Startups are the main pillars of the modern business economy; they bring jobs, innovation, dynamics, and many solutions (to common problems) to the table. Startup statistics show us how the world is changing, reminding us how both Apple and Twitter were once startups and that Uber is only 10 years old.
So, whether you want to dedicate your startup to the betterment of the world or to develop a super-technology, or perhaps you are simply curious about what the future brings, in any case, here are the main points and figures of the modern startup world.
In March 2019, The Wall Street Journal proclaimed the Chinese Ant Financial Services Group the most successful of all startup companies that reached over $1 billion in value, also known as unicorns. Formerly known as Alipay, Ant Financial is an affiliate company of the Chinese Alibaba Group founded in 2014. In 2019, it reached a value of $150 billion.
One-quarter of the world’s unicorn-startups originated from Silicon Valley; global ratings put San Francisco as number 10 on the list of best cities for startups.
In 2018 alone, startups in Silicon Valley collected over $26 billion in venture capital, but Berlin was named the world startup capital as per stats. This ranking takes into account the costs of living, safety, the housing market, and the overall quality of life, categories by which San Francisco ranks much lower.
(Knightfrank.co.uk; Mobile World Capital)
London has the most startups in Europe, even though its Shoreditch district is marked as the costliest creative startup district on the globe; according to estimates, the cost of renting business space in Shoreditch is $66,706 per year for 600 sq ft.
In 2018, 8,974 startups were founded in London, making it the top city-hub for European startups, followed by Paris (2,750) and Berlin (2,330), as shown in the startup business statistics.
Recent startup data attribute 29% of startup failure to ineffective management of capital due to inexperience. A crucial consequence of this lack of knowledge of the market is choosing the wrong price for the startup product. This accounts for approximately 18% of all startup failures. In the business world, 71% of firms fail because of poor financial planning and management.
The SHELL analysis shows that the absence of a concrete business model contributed to 35% of startup failures. Next in line was the lack of business development; especially related to commercial development, which occurred in 28% of cases. Moreover, 21% of startups rapidly ran out of funding and 18% didn’t succeed to make the product market ﬁt.
Neglecting legal actions like checking the employees’ previous work contracts, issuing a non- disclosure agreement with potential investors or considering international intellectual property protection, are classic startup errors that entrepreneurs make.
Startup statistics show that legal causes make for 8% of startup failures. Furthermore, legal difficulties led to disagreements between team members and investors — yet another cause for startup failures (13% of them to be exact).
The effort that entrepreneurs put in the process of launching a startup is a crucial element for its success. Working long hours, making the right decision, and commitment is more difficult than it seems — hence why business startup statistics for 2107 attributed 13% of startup failures to startup members losing their bearings, 9% to losing their passion, and an additional 8% to professional burnout of the startup staff.
(Chamber of Commerce)
In 2018, the biggest failure rates for small businesses in the US were recorded for companies in the construction, warehouse, and transportation industry with a staggering 75% failure rate.
For other small businesses, the failure rate was estimated at 20% for the period of the first year and 30% at the end of the second year. The small business failure rate (2018) shows, that despite the popular belief, restaurants in the US have a slightly smaller failure rate than average (17%).
The most numerous startup “postmortem reports” according to a SHELL analysis, were made by Social Media startups with 12.3%. The Software industry startups were next in line (9.3%), as well as Entertainment and eCommerce startups with 7% and 6% respectively.
The lowest rates of startup failures were noted for the telecommunication, security, and educational technology industry (0.5%) as shown in the statistical analysis on the startup failure rate (2018).
European records observing the survival rates of EU startups show a significant drop in survival rates of companies since 2004. The most remarkable difference can be seen in Belgium startup data where, according to Eurostat, survival rates went down by 22.37% for the 2011–2017 period.
Estimates show that after the first round of funding, startups have a failure rate of approximately 97%. For stage B (second round of funding) the failure rate is 88.7%. For stage C it is 84.1%, and so on.
Overall, the failure rate drops continuously with each round of funding, reaching 72.4% by stage H. The evaluated startup failure rate by stage differs only slightly between different startup data analyses, but it always follows the same trend.
Barely 8% of all businesses in the US today are startups, compared to 35% in 1980.
Over the last 40 years, startups were responsible for 100% of all net job growth, this drop presents a serious problem in the US economy.
Furthermore, startups and small businesses are 13 times more innovative per worker than large firms, creating more patents per employee in more revolutionary, cutting-edge scientific and technical fields. Estimates of recent startup statistics deduce that losing half of this innovative force is due to changes in the US patent policy, which can be rectified in the future.
The GEM global report for 2017/18 elaborated on a motivational index between necessity- and opportunity-driven startups. Results show that startups born in the regions with developed industries are 5.2 times more driven by innovation than by necessity. For the regions with economies in development, the motivational index was lowest in Africa, where the creation of startups is 1.5 times more motivated by opportunity than necessity as displayed in the startup statistics 2017.
(Fundera.com; Chamber of Commerce)
22 million of 30.2 million small businesses operating in the US in 2018 were run individually — solely by the owner. More than half of all small businesses (approximately 52%) are home-based and usually run by women.
In North America, 29.5% of entrepreneurs are expected to create more than six startup jobs in the first 5 years of a startup’s life. Ranking first on the global scale for job creation per startup, North America is followed by Asia and Oceania with 21%, Europe (18.5%), Latin America and the Caribbean region (18%), and Africa (17%).
In 2018, an estimated 55 million workers in the US were freelancers or 35% of the total US workforce. As displayed in the small business startup statistics, 42% of the employed workforce in these businesses and startups were contract workers. Freelancers are booming and each year market needs for them are higher because they are more affordable than full-time employees.
The intellectual property (IP) industries accounted for 27.9 million jobs in 2014. In close correlation with the startup industry, IP follows the upward trend in the number of educated entrepreneurs. Workers in the IP industries have 46% higher wages than the average American. The whole industry, directly and indirectly, supports around 45.5 million jobs or 30% of all US employees as per startup statistics 2019.
(Chamber of Commerce)
The US Chamber of Commerce estimates that the funds needed to start a small business, with less than 500 employees, ranges from $5,000 for the individually-run, home-based startups to $500,000 and more for those with more employees, located in a central urban area.
(Global Startup Funding Summary)
The total investment amount, on a global scale, for startups with disclosure deals reached $407 billion; namely, an increase of 23.3% in invested funds since 2017. Globally, there were close to 21,000 companies from 131 countries that raised startup funding and investments for 29,572 investment deals in 2018.
(Startup Funding Summary)
Asia surpassed Europe and North America in total investments with $179.8 billion raised for 2018. The region of East Asia (notably China and Japan) raised the most; $119.7 billion to be exact. South Asia (India, Sri Lanka, and Bangladesh) startups raised $38.9 billion. Finally, startups in South-East and West Asia followed suit with $15.9 and $5.2 billion accordingly.
Global trends note an ever-increasing number of startups related to artificial intelligence (AI) each year. China has close to 1,500 AI companies and ranks first on the global scale with the biggest investments in AI startups. Startup funding stats reveal China acquired 48% of the total AI startup market worldwide. The US ranked second, investing over $15 billion in AI in 2017, or the equal of 38% of the global AI startup funding.
(Chamber of Commerce)
Startup businesses are most commonly self-financed (75–80%) or financed by loans from family and friends (2–6% of the initial startup funding). Only 16% of new startups are financed by smaller-bank loans with approval rates of 49.7%. In contrast, only 26.3% of startup loans were approved by big banks.
(Startup Funding Summary)
In 2018, venture capital funding allocated $247.8 billion to a total of 8,182 deals. Seed funding accounted for 3,777 deals or 46% of the total number. Today, startups have more access to seed capital than in the previous 5 years. On the other hand, late-stage funding is becoming increasingly complicated despite the abundant funds that are available.
There were a total of $3.09 billion invested in Business-to-Business (B2B) startups alone in 2018. The majority of these offer data solutions such as data analysis, storage, and security to companies, to help optimize processes and make them more transparent. Startup statistics show that most EU startups engage in B2B markets (82.1%), generating their revenue exclusively (46.5%) or mainly (25.3%) through B2B services.
Many a startup tries to fund their business by crowdfunding, mainly in the seed-stage. With a total of 460,000 project launches and a success rate of 37%, Kickstarter is one of the biggest crowdfunding platforms in the world. Through Kickstarter, a total of $4.56 billion funds were collected between 2012 and 2019, yet only 10% of the funded projects were startup-related. Reaching out to crowdfunding is growing in popularity among entrepreneurs; startup stats predict that the crowdfunding market will reach $30.6 billion by 2025.
In 2018, medicinal marijuana startups in the US marked a significant rise in their funding. In the states of Colorado and Washington the market funding doubled in size and went from $239 million in 2015 to $593 million by 2017. The Canadian-based Tirlay profited most from this raise and with $47 million in funds, became one of the best-funded startups in the US.
(EU Startup Monitor; Valuer.ai)
In the EU, the IT/software development sector is the most popular field, accounting for 19.1% of all startups. The second most popular startup field is Software as a Service (SaaS), encompassing 18.5% of the 2018 startups. Globally, 52.6% of all startups were created in the fields of web services & apps (18.6%), SaaS (15.3%), ecommerce (10.1%), and IT & software (8.6%), tech startup statistics reveal.
Total early-stage entrepreneurial activity, or TEA, is the percentage of adults that have started and managed their own business up to 3.5 years. The GEM global report for 2017/18 points out that TEA rates were highest in Latin America, North America, and the Caribbean, where 18.5% of working-age adults engage in startup entrepreneurial activity. The lowest TEA rates were recorded in Europe (8.1%).
(EU Startup Monitor)
EU startups entail all industry sectors, yet the vast majority (a staggering 99.3% of them) offer online solutions. Besides the popular IT/Software sector, EU startup stats show a number of startups emerging in new trending sectors such as the green technologies (4%) and fintech sectors (5.1%).
Gender distribution statistics of startup founders in the EU in 2018 state that Poland is the country with the highest percentage of female startup founders. Portugal, on the other hand, is the country with the lowest proportion of only 5.1% of startup founders being women. In 2018, the vast majority (82.8%) of EU startups were founded by men with a median age of 35.
(EU Startup Monitor)
The majority of new businesses consider themselves global. Some of them operate across borders from multiple offices in different countries. 29.1% of entrepreneurs in EU startups are non-EU residents and on average have 12.8 international employees. 88% of startups plan on expanding internationally, mostly within the Eurozone (85%) or in the US (40%).
(Research Gate Net; SmallBizTrends)
Success rates of startups differ greatly across countries, geographical regions, and industries. Globally, the overall success rate of new startups is estimated between 20–25% in the first 6 years, 24–28% after 7 years, and 30–35% after 8 years of existence. In 2018, in the US, as much as 56% of startups made it to their fifth year.
(Finances Online.com; Moyak.com)
Each year, worldwide statistics show approximately 300 million entrepreneurs working on starting around 150 million businesses. About one-third of startup projects will be successfully funded and launched.
Hence, around 50 million new companies enter the global market annually, which makes for about 137,000 startups per day. In the US, around 543,000 small businesses are launched every month.
Business estimates state that 8 of 10 startups cease to exist after the first five years. Generally, around 80% of small businesses in every business sphere survive their first year, 73% survive their second year, and about 56% make it through their fifth year. The entrepreneurship failure rate has never been lower than in 2018, with only 22.5% of startup businesses failing after their first year.
Profitability can vary from startup to startup, mainly depending on the industry in question and the size of the startup; an exact timescale for the prosperity of new firms doesn’t exist. In general, 3 years is the usual estimated time needed to balance out the revenues and the costs of a startup, and in the 4th year, most startups begin to turn a profit.
In most cases, unsuccessful startups enter the non-profitable sectors or fail to target the right needs of customers. Another major reason for failure is poor financial planning, inadequate fund management, and insufficient fund reserves.
Many startups make incorrect estimates of the markets that they enter and choose the wrong price for their product. Some startup teams lack experience and strategy to outlive the competition or make new customers. Failing to legally cover crucial business aspects is also a frequent cause of startup failure.
An idea alone is not enough to change the world. Successful investors and entrepreneurs always keep a vigilant eye on global trends, technologies, policies, and human needs in general. Startup statistics show that within the current business ecosystems, one thing is certain — businesses revolve around innovation. After all, startups are the ones making them unknowingly, or deliberately, by trying out new formulas and bringing prosperity to the world.