Understanding startup failure rates is critical for anyone looking to enter the business world. While you may have heard that 90% of startups fail, recent data from the U.S. Bureau of Labor Statistics reveals a more nuanced picture: approximately 21.5% of private sector businesses fail within their first year, 48.4% within five years, and 65.1% within ten years.
The truth is that startup failure statistics vary significantly by industry, location, and funding stage. This comprehensive guide provides data-driven insights into why startups fail and, more importantly, how you can improve your chances of success.
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Table of Contents
Startup Failure Statistics by Industry
Not all industries face the same challenges. Here’s what the data reveals about startup failure rates across different sectors.
1. A Shocking 95% Failure Rate for Blockchain and Cryptocurrency Startups
Blockchain and cryptocurrency startups face immense challenges, with approximately 95% experiencing failure. The volatility of the crypto market, regulatory uncertainty, and technical complexity contribute to this exceptionally high failure rate.
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2. E-commerce Startups Face an 80% Failure Rate
The e-commerce industry poses significant challenges for startups, with an 80% failure rate. This means that 4 out of 5 e-commerce startups encounter substantial obstacles, making success rare in this competitive arena. High customer acquisition costs, thin margins, and intense competition from established players contribute to this high failure rate.
3. Tech Startup Survival Below 50%
According to research analysis, even IT startups struggle, with 63% of tech businesses failing within the first five years. A significant portion face closure in their first year, with only a small percentage managing to achieve long-term sustainability. The rapid pace of technological change and intense competition from both startups and established tech giants make this sector particularly challenging.
4. 75% of Backed Fintech Startups Face Failure
In financial technology, three out of four fintech startups supported by investors don’t succeed, facing a 75% failure rate. This highlights the challenges these businesses encounter navigating complex regulatory requirements, establishing trust in the financial sector, and competing with established financial institutions.
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5. Construction and Retail Startups Face a 53% Failure Rate
According to U.S. Bureau of Labor Statistics data, starting a business in construction and retail presents significant challenges, with 53% of startups in these sectors facing failure. The data reflects that over half of these startups fail to establish a lasting presence, indicating the demanding nature of these capital-intensive industries.
6. Manufacturing Industry Startups Struggle with a 51% Failure Rate
Manufacturing startups face a significant hurdle, with a 51% failure rate. High capital requirements, supply chain complexities, and the challenge of achieving economies of scale contribute to this harsh reality.
7. The HealthTech Industry Has an 80% Startup Failure Rate
Healthcare startups face a formidable challenge with an 80% failure rate, meaning only about 20% successfully navigate the complexities of the healthcare technology sector. Regulatory hurdles, lengthy sales cycles, and the need for clinical validation make this one of the most challenging sectors for startups.
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8. EduTech Startups Stand at a 60% Failure Rate
EduTech startups face a considerable challenge with a 60% failure rate, indicating that only around 4 out of 10 successfully navigate the complexities of the educational technology sector. Compared to other industries, EduTech startups often progress more slowly, emphasizing the gradual nature of adoption in educational institutions.
9. Gaming Industry Startups Have a 50% Success Rate
According to industry analysis, gaming industry startups face a 50% failure rate, highlighting the difficulty of establishing a presence in this competitive space. The main contributors to failure include ineffective marketing strategies, weak online presence, and the risk of expanding too rapidly in a hit-driven market.
10. Business Failure Rates Show Long-Term Consistency
Despite the evolving business landscape, research indicates that business failure rates have remained relatively stable across most industries since the 1990s, suggesting that fundamental business challenges persist regardless of technological advancement.
Startup Failure Statistics by Country
Geographic location plays a significant role in startup success rates. Let’s examine how different countries’ business environments affect startup survival.
11. U.S. Startups Face a 21.5% First-Year Failure Rate
Contrary to popular myths, U.S. Bureau of Labor Statistics data reveals that 21.5% of private sector businesses in the United States fail in their first year. After five years, 48.4% have faltered, and after 10 years, 65.1% have closed. Startup ventures in the USA operate in a competitive but supportive ecosystem with access to substantial venture capital.
12. In Canada, the Startup Failure Rate Is Approximately 90%
In Canada, the startup scene faces substantial challenges with reported failure rates approaching 90%. The information sector records particularly high failure rates, pointing to specific difficulties within tech-focused industries.
13. In the United Kingdom, Approximately 60% of Startups Experience Failure
Unlike startups in the USA and Canada, businesses in the United Kingdom face around a 60% failure rate over five years. While this is lower than some other countries, this figure still points to significant challenges within the UK business environment, including Brexit-related uncertainties and market access considerations.
14. Startups in France Face an 85% Failure Rate
Understanding country-specific challenges is crucial for international entrepreneurs. In the case of France, the approximately 85% failure rate represents one of the higher rates in Europe, influenced by regulatory complexity and labor market rigidity.
15. In India, the Failure Rate for Startups Is Approximately 90%
In India, startups encounter significant hurdles, with reported failure rates around 90%. Many face setbacks by the first year’s end, with ongoing struggles to establish themselves in the competitive Indian market, though the ecosystem is rapidly maturing with increasing government support and venture capital availability.
Reasons Startups Fail
Understanding why startups fail is crucial for avoiding common pitfalls. Here are the most significant factors backed by research.
16. 47% Lack of Financing or Investors
According to 2022 research reported by CNBC, lack of financing and investors poses significant challenges for 47% of startups, serving as a primary reason for their failure—nearly double the 2021 percentage.
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17. 44% Running Out of Cash
Similarly, research shows that running out of cash contributes to the failure of 44% of startups. Effective financial management and maintaining adequate runway are critical for startup survival.
18. 33% Impact of COVID-19
The global impact of the COVID-19 pandemic affected 33% of startup failures in 2022, though this percentage decreased from 59% in 2021. Adaptability and resilience have become crucial for startups to overcome unexpected external factors affecting the business environment.
19. 21% of Startups Fail Due to Poor Market Timing
Poor timing reveals the critical nature of launching products or services in sync with market demand. Market research and strategic planning are essential factors to ensure meeting consumer needs at the optimal moment.
20. Team and Investor Problems Cause 21% of Startup Failures
According to CB Insights research, issues between team members or investors contribute to failure in a significant portion of startups. This figure highlights the important role of teamwork, effective communication, and aligned goals in startup success.
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21. Legal Problems Cause 19% of Startups to Fail
Legal challenges emphasize the importance of legal clarity for startups. Entrepreneurs must navigate regulations carefully, ensuring compliance and mitigating legal risks for long-term sustainability.
22. 16% Fail Due to Lack of a Clear Business Plan
Absence of direction in the form of a viable business model is a significant factor contributing to failure. It highlights the importance of establishing a robust operational plan, including revenue generation and cost management, to create a sustainable business foundation.
23. Burnout Drives 16% of Startup Failures
Research indicates that burnout is a prevalent issue causing failure in a portion of startups. Maintaining work-life balance, managing stress, and adopting sustainable work practices are vital to avoid exhaustion and increase chances for long-term success.
24. 14% Fail Due to Unstable Economy
Economic uncertainty contributes to startup failures. While entrepreneurs cannot control economic conditions, startups should be prepared for market volatility, ensuring resilience in the face of economic challenges.
25. 12% Fail Because of Ineffective Marketing
CB Insights analysis reveals that poor marketing is a key issue contributing to failure. Effective branding, customer acquisition strategies, and promotional efforts are crucial in reaching target audiences and creating sustainable market presence.
26. 9% Fail Because Products Aren’t User-Friendly
A product not being user-friendly is a significant factor in startup failure. This statistic demonstrates the importance of prioritizing user experience and ensuring that products or services align with customer needs and preferences.
Startup Failure Rate by Stage
Understanding when startups typically fail can help entrepreneurs focus their efforts during critical periods.
27. 21.5% of Startups Fail Within 12 Months
According to the U.S. Bureau of Labor Statistics, 21.5% of new businesses fail within the first year. These failures are often linked to testing unproven products or services in undefined markets, insufficient capital, or inadequate market research.
28. 48.4% of Startups Face Failure Within Five Years
BLS data shows that 48.4% of new businesses fail before reaching the five-year mark. The first five years represent a critical period where startups must achieve product-market fit, sustainable revenue, and operational efficiency.
29. Only 34.9% of Startups Survive Beyond Ten Years
According to official government data, surviving in the business world for over a decade is a formidable challenge, with only 34.9% of startups managing to do so. By this point, many registered small businesses may have evolved significantly from their original startup model.
30. Most Startups Struggle Before Series A Funding
According to venture capital research, approximately 60% of startups that secure pre-seed funding fail to progress to Series A. As they aim for Series A, many cannot gather the needed support from investors, preventing them from advancing to the next funding stage.
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31. 35% of Startups Fail After Series A Funding
As startups move from Series A to Series B, approximately 35% encounter obstacles that lead to failure before reaching the next funding stage. Even with significant financial backing, many startups struggle with scaling challenges, market competition, and operational complexities.
32. Only 1% Chance of Failure After Series C Funding
As startups progress through funding stages and mature, research indicates that the likelihood of failure decreases substantially. The risk of a startup failing past the Series B stage drops to approximately 1%, as these companies have typically achieved product-market fit and operational maturity.
Startup Costs Statistics
Understanding the financial requirements for launching different types of startups is essential for planning and fundraising.
33. The Average Cost of Starting a Small Business is $3,000
According to small business research, the average price tag for starting a small business is around $3,000. For those choosing to start a home-based business, including franchises, typical costs fall between $2,000 and $5,000.
34. Launching Healthcare, Restaurants, and Manufacturing Startups Demands Over $100,000
Starting a business in certain fields requires substantial capital. Healthcare providers, restaurants, and manufacturing companies are among the most capital-intensive startups, needing investments exceeding $100,000 for a successful launch.
35. Startup Equipment Costs Can Reach $125,000
When launching a startup, research shows that expenses associated with acquiring necessary equipment can reach as high as $125,000, varying depending on the industry and the specific products and services the startup offers.
36. Major Venture-Backed Startups Often Raise Over $1 Billion
Entering the venture capital world at scale, like Uber and Airbnb did, requires massive amounts of capital. Major startups in this category often raise more than $1 billion in total funding to achieve their growth and operational objectives.
37. Over Half (58%) of US Small Businesses Launch with Less Than $25,000
When initiating operations, a significant majority (58%) of small businesses in the United States start with modest startup capital of less than $25,000, demonstrating that many successful businesses begin with relatively limited resources.
38. “Love Money” Remains a Leading Funding Source
When securing initial funding, many entrepreneurs rely on friends and family. In recent years, “love money” has remained one of the most common funding methods, showing the importance of personal networks for getting the financial help needed to start a new business.
Startup Success Statistics
While failure rates are important to understand, examining success factors provides actionable insights for improving your odds.
39. 30% Success Rate for Serial Founders
Entrepreneurs who have succeeded with a previous business face approximately a 30% chance of success with their next venture. Research confirms that experience in starting a business significantly increases chances of success.
40. 82% of Successful Startups Are Led by Qualified, Experienced Founders
A significant 82% of successful business owners possess the right qualifications and relevant experience to manage a company effectively, even when faced with limited cash flow challenges.
41. Only 18% of First-Time Startup Founders Succeed
Starting a business presents substantial challenges, with only approximately 18% of first-time startup founders managing to steer their ventures toward success. This underscores the value of entrepreneurial experience and mentorship.
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42. 51.6% of Startups Survive the First Five Years
According to U.S. Bureau of Labor Statistics data, reaching the five-year mark is a significant milestone, with 51.6% of businesses managing to survive this crucial period.
43. Mining Sector Startups Have Strong Survival Rates
Among various industries, certain sectors like mining and agriculture demonstrate relatively higher survival rates, reaching notable five-year survival rates compared to more volatile technology sectors.
44. Only 1% of Startups Achieve Billion-Dollar Valuations
Becoming a unicorn—a privately held startup valued over $1 billion—is achieved by only approximately 1% of startups. Successful unicorns like Uber, Airbnb, Slack, Stripe, and Docker showcase the exclusivity of this achievement.
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45. A 50-Year-Old Founder Is Twice as Likely to Succeed as a 30-Year-Old
Contrary to common assumptions about young entrepreneurs, research published in Forbes indicates that age plays a significant role in entrepreneurial success. A 50-year-old founder is approximately twice as likely as a 30-year-old founder to build a successful business, likely due to greater industry experience, professional networks, and financial resources.
46. 80% of Billion-Dollar Companies Have Multiple Founders
Harvard Business Review research reveals that approximately 80% of billion-dollar companies launched since 2005 attribute their success to having two or more founders. Multiple founders bring diverse skills, shared workload, and mutual support during challenging periods.
Frequently Asked Questions (FAQ)
What percentage of startups fail?
According to the U.S. Bureau of Labor Statistics, 21.5% of startups fail within their first year, 48.4% fail within five years, and 65.1% fail within ten years. The often-cited “90% failure rate” is a myth that doesn’t reflect actual data. Failure rates vary significantly by industry, with some sectors like blockchain (95%) facing much higher failure rates than others like agriculture (lower than average).
What is the #1 reason startups fail?
The number one reason startups fail is lack of market need for their product or service, accounting for approximately 42% of failures according to CB Insights research. Many startups develop products without adequately understanding market demand. The second most common reason is running out of cash (38%), followed by not having the right team (20%).
Which industry has the highest startup failure rate?
Blockchain and cryptocurrency startups have the highest failure rate at approximately 95%, followed by healthcare technology (80%) and e-commerce (80%). Technology startups overall face a 63% failure rate within five years. In contrast, sectors like agriculture, utilities, and mining tend to have lower failure rates and better long-term survival prospects.
Do startups fail more in the first year or later?
While 21.5% of startups fail in their first year, the failure rate accelerates between years one and five, with an additional 26.9% failing during this period (bringing the cumulative five-year failure rate to 48.4%). The first year tests initial viability, while years two through five test scalability, operational efficiency, and market sustainability. After year five, the failure rate slows considerably.
What percentage of venture-backed startups succeed?
Approximately 65% of Series A startups successfully raise Series B funding, meaning 35% fail between these stages. For startups that reach Series C and beyond, the failure rate drops to around 1%. Only about 1% of all startups achieve “unicorn” status (valuation over $1 billion). Overall, venture-backed startups have better survival rates than bootstrapped companies, but still face significant challenges.
How can I reduce my startup’s chance of failure?
To improve your odds: (1) Validate market demand before building—ensure there’s a real need for your product; (2) Maintain adequate runway—have 12-18 months of cash reserves; (3) Build a complementary founding team with diverse skills; (4) Stay close to customers and iterate based on feedback; (5) Create a realistic business model with clear paths to profitability; (6) Time your market entry carefully; and (7) Be willing to pivot when necessary. Serial entrepreneurs have 30% success rates compared to 18% for first-timers, highlighting the value of experience and learning from failures.
Does founder age affect startup success?
Yes, significantly. Research shows that a 50-year-old founder is approximately twice as likely to succeed as a 30-year-old founder. Older entrepreneurs typically have more industry experience, stronger professional networks, better access to capital, and refined business judgment. The average age of successful startup founders is actually 45, contradicting the popular narrative about young tech entrepreneurs.
What’s the difference between small business failure rates and startup failure rates?
Startup failure rates are often higher than general small business failure rates because startups typically pursue innovation and unproven business models, while many small businesses operate in established markets. The U.S. Bureau of Labor Statistics data (21.5% first-year failure, 48.4% five-year failure) covers all new businesses. True startups—particularly those in technology and seeking rapid growth—often face failure rates of 70-90% depending on the sector.
Ready to Beat the Odds?
Understanding startup failure statistics is the first step to avoiding becoming one. The data reveals that success isn’t about luck—it’s about preparation, timing, market validation, adequate funding, and building the right team.
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References
- U.S. Bureau of Labor Statistics. (2024). Business Employment Dynamics: Establishment Age and Survival Data
- LendingTree. (2024). Percentage of Businesses That Fail
- CB Insights. (2022). The Top 12 Reasons Startups Fail
- CB Insights. (2024). 483 Startup Failure Post-Mortems
- CNBC. (2023). The 3 Biggest Reasons Startups Failed in 2022
- DemandSage. (2025). Latest Startup Failure Rate Statistics
- Entrepreneur. (2025). The True Failure Rate of Small Businesses
- Forbes. (2022). Older Entrepreneurs Outperform Younger Founders
- Harvard Business Review. (2022). Don’t Buy the Myth That Every Startup Needs a Co-Founder
- CNBC. (2019). Almost 60% of Small Business Owners Launch with Less Than $25,000