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90% Startup Failure Myth: Why the Odds Are in Your Favor
The truth behind startup failure statistics and how you can succeed despite the myths.
Anmol Goel
October 10, 2024 • Estimated Reading Time: 5min6 minutes
Hello Innovators,
Welcome to this edition of the GACS Newsletter! We’ve all heard the phrase, “9 out of 10 startups fail,” but how accurate is that, really? This statistic gets tossed around in the startup world so often, it’s almost become a rule of thumb. Before we let that figure discourage anyone from pursuing their entrepreneurial dreams, let’s take a closer look at the numbers.
Here at GACS, we believe in challenging the status quo and separating fact from fiction. While building a successful startup is no walk in the park, the idea that 90% of startups are doomed from the start is more myth than reality.
The Reality Behind the Numbers
According to the Startup Genome Report, the actual failure rate is much closer to 1 in 12 startups—not the dramatic 9 out of 10 we often hear about. In fact, government statistics show that 75% of businesses survive their first year, and between 35-60% make it to the five-year mark. That’s a lot more encouraging than what the myth would have you believe.
It’s also important to note that success doesn’t always look the same for every startup. Some startups pivot, others merge, and many continue growing slowly but steadily. Not every “failure” means a complete shutdown.
What Does "Failure" Really Mean?
The confusion often lies in how we define failure. Are we talking about startups that close their doors for good? Or are we including startups that didn’t grow as quickly as expected or that pivoted into a different direction? When you broaden the definition of failure, the numbers can seem more intimidating than they really are.
Many businesses that fall under the so-called failure category simply didn't achieve hypergrowth or exponential success. Yet, they’re still providing value, generating revenue, and employing people at a slower pace.
One of the most often cited sources is a 2019 report by Startup Genome. Startup Genome is an organization which is known for producing reports on startup ecosystems. They survey popular startup regions, such as Amsterdam and Berlin, and write it up. Fun read.
The Myth’s Origins
So, where did the "90% of startups fail" myth come from? Interestingly enough, it can be traced back to a 1975 report, which focused heavily on business closures without comparing them to new startups launching in the same period. This selective reporting gave a skewed perspective of the business landscape at the time, and unfortunately, the myth stuck.
The lesson? Always dig into the data before accepting any statistic at face value, especially when it comes to something as dynamic as the startup world.
The US government also published a graph, focusing on the early years, with more explanations of where the numbers in the datafile come from (here)
The data covers approximately 98 percent of nonfarm payroll businesses in the United States, according to the report.
How You Can Defy the Odds
The good news is that startups have better odds of success than you might think. The key is perseverance, adaptability, and learning from each step of the journey. The road may be bumpy, but that’s part of the process. As long as you keep refining your product, engaging with customers, and iterating on your strategy, your startup has every reason to succeed.
Here are a few practical tips to help you along the way:
Stay Lean: Focus on developing a minimum viable product (MVP). This helps you launch quickly and gather valuable feedback to improve your offering.
Listen to Your Customers: Regularly engage with your users to understand their needs and preferences. Their insights can guide your next steps.
Be Open to Change: Don’t be afraid to pivot if something isn’t working. Flexibility can often lead to unexpected opportunities.
Personal analysis: 17 cohorts of a venture building course in Delft University of Technology - Build Your Startup
don’t let the fear of failure hold you back. The real challenge is to keep learning and improving, no matter what obstacles come your way.
At GACS, we’ve worked with countless startups that didn’t fit the "9 out of 10 fail" narrativeand we’re confident yours can break the mold too. Whether you're just starting out or already in the thick of things,
We hope you found these tips helpful! For more insights and detailed guides, visit our GACS Blog, and Stay tuned for more insights and tips from the startup world in our upcoming newsletters!
Best regards,
The GACS Team