Startups’ Success and Failure Rate in 2023: In-Depth Overview
This review article is for startup founders and serial entrepreneurs who want to know the reasons why 9 out of 10 startups fail.
What we will talk about:
- 9 reasons why do startups fail;
- What is the startup survival rate by the funding stage?
- What is the success rate of startups depending on the industry?
- Overview of startups failure depending on the country;
- and more!
Let’s look at the statistics of successful and failed startups.
In case you have doubts about the relevance of the article, the information is current for 2023.
Why Do Tech Startups Fail?
Before digging deep into an overview of startup success rates, let’s consider why tech startups fail.
The reasons for failure can be completely different. Usually, it all depends on the specific project or market situation.
We’ve collected some of the primary and common reasons why some of the startups fail, based on CB Insights’ report of startup post-mortems.
|Lack of market demand||The company doesn’t study the market demand. They deal with solving problems that are interesting only to the company.|
|Lack of money||The money and time for startups are limited. |
Therefore, it is essential to reasonably distribute them, make cost valuations or attract additional startup funding.
|Inappropriate team||The ideal startup team should include people with different skills. |
After the company’s failures, many co-founders complain about mistakes while choosing the right specialists, starting with the technical director.
|Competition||When an idea gets positive feedback from the market, a huge number of companies can work in this direction. |
Of course, you shouldn’t pay too much attention to competitors, but you can’t ignore them either.
|Pricing||The cost of a product or service should cover the costs, but at the same time, it should remain available to customers.|
|User-unfriendly product||Many startups face problems because they don’t listen to the needs of users. |
For example, startups can make a product overly complex and incomprehensible to their target audience.
|Lack of business model||If a company has only one channel or it hasn’t found a way to make money on a product, then investors are unlikely to invest in it.|
|Poor Marketing Strategy||It is extremely important for a startup to know and understand its audience, be able to interest it, and turn it into customers. |
If no one knows about your product, then it doesn’t matter how revolutionary it is.
|Ignoring customers||It doesn’t matter that the creators think their product is the best – it is important that the audience has the same opinion. |
The company will have to take into account the customers’ feedback and adapt to it.
Regardless of the number of startups that fail, if you follow the right principles of a lean startup, your project can be successful. A good start point is a guide on how to start a startup.
Let’s move forward.
Overview of Startup Success Rates by Stage, Industry, and Location
There are many factors that influence the startup success rate. Below, you can find the main startup success rates by stage, by industry, and by country.
Startup Success Rate by Stage
Investment rounds are stages of raising funds for business development. There are 3 early stages of attracting investments for startups:
- Pre-seed or pre-series A stage;
- Seed or series A stage;
- Maturity or after-series A stage. All other later stages are named by letters, round B, round C, round D, and so on.
The name of the stages tells what to expect – both for startups and investors. Startups immediately understand which investors to approach while investors can focus on the segment of interest and not process unnecessary applications from irrelevant startups.
For example, if a startup is looking for seed funding, but sees that the investor focuses only on investments in businesses in the later stages (from round B and above), then it makes no sense to waste the time and the team’s resources.
Here, we have an infographic that shows the average round size.
Let’s see the main difference between stages.
Early Stage or Pre-series A stage
The first stage is the pre-series A investment stage. The founders invest their resources (including FFF resources – friends, family, fools) in starting their own business.
Then they look for options for grant support or funds from private investors in their industry or ecosystem.
The task of the pre-seed stage is to test the hypotheses of your business idea, choose a vector of activity and turn the hypothesis into a product.
The funding amount at this stage is typically between $50,000 – $200,000 and the target runaway is 3 to 9 months.
About 60% of companies that reach pre-series A funding fail to make it to Series A, so the success rate is only 30%-40%.
We can name such successful examples of pre-seed funding startups in 2021:
- Copy.ai. A startup that provides automated creativity tools and allows to generate of marketing copy in seconds, raised 1.4M pre-Series A.
- Evaluate.Market. It is a blockchain startup that helps users trade NFTs and raised 1.6M pre-Series A this year.
- TalentQL. It is a recruiting American startup that raised a 1,2K pre-series A round.
Dmytro Serheeiv, a co-owner at PDFliner, said ” The studies show that only 20-30% of companies leave the pre-seed stage, while the follow-on rate is a bit higher and floats at around 50% on each stage. This means that up to 70% of startups fail on the pre-seed stage and 50% of startups fail on every stage until they reach the series D stage.”
Once pre-seed funding, it’s time to raise investments in round A.
Series A Stage
When the product-market fit is found and you gathered a high-quality team, it’s time to attract venture capital of round A. It is money and cash flow for the growth and development of the business processes that you found at the stage of product-market fit.
The typical investors at this stage are an angel and VC investors.
The funding amount at this stage is typically between $500,000 – $3,000,000 depending on the industry and the target runaway is 12 to 18 months.
About 65% of the Series A startups get series B, while 35% of the companies that get series A fail.
We can name such successful business examples of series A startups in 2021:
- Noissue. A New Zealand-based packaging platform creates sustainable packaging accessible to businesses of all sizes and raised $10M Series A.
- DiviGas is a $3M-seed company aimed at cleaning up hydrogen production.
- Walkie-talkie, a social audio startup, has raised a $3.25M-seed round led by Heroic Ventures.
Matt, CEO of hellobonsai, said:“Global startup success rate on seed-stage is: About 50% of businesses with employees survive five years – a report says that in five years companies mature and stabilize within their markets. In a recent study, about 80% of small businesses reported profits. Robotic tech startups and manufacturing startups are enjoying growth rates of 189.4%.”
After investing in Round A, it’s time for the mature stage investments.
Maturity or After-Series a Stage
After Series A funding the startup raises for Series B funding, then C, D, E rounds. Every next stage of funding happens after the company has already been developed through the previous stage and now needs to expand further.
Such a startup proved its potential in the market, has a great number of active users but still growing its revenue.
The chance to fail on this level is 1 out of 100. However, not many companies are making it to Series F funding. Every round of funding challenges the startup with new opportunities for the business.
Most Series B startups are typically valued between $30M to $60M, while the Series F startup is valued at $400M and more.
We can name such successful examples of Maturity startups in 2021:
- MachinaLabs is a $30M-seed startup that produces on-demand manufacturing robots and is now on a Series B round.
- Hangshun Chip is a Chinese company that raised $156.6M in Series D funding from F&G Venture, MeiG Smart, and Shenzhen Investment Holdings. The startup provides ARM-based MCUs with ultra-low power consumption for IoT applications.
- Ginger is an American healthcare startup that raised $100M in Series E. They provide on-demand mental health support.
The later stages are less risky, but the return is much less. Businesses at these stages are already mature, tested their hypotheses, and learned how to make money. At the same time, there is already a crowd of competitors who have copied the product.
Farhan Advani from Find Here Buy Here said “Only about 10% of companies that have raised series D funding are considered successful. Part of this has to do with the fact that startups are more likely to fail when they have raised large amounts of capital. As far as metrics go, CB Insights research shows that in 2012, the 76 companies in their sample set that had at least $50 million in funding received an average amount of $180.7 million before winding up. Most of this money was invested in the companies’ most recent rounds, and more than 50% of it went to companies that eventually failed.”
Let’s see the other success rate defined by the industry.
Startup Success Rate by Industry
In this part, we’ll consider the startup success rate in leading industries and take the examples of eCommerce, FinTech, HealthTech, EduTech, and Gaming companies.
1. Startups Success Rate in eCommerce Industry
The eCommerce industry is not only financial or commercial online transactions, but it is a chain of constantly improving, global business processes associated with conducting transactions.
But ideas for eCommerce startups are not limited to sales. It can be about personalization, improving the customer experience, or buying in installments.
Global e-commerce sales are around $ 3.5 trillion in 2021 and are expected to grow rapidly in the future.
The e-commerce market statistics show about 80% business failure rate of startups. That means the success rate is about 20%.
One of the main reasons for e-commerce startup failure is the lack of market analysis and the needs of the target audience. Although these are fundamental steps in the process of developing an e-commerce application.
We chose some of the brightest examples of successful e-commerce startups of this year:
- Deliverr company which provides fast shipping and delivery services to eCommerce companies.
- Bonobos company started out with pair of pants and now is one of the most popular menswear brands online.
- Healthy Mummy is a community and a shop that assists mums to lose weight fast.
Daniel Javor, CEO of stepbystepbusiness.com, said “According to the SBA, 78% of startup small businesses overall survive for at least one year. Ecommerce lends itself to failure due to the competition factor alone, but poor online marketing is the number one reason for failure. Online marketing is still not a perfect science, and it takes a budget that most startups do not have.”
Another growing industry is Fintech.
2. Startups Success Rate in FinTech Industry
The FinTech industry covers financial services with the help of innovative technologies such as Big Data or online-only banking. Online financial services have been booming since the introduction of PSD2, a European regulation for electronic payment services.
The statistics show that up to 75% of Fintech startups fail. It means the success rate is only 25%. Most of the fintech startups fail after they secure funding from VCs and partially sell an online business because they overlook compliance.
We chose some of the brightest examples of successful Fintech startups of this year:
- Digital-only mobile bank Monzo based in the UK currently has 4,245,063 users.
- BitPesa startup allows to buy and sell Bitcoins and delivers fiat currency directly to mobile phones.
- Betterment is a popular American AI-powered robo-advisor for investment and has more than $6 billion in assets.
Michael Burtov, a serial entrepreneur from burtov.com, said “The fact is that, in the USA, only about 0.05% of startups raise venture capital. Simply put, the available data captures 0.000375% of the USA startup universe. From my own experience with hundreds of startups, and prominently in the Fintech space – most startups fail far before they raise Venture Capital and for a variety of reasons. In FinTech, with the emergence of blockchain-based instruments like cryptocurrencies and NFTs’ their is an unprecedented number of startups being “minted” as part of this gold rush.”
Right now, FinTech is the fastest-growing niche for startups. So it’s important to have an idea of how much it costs to develop a FinTech app.
The other leading industry is HealthTech.
3. Startups Success Rate in HealthTech Industry
HealthTech includes technological developments for health, as well as devices and software for monitoring the state of people’s health.
The statistics show that the HealthTech startup failure rates up to 80%. It means the chances of success are only around 20%.
Most of the HealthTech businesses fail in the first year because the business owners couldn’t determine their value proposition or chose the wrong evidence strategy.
We chose some of the brightest examples of the successful HealthTech startups of this year:
- Veda is a startup that combines NASA and AI expertise and provides internal data sets that help to process patient information and automate manual tasks.
- Hims & Hers is an American startup that allows access to specialists via an online platform, allowing people to find help from their homes.
- Circulo Health is an AI-based startup that provides information at a faster pace and gives access to healthcare by collecting detailed data about the patients and doctors.
Now, let’s see what is going on in the EduTech Industry.
4. Startups Success Rate in EduTech Industry
With over $20 billion of investments in 2021, EdTech is emerging as another popular startup industry that provides educational technology solutions to people all over the world.
Compared to the other industries, the EduTech startups develop slowly. The statistics show that the EduTech startup failure rates up to 60%. It means the success rate is around 40%.
Most EduTech startups fail because of the introduction of unnecessary technologies and insufficient teacher training.
We chose some of the brightest examples of the successful EduTech startups of this year:
- Immerse startup provides a platform that allows its students to use VR headsets to practice their English skills.
- The Finnish EduTech startup Kide Science uses a learning model for kids based on play, imagination, and science aimed at the STEAM experience.
- Preply is a European online language learning company that connects students and tutors through the use with the helo of data-driven tools.
Jonathan from Mobitrix, said “One of the reasons startups fail in EduTech is that they rush to success and skip critical steps required to succeed. One of these steps is to get to know the stakeholder well and then use that knowledge to develop an appropriate revenue model. Parents, for example, value high-quality products at reasonable prices, and educational institutions value unique products that they can purchase at a low cost and resell at a higher cost. The other reasons are a misinterpretation of early traction and a market misknowledge.”
Let’s look at startups’ success rates in the gaming industry.
5. Startups Success Rate in Gaming Industry
Over the last years, there is a decrease in venture capitalists’ interest in gaming startups in the early stages. Investors claim the gaming industry is unpredictable.
The statistics show that the Gaming startup failure rates are 50%. It means the success rate is also 50%.
The Silicon Valley investors consider the gaming industry is some kind of a creative one rather than tech. There should be a successful combination of art and business.
We chose some of the brightest examples of successful Gaming startups of this year:
- Z League is a skill-based tournament startup that uses a ranking algorithm and gathers the player’s warzone stats to divide them into teams.
- Playable Worlds is a PC gaming company that provides game development, online games, and gamification.
- Lionheart Games is a mobile game studio aimed at creating innovative games.
Jason McIntosh from ggcircuit.com, said “In the realm of location-based eSports, out of our first 600 software customers, 69% failed within two years. At this point, location-based eSports by themselves are not profitable. It MUST be one part of an overall gaming entertainment strategy.”
Now that we researched the various industries, let’s see the correlation of startup success rates by the location.
Startup Success Rate by Country
According to the 2021 statista data this year, the United States is leading in the number of startups (63,703). India is second on the list with 8,301 startups, while the UK is in third place with 5,377 startups.
By comparison, the United States has nearly three times as many startups as the other 10 countries we have on our list combined. SBA (Small Business Administration) connects business owners and mentors to help them grow.
Besides, in the USA, we collected the data on startup success rates in Canada, the United Kingdom, France, Germany, Switzerland, Estonia, South Africa, Hong Kong, Singapore, and Australia.
Let’s take a look at the details.
1. Startup Success Rate in the USA
New business statistics show that the new startups’ rate decreased in Q4 with over 1.1 million U.S. businesses, then raised again to 1.37 million in the first quarter of 2021 and then to 1.44 million in the second quarter.
The percentage of startups that fail in their first years in the USA is over 80%. It means the success rate is about 20%.
Among the best examples of American startups in 2021 are:
- SHIFT is a digital coach for remote teams. It helps leaders to connect, evolve their culture, and build effective virtual teams.
- Honeybee is a FinTech company, that takes care of the financial wellness of employees.
- Hypeercare is real-time healthcare coordination for medical specialists.
Richard from realpeoplesearch.com, said “According to research, 21.5 percents of startups fail in their first year, 30% in the second year, and 50% in their fifth year. Money running out, being wrong in the market, lack of research are some of the common reasons for the failure. While, on the flip side, 16.5% of the small businesses at times tend to succeed. This is usually for small businesses or startups. Generally, unicorn startups have a little higher rate as compared to startups, due to the availability of resources and funds.”
Let’s move forward to another North American country, Canada.
2. Startup Success Rate in Canada
The percentage of startups that fail in their first years in the USA is over 80%. It means the success rate is about 20%.
Among the best examples of Canadian startups in 2021 are:
- Drop is a customer loyalty startup that provides users with points for linking debit or credit cards.
- Ritual is a startup that offers food and drinks delivery and allows users to pre-order and pre-pay their orders from local restaurants.
- Integrate.ai company uses machine learning and cross-industry intelligence to know how to predict the customers’ needs and market needs beforehand.
Also, Richard shared his opinion regarding Canadian startups, “the data of Canadian financial institutes reveal that 75% of startups do not return the money they borrowed from various sources. The truth is that a very high percentage of the companies that start, end much earlier than desired because generally, it is an established notion that 20% of businesses miss the mark in their first year and almost 60% will go bankrupt within their first three years. Statistical sources coming from Canadian government institutions show 85% of Canadian startups fail within a year. Of which 45% of goods-producing companies hardly make their first year while 40% of service sector startups fail in a year. This is an alarming situation for a country that has a 7% unemployment ratio.”
Let’s take a look at the startup scene in the United Kingdom.
3. Startup Success Rate in the UK
UK tech startups face incredible growth, with £17.8b of equity investment raised between January and October 2021.
The percentage of startups that fail in their first years in the UK is over 70%. It means the success rate is about 30%.
Among the best examples of British startups in 2021 are:
- FinTech startup SumUp provides a payment processing system for small businesses and offers business owners to accept secure card payments.
- CMR Surgical is a Cambridge-based technology company that creates robotics for surgical purposes.
- OVO Group provides other green energy companies with supplies of renewable electricity.
Nathan Bynum from nathanbynum.com, said “t may seem daunting that 89% of businesses in the UK survive their first year in business yet over half are gone after 5 years. However, if we consider the fact that 93% of all businesses that become successful have pivoted from their initial idea, these UK numbers show remarkable resilience in the face of many tribulations that sink the majority of unary businesses worldwide.”
We’ll continue with an overview of European startups from France.
4. Startup Success Rate in France
The French startups are mostly succeeding in creating software or cloud-based platforms.
The percentage of startups that fail for the first time in France is over 80%. It means the success rate is about 20%.
Among the best examples of French startups in 2021 are:
- Enterome is a healthcare startup that produces drugs for chronic conditions and develops specific practices based on molecular interaction.
- Devialet is a startup aimed at acoustic engineering and the creation of high-end connected audio speakers.
- OpenClassrooms is an online education startup that develops free-access courses in computer programming, science, marketing, and entrepreneurship.
The next overview piece is about German-based startups.
5. Startup Success Rate in Germany
The percentage of startups that fail in their first years in Germany is over 75%. It means the success rate is about 25%.
Among the best examples of German startups in 2021 are:
- ResearchGate is an Edutech social networking startup that provides learners with scientific knowledge and gives them the opportunity to share their work.
- Adjust is an intelligent mobile analytics startup that offers marketing automation products, fraud prevention services, and cybersecurity.
- Coya is an online insurance startup that provides digital insurance and offers transparent products at a low cost.
Melanie Marten from PR ON THE GO, said “The stability of startup businesses is measured by their termination rate by the German KfW Development Bank, and their Start-up Monitor which states that in the course of three fiscal years, around 30 % of founders discontinue their startups. In fact, the stability of the continuance is even somewhat weaker. After the first 36 months 66 % of startups are still active and 57 % after 60 months.”
The next country on the klin list is Switzerland.
6. Startup Success Rate in Switzerland
The percentage of startups that fail in their first years in Switzerland is over 65%. It means the success rate is about 35%.
Among the best examples of Swiss startups in 2021 are:
- CUTISS is a biotech startup that uses personalized skin technology to heal skin defects with the help of bioengineering.
- 9T Labs is a startup that creates a new way of manufacturing carbon composites.
- Planted Foods is a startup that creates plant-based protein made of 100% animal-product-free components.
And the final European country in this article is Estonia.
7. Startup Sucess Rate in Estonia
The percentage of startups that fail in their first years in Estonia is over 75%. It means the success rate is about 25%.
Among the best examples of Estonian startups in 2021 are:
- Co-One is an artificial intelligence-based software startup that offers data management and annotation services to other companies.
- RebelRoam is a telecommunication startup that provides internet traffic management for travel companies.
- Lingvist is an Estonian startup that offers language learning solutions and uses mathematics for better results.
David from Marketing Disty, said “According to the Estonian Startup Database as of 2021, 1,376 startups have been created. Out of the total amount of Estonian startups up to 2021, 347 have been active for 5 years or more. This means 25.2% of Estonian startups can be considered a success to date as it typically takes a small businesses at least 2 to 3 years to be profitable and at least 5 years to become truly successful.”
Now let’s move to an overview of startups from South Africa.
8. Startup Success Rate in South Africa
The percentage of startups that fail in their first years in South Africa is over 86%. It means the success rate is about 14%.
Among the best examples of South African startups in 2021 are:
- Aerobotics is a data analytics startup that offers aerial imagery and ML algorithms to help farmers identify pests and diseases in the early stages.
- AzarGen is a biotech company that deals with developing human therapeutic proteins with the help of genetic engineering & synthetic biology.
- MAXHOSA AFRICA is a popular knitwear brand that offers knitwear design solutions.
Eleni from StartupBlink shared their insights: “The South Africa Startup Ecosystem is a regional Leader in innovation, ranked at number 48 globally, and shows a positive momentum 4 spots since 2020. South Africa also ranks at number 1 for startups in Southern Africa. You can check more details here.”
Let’s continue an overview with a look at Asian startups.
9. Startup Success Rate in Hong Kong
The percentage of startups that fail in their first years in Hong Kong is over 70%. It means the success rate is about 30%.
Among the best examples of Hong Kong startups in 2021 are:
- Bravera is a healthcare startup that creates fitness challenges for social good or for discount rewards.
- Gini is an app that offers users tracking and management systems for their personal finances.
- Grana is a fashion e-commerce startup that produces clothes made from fabrics from all over the world.
Richard from RealPeopleSearch, that kindly shared with us insights on Canadian and the US startups, also shares his thoughts on this: “The number of start-ups in Hong Kong has been steadily increasing over the previous few years. The number of local start-ups increased by 28 percent between 2018 and 2020, to 3,360, employing 10,688 people. Financial technology (fintech), eCommerce/supply chain management/logistics technology, and professional and consultancy services account for the vast majority of them.”
10. Startup Success Rate in Singapore
The percentage of startups that fail in their first years in Singapore is over 70%. It means the success rate is about 30%.
Among the best examples of Singaporean startups in 2021 are:
- Credit Culture is a Fintech provider that oﬀers digital solutions for personal loans in Singapore.
Goxip is a design startup that discovers fashion and beauty products and provides its in-house FfinTtech payment solution.
- Silentmode is a healthcare startup that offers to eliminate stress with the help of wearable technologies.
A startup founded from Singapore, a founder of CocoSign, Stephen shared his input here: Despite having an excellent Startup ecosystem with low tax rates, compelling government initiatives, plenty of angel investors, etc but Singapore still has a Startup failure rate of 70%80% in the first few years. 90% of the Startups survive the first year but the young entrepreneurs who thought entrepreneurship is a bed of roses have a keen habit of losing hope if failure follows another two or more years. Singapore has a high Startup failure rate because the trend of Startups has taken its toll on the young generation. But those Startups that stay consistent and backed by mutual networking events such as Flex user groups, or Angel investors who are willing to throw their money at a good idea with their deep pockets have a chance of crossing a $5-$10M mark in a few years. The community is ethically strong and people are relatively educative.”
Finally, let’s take a look at Australian startups.
11. Startup Success Rate in Australia
The percentage of startups that fail in their first years in Australia is over 75%. It means the success rate is about 25%.
Among the best examples of Australian startups in 2021 are:
- Airwallex is a FinTech startup that allows businesses to take and make payments from anywhere across the world.
- Canva is a SaaS startup that offers users the to create social media and other forms of digital content.
- Secure Code Warrior is a cybersecurity and learning startup that provides personalized development startup business plans and secure codes.
Matthew from Hypernia, said “Few Australian startups survive the first three years. There are disparities in survival rates between sectors, with ‘Transport, postal, and warehousing’ having a 45.7 percent three-year survival rate of firm entries, and Agriculture having a lower than average yearly exit, hovering at 7-8 percent, making this one of the more stable businesses. Australia exhibits all of the characteristics of a strong startup economy. Cities like Sydney, Melbourne, and Perth have risen to become promising hubs of technological innovation.”
There are many numbers showing the success rate of the startups. Some of them are true, while others can be exaggerated.
But if you are considering starting a startup, you should make think carefully and examine the startup statistics.
Would You like to Join the Club of Successful Startup Founders?
After considering the startup success rate, you can start deciding on the direction, problem, and product. Make sure there is a market for your solution.
The next step is to find out how to build a startup from scratch.
Bonus InfographicStartup Success and Failure Rate in 2023
Here’s a summary of our in-depth guide. Learn the basic steps that describe why 9 out of 10 startups fail.