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.
How Big is the Startup Market in 2023?
Seventy-four percent of businesses plan to increase their marketing budget or keep it the same throughout the first half of 2023. More than half of the business owners aim to stick to their current expansion strategy or start a new one. Also, 2 in 5 Americans plan to start a business in 2023. So, you can expect that the startup market will expand in 2023.
General Startup Statistics
Thinking about launching your startup and don’t know how to do it? 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 2022
- 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.
- 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
- White or Caucasian: 85 percent
- Asian or Asian American: 4 percent
- Hispanic/Latino: 4 percent
- Black or African Americans: 4 percent
- Other: 3 percent
- 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:
- 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:
- 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.
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, there 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 2022, 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 successful business owners admit that they often exploit opportunities at the right time.
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
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 utilize personal funds initially 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
Also, knowing about declining industries in the U.S. will help you better plan a niche to venture into.
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 wondering about the least profitable industry in the U.S. now? The hotel and gaming industry experienced a net profit margin of -29 percent as of January 2022.
Startup Trends in 2023
Here are key startup trends you should watch out for in 2023:
- Thanks to A.I., the internet of things (IoT), blockchain, cloud computing, and 5G, 2023 will see an accelerated digital transformation. So, you will find more players entering this field
- 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
- Consumers and investors are increasingly picking businesses with the right environmental and social credentials. So, there will be an increased focus on sustainability in 2023
- More startups will enter the market to help companies offer immersive customer experiences.
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.
What Is the Average Small Business Success Rate?
New employer firms’ survival rate for 15 years was around 34 percent, according to a report published by SBA.
What Is the No. 1 Reason Startups Fail?
The no. 1 reason why startups fail is a lack of cash or failure to raise new capital, according to C.B. Insights. So, you should proactively fix cash flow problems and try to raise money, so that lack of cash doesn’t stand in your way to success.
What Is the Top Valued Startup?
ByteDance is the top-valued startup. It is the parent company of TikTok. At present, the company is valued at $140 billion.
Use These Statistics to Help You Form a Successful Startup
It is not easy to start a business. Most startups begin with personal money, and funding rounds are a distant reality for many. So, you should not feel disheartened if your small business loan application is rejected or you miss a small business grant. Consider these startup statistics to make informed decisions, but don’t let startup failure statistics demotivate you.
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Oh, yes. Running out of cash is the main reason why startups fail. That’s why it’s important to pare down initial expenses. It will help you put your business on a firm foundation.
To reduce your initial costs, buy used items for your business, like the equipment you can get for a discount. You’d be surprised how much you can save on items that are practically as good as new just because someone else has owned that product before you. Or, you may also want to consider renting equipment. Equipment leasing also benefits entrepreneurs because it excludes repairs and maintenance costs.