressively, and the fact that a company has been around for a few years doesn’t mean it will succeed.
For a new company to withstand the test of time, it must have a perfect product for its target audience, and the founder must be meticulous and goal-oriented. Additionally, the business must grow fast, team members must know how to recover from a loss, and having a co-founder will increase its chances of success.
Around 90% of startups fail. Factors leading to a startup failure begin during the first year, and 20% of new businesses close within that time. Moreover, 30% of startups fail during the second year, 50% close down after five years in business, and 70% leave the market after 10 years in business.
Causes of startup failures include low cash flow, ignorance of the target market, and pricing and cost issues. Other causes are gathering the wrong team, poor business model, and the inability to keep up with competitors.
Many startup businesses have experienced tremendous success since their inception. They include Airbnb founded in its co-founders’ living room in 2007, the social media platform Instagram, and Ben Silberman’s Pinterest.
Others are business models like Rovio’s Angry Birds that tells the story of success after several failures, the professional networking platform LinkedIn, the vehicle-hiring company Uber, the messaging platform Whatsapp, the microblogging and social networking service Twitter, and the billion-dollar social media platform Facebook.
About 627,000 of startups are founded each year. Conversely, 595,000 of businesses close annually—according to the latest figure from a 2008 research.
The numbers reached a peak in 2006 (670,000), however, it has declined ever since.
About 20% of new businesses fail within the first year of operating. The percentage has been consistent for a long time, and businesses close up yearly due to their inability to break even.
Startup statistics show that some of the reasons new ventures fail are investing in the wrong market, shaky and imperfect business plan, insufficient funds, wrong location, lack of internet presence, poor marketing, and rigidity.