Default result of a startup is death. Every entrepreneur should be privy to this fact before taking the leap and this knowledge plays a role while building a venture. Startup failure confessions have revealed a lot and being open about such issues helps everyone. Two reasons why we don’t hear much about failures are:
- Startup death is hard to identify (most of the dead are buried very quietly)
- Survivorship bias reigns (we only hear about the successful ones)
CB Insights recently did a study on data on tech companies which died between 2010 and 2013 to see what we can learn about startup mortality:
- This isn’t a big surprise but each year since 2010, 70% of all dead tech companies have been in the internet sector (other sectors being mobile and telecommunication, computer hardware, electronics and software).
- 55% of failed startups raised $1M or less, and almost 70% companies died having raised less than $5M overall. Many startups die because of a lack of runway owing to limited funds.
- 71% of the dead companies lasted less than two years after their last funding round.