How many startups fail
The figure most often quoted is that around nine in ten startups fail. For new businesses in general, United States Bureau of Labor Statistics data shows roughly one in five closes within its first year, about half within five years and around two thirds within ten.
Venture backed startups fail in a different way. Few close in the first year because they are funded, but most never return the money invested in them.
The most common reasons startups fail
CB Insights analysed over a hundred startup post mortems and recorded the reasons founders gave. Most startups gave more than one reason, so the figures add up to more than one hundred percent.
- Ran out of cash or failed to raise new capital, 38 percent
- No market need, 35 percent
- Got outcompeted, 20 percent
- Flawed business model, 19 percent
- Regulatory or legal challenges, 18 percent
- Pricing or cost issues, 15 percent
- Not the right team, 14 percent
- Product mistimed, 10 percent
- Poor product, 8 percent
- Disharmony among the team or investors, 7 percent
What the statistics miss
Running out of cash is how most failures end, not why they happen. Behind it is usually one of the other reasons, most often no product market fit or unit economics that never worked.
Newer failures increasingly involve AI. Products are copied faster and prices fall sooner, which shortens the time a startup has to find its footing. See why AI is making more startups fail.
What happens to startups after they fail
Most are simply switched off, but the code, users, data and domain often still have value. Founders increasingly sell what is left rather than writing it off. Read why startups fail for each reason in depth, or how to sell your startup.
Common questions
What percentage of startups fail?
Around 90 percent is the most quoted figure. For all new US businesses, about 20 percent close in the first year and about half within five years, according to Bureau of Labor Statistics data.
What are the top two reasons startups fail?
Running out of cash and no market need. In CB Insights research, 38 percent of failed startups cited running out of cash or failing to raise, and 35 percent cited no market need.
What are the 10 most common reasons startups fail?
Running out of cash, no market need, being outcompeted, a flawed business model, legal challenges, pricing problems, the wrong team, bad timing, a poor product and conflict among the team or investors.