Why 90% of Startups FAIL in the first 5 Years

Over 305 million startups are created every year around the globe, and the majority of them don’t last long. In fact, up to 90% of startups fail, across almost all industries, the average failure rate for year one is 10% However, in years two through five, a staggering 70% of new businesses will fail and reasons for failure include money running out, being in the wrong market, a lack of research, no Product-Market fit, bad partnerships, ineffective marketing, and not being an expert in the industry.Show more

When we look at the failure of Theranos, this was a startup that was going to change the world back in 2014. Theranos was making a blood-testing device that could test you for any disease you can imagine, from only a small drop of blood. But there was a problem, the product really didn’t work. Sure there was a device, The Edison, but it could never do what they claimed it could do. Actually it never really worked.

So a startup is in essence, a business experiment with potential. This means that real startups are prone to failure by definition. They are testing assumptions, and it’s very likely these assumptions are wrong. The more innovative the startup, the riskier the assumptions and the more likely it is to fail. If you’re doing anything remotely innovative, you need to accept that you are likely to be wrong. The world is very complex, and most ideas and the assumptions they carry turn out to be bad. When you put this new kind of risk on top of the traditional risks of starting a business, it’s no surprise why most startups fail

Most of these startups fail at an early stage of the project and most of them have a higher risk of failure in the early stages because most of the startups are funded by the founders, their families, and friends so it becomes hard to raise enough capital to get the business up and running. Many early-stage startup projects don’t even register a legal entity – you don’t need one to test an idea. You need one once you start making money. So let’s look at the Reasons why 90% of startups fail? But before we do!

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