Startup Statistics, Facts and Trends
Startups and small businesses are the growth engine of any country. If you want to check the economic health of a country then you have to look at their startup scene. A country with a growing startup culture is more likely to perform better on economy and job creation as opposed to a country which lacks startup culture.
In the USA it is estimated that startups are responsible for creating 30% of new jobs every year. In other countries it is even more.
I’ve no doubt 2020 is going to be a great year for startups all over the world. You can attribute this positive sentiment to the internet and the digital economy.
Because of the internet more and more businesses want to go online. They will obviously need applications and websites. Hence most of the startup growth in developed countries is going to come from the tech sector.
Moreover what adds to the positive sentiment is there is no dearth of investors for funding and banks who can grant loans.
However competition is very tough because every entrepreneur is competing for the same space. Although failure rates are high but entrepreneurs are still willing to take risk because there are in people who want to invest in innovative business ideas.
Top 25 startup interesting stats and trends for the year 2020
I’m sure it will inspire you to get started.
- Starting on a negative note, more than 70% of startups fail because of various reasons. One third will fail in the first year and remaining one third in next 2 years.
- 50% startup fails because they can’t offer products and services that market needs. Startup innovation ideas fail because they are putting resources in improving a product without involving the end users. 30% fail because of cash flow issues. Other 20% can be attributed to various factors like lack of passion, no team work, no competitive edge etc.
- However the good news is the startups which are not failing 70% of them are reporting profits. That is every 7 out of 10 entrepreneurs are in profit.
- Moreover startup failure rates have come down considerably and only 30% are closing compared to previous few years.
- San Francisco and Silicon Valley are the epicenter of entrepreneurship, not just in US but around the world. They are home to more than 14% of global startups. When it comes to Global Entrepreneurship Index US is considered to be one of the best countries for startups. Switzerland is second followed by UK and Canada. SF and Vancouver are considered to be best cities. Berlin and London are the next.
- An older startup founder is 50% more likely to succeed than a younger one. If an entrepreneur’s age is 50 years then because of his experience and understanding of the business is more likely to succeed than a 25 years old young founder. On an average most appropriate age for the success is 45 years.
- In USA more than 65% of entrepreneurs are starting their businesses from home. Garage is the place where they set up their business.
- People who own a house are 30% more likely to start a new business from home than people who don’t you can check the guide to start it here on Moneyconnexion. After having their own home they are more confident and financially secured to take risk.
- 60% of businesses don’t have any staff when they are starting out. They don’t have money to hire them hence they depend upon family members and friends initially.
- When it comes to startup unicorns the USA leads by far. There are more than 150 active unicorns in USA that worth more than $600 billion. However when it comes to the most valued startup in the world then it is a Chinese company named ByteDance. They are the maker Toutiao a Chinese mobile content platform worth whopping $75 billion.
- Let us learn something about funding. In USA 60% startups depend upon personal savings for their funding. However in developing countries they heavily rely on banks. Funding to startups by venture capitalists is very low.
- More than 80% startups go to bank for loans to expand their business. They are unable to expand the business from the profits made by the compnay.
- You will be surprised to know that in USA only less than 6% of all startups were funded by venture capitalists. So in reality the funding by venture capitalists is very small.
- Startups are 50% more likely to get approved for loans from smaller banks rather big banks. New entrepreneurs depend mainly upon small banks and even NBFCs. The main reason is big banks don’t trust new entrepreneurs and their business ideas.
- Startups around the world are raising more money than ever before. Between the year 2012 and 2018 startup funding worldwide across industries grew by 50%. The median seed funding round in USA has increased by 300%.
- Major startup growth is coming from industries like tech, health, beauty and fitness. In 2018 they increased by 35%. Other industries like food & beverage grew by 12% and retail by 8%.
- About 80% of entrepreneurs around the world believe AI (Artificial Intelligence) is the future when it comes to technology and automation. Moreover advanced manufacturing and robotics tech startups are growing by 150% per year. Hence AI is very important for entrepreneurs.
- In developing countries majority of startups are coming out of sectors like remote healthcare, retail distribution and distant learning. They are less likely to succeed in tech sector.
- Startups from information and construction industry have the highest failure rates. It is estimated that more than 50% of startups fail in these sectors. Prime reason is entrepreneurs fail to find markets and understand customer’s needs.
- Around 70% of entrepreneurs feel conditions are going to improve this year compared to previous year. They are pinning their hopes on higher economic growth and maturing startup ecosystem.
- More than 60% of adults believe starting a new business is better than a 9 to 5 job. It gives them financial independence and freedom to be their own boss. For 50% of new entrepreneurs the main reason of starting a new business is they want to be their own boss.
- To your surprise only 10% of the startup founders are graduates in USA, 33% of them have some high school diploma. Remaining of them doesn’t have much academic background. Educated founders are more likely to succeed than less educated ones.
- 90% of startup founders are working overtime. Instead of working regular 6 to 7 hours they are working 9-10 hours per day. On an average they are working more than 65 hours a week. Some work on weekend also.
- When it comes to mentorship and guidance then 30% of them go to internet for some sought of advice. Founders try to connect with their colleagues and other likeminded people online.
- Mentored startups are 50% more likely to succeed and raise 7 times more money than a startup without a mentor. Mentors can guide novice entrepreneurs and give them a roadmap to take company ahead.
- A startup with a great team performs 200% better than a startup with a poor team. Having a perfect team is indispensible when it comes to success. Startups succeed where co founders and CTO are more involved in day to day affair.
- 70% of startups are suffering from huge debt. They are highly leveraged hence making them vulnerable to going bankrupt.
- 80% of founders came to realize that for the success it is not their unique idea that matters but how they execute it makes a difference.
- For consumer sectors founders with a non technical background are 30% more likely to succeed than a technical founder.
- According to Forbes founders of failed startups have 25% higher chances of succeeding in their next venture. If the economy is doing great then the success rate can further increase.
- Companies that presale their products are able to retain 80% of their customers.
- Only 30% of startups felt need for expansion. Others were content with what they are doing. For expanding they go to small banks for loans.
- More than 70% of startups plan to go international after few years.
The above list of stats is well over 25 but it really doesn’t matter because all of them are very interesting for a new entrepreneur like you. After reading these stats you will get a fair idea where do you stand as an entrepreneur who is looking to launch his/her new startup.
Many novice entrepreneurs get carried away and end up making huge mistakes with their startups. These facts will help you to get realistic and not jump the gun early.
Finally I hope this article will not only inspire you but also help curbing your unwarranted enthusiasm.
For stats and figures we have consulted sources like Gallup, Fundera, Forbes, US Labor Bureau, Neilson