What Are Current Startup Statistics, Facts, and Industry Trends?

The world of startups is fascinating. Reading startup success and failure stories are binge-worthy. Yet, a lot of mystery lies around the rise and fall of startups. To clear the air, here is a list of facts and statistics about the startup industry. 

What is a startup?

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• The startup industry is defined by how quickly a company grows. Paul Graham, a co-founder of Y Combinator, believes the initial phase of growth for a startup is 5-7% per week. (Graham)
• Startups are also referred to as “high-growth businesses”, per the Kauffman Foundation, a leading organization in reporting small business, entrepreneurship, and startup data, as of 2016. (Kauffman)

How many startups are in the United States?

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• There are over 179,000 startups in the United States, as of 2020. (AngelList)

What is the startup failure rate? Success rate? How many startups fail every year?

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• The first year business failure rate is an average of 21.3% since 1994. (Bureau of Labor and Statistics)
• The fifth year business failure rate is an average of 51.2% since 1994. (Bureau of Labor and Statistics)

Why do startups fail?

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• The number one reason startups fail is their product or service has no demand, as of 2019. (Small Biz Trends)
• 29% of startups fail because they run out of cash, as of 2019. (Small Biz Trends)
• 23% of startups claim they do not have the correct team, as of 2019. (Small Biz Trends)
• One in seven, or 14%, of startups, fail due to poor marketing, as of 2019. (Small Biz Trends)

Why do people create startups?

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• Most people start a business to become their own boss. 26% of founders fall into this category, as of 2020. (Guidant Financial)
• 23% of founders want to pursue their passions, as of 2020. (Guidant Financial)
• 19% created a startup because the opportunity fell into their lap, as of 2020. (Guidant Financial)
• 12% were dissatisfied with a classic, 9-5 job and were tired of corporate America, as of 2020. (Guidant Financial)
• Interestingly, 6% of founders start their company because they are not ready to retire, as of 2020. (Guidant Financial) 

How do startups get their funding?

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• Using personal funds as seed money is how most startups begin their journey, at 77%, as of 2018. (Small Biz Trends)
• Startups use bank loans at 34% and borrowing from friends and family at 16%, as of 2018. (Small Biz Trends)

Does having a business plan change startup funding?

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• 36% of founders with a business plan receive a business loan, 36% use investment capital, and 64% grew their company, as of 2010. (Small Biz Trends #2) 
• 18% of founders without a business plan receive a business loan, 18% use investment capital, and 43% grew their company, as of 2010. (Small Biz Trends #2) 

Which U.S. cities have the most startups?

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Using statistics for the percentage of workers employed by startups, cost of living, and startup density, these are the top U.S. cities to move to in order to work for a startup as of 2019. (Volusion)

1. Seattle, Washington
2. Austin, Texas
3. San Jose, California
4. Nashville, Tennessee
5. Denver, Colorado. 

Other interesting startup facts

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• Startups with more than one founder usually raise 30% more capital and have almost 3 times the user growth, as of 2019. (Small Biz Trends)

Sources

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1. AngelList
2. Small Biz Trends
3. Small Biz Trends #2
4. Guidant Financial
5. Graham
6. Kauffman
7. Bureau of Labor and Statistics
8. Volusion

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