What Percentage Of Startups Fail?

September 29, 2021

Blatantly put, around 90% of startups fail. You can easily reach this data, even from different years. A 90% rate of failure can make you worry about the process and make you feel demotivated. That’s why most people have difficulty getting outside of their comfort zone. Success includes many harsh realities to face, toughness, and problems, but you must go beyond thresholds. It’s an excruciating process that requires resilience, perseverance, and dedication. Still, it can be achieved, especially if you are aware and conscious of why most startups fail. The reasons are common, and most fail stories can be classified under at least one of them. According to CB Insights, there are the top 12 reasons why startups fail. Let’s look at the reasons and talk about some of them more deeply.

Ran out of cash / failed to raise new capital

According to CB Insights, running out of cash or failing to raise new capital is the top reason why 90% of startups fail. Perhaps they are making some mistakes while managing the money, and also, they might plan the future wrong (simply, forecasts are not working). It seems this is one of the most critical points while running your own business, so you had better learn about cash flow and unit economics before starting the company so that you will not run out of cash. These skills are vital while raising capital, as well. If you do not know where to use the new capital, you probably won’t raise the necessary capital. You can read Don’t Raise VC Money Before You Understand Unit Economics from Crunchbase News for more insight.

No Market Need

No market need is among the top reasons (second common) why startups fail. If there is no need for your solution in the market, you will probably go bankrupt (Unless you pivot your business). Most startups suffer from this issue: they are trying to solve a problem that does not exist. To avoid this risk, you must conduct customer research more carefully and meticulously on the initial data. You must first understand the problem and, more importantly, be sure that the problem exists. People must feel the pain intensely, and they must need your solution.

The other reasons are said to be:

  • Got outcompeted
  • Flawed Business Model
  • Regulatory/Legal Challenges
  • Pricing/Cost Issues
  • Not the Right Team
  • Product Mistimed
  • Poor Product
  • Disharmony among Team/Investors
  • Pivot Gone Bad
  • Burned out / lacked passion

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