“Nine out of ten startups fail.”
The U.S. has experienced a wave of entrepreneurship over the last two decades. Technology has made it easier to launch, funding choices are now broader, and social media has given founders a potent platform to build an audience. But accompanying that has been a brutal truth: most startups fail.
And in 2025, the landscape is still as complicated as ever. Economic insecurity is still weighing on founders. AI innovation is opening up all new possibilities, but it’s also raising the game in terms of expectations and time to market for your products. That appetite, for the time being, is gone; venture capital has reoriented itself with fewer early bets, more demand for profitability, and proof.
We’re going to dissect in this post why so many startups go sideways. We’ll examine the data, the timelines, and the warning signs and, most importantly, how to beat the odds. Whether you’re just starting out or already deep in the trenches, this is your survival guide.
Key Statistic: 90% of Startups Ultimately Fail
Let’s start with the big number.
Based on research commissioned by Spdload and Exploding Topics, 90% of startups fail. The dream may be great, but so is the risk.
Around 10% of new businesses shut down in their first year. But it doesn’t stop there. Many others slowly fade away over time. They ran out of money. Or they reached a wall with their product-market fit. Or they just can’t compete.
Here’s another telling stat: according to Exploding Topics, only 40% of startups ever become profitable. About 30% of them break even, they surmise, while the rest just lose money until they throw in the towel.
- Year 1: 90% survive
- Year 3: 60–70% survive
- Year 5: ~50% survive
- Year 10: Only ~30% survive
This shows us that failure is not a singular event; rather, it is a recurring phenomenon. It’s usually a slow and cumulative process. There’s so much you can just get by doing for years without ever fully succeeding until the final shoe drops. For most, the end of a startup is quiet; a team breaks up, a site goes dark, and that’s that.
Year-by-Year Breakdown of Startup Survival
Year 1: The Setup and Struggle
This is the honeymoon period, although some 1 in 10 startups will fail even at this early stage. Why? Most often, it’s not due to a platform or network end of life, but because demand was misjudged, budgets over-optimized, or product execution was suboptimal. Many founders are unaware of the difficulty in securing their first real customers. The MVP may flop, or the competition may already be miles ahead.
Year 2: The First Fork in the Road
Here’s when things start to get real. Funding dries up. The initial enthusiasm fades. While that is the case, founders must demonstrate their business model and its potential for growth. The remaining startups lose a significant portion here. It tends to be the year of the first big pivot, or when founders finally wake up to the fact that what they’re building is something no one wants.
Year 3 to Year 5: Make or Break
Half of all start-ups are out of business by the five-year mark. If you’ve come this far, you’re already in the top 50%. However, challenges change: it’s less about finding product-market fit and more about creating a sustainable growth system or team structure. Founders have to stop being hustlers and become managers, and not every founder makes that transition.
Year 6 to Year 10: The Growth Ceiling
This is the stage during which businesses either become institutions or fade away quietly. Many founders burn out, stumble in scaling up, or get pushed out by larger rivals. By year 10, fewer than 30% are still around. It’s a long game, and plenty of people either burn out or hit structural weaknesses they can’t fix.
Why Startups Fail: The Leading Causes
Wilbur Labs and Exploding Topics have put together an interesting list of reasons startups fail. There are easy solutions to all of these issues, if and only if you know that they’re on the way.
- Ran out of funding – 38%: There’s no guarantee that money will bring you success, but it’s guaranteed that not having it will breed failure. Many startups spend too much too early, or misjudge their runway. An ill-executed fundraise or the absence of fiscal discipline can kill a promising startup.
- No market need – 35%: You can create a beautiful product, but if it’s something nobody needs, that means nothing. Remember to always begin by asking, “What is the real problem that we are solving?” Founders fall in love with an idea and don’t validate whether or not there’s a demand for it.
- Outcompeted – 20%: It’s not always about doing something first, it’s about doing it best. Startups that don’t distinguish themselves and evolve typically fizzle out. Fast followers can come in and execute better than you.
- Wrong team – 18%: Great ideas can only go so far without great execution. The wheels come off quickly if the team has a lack of balance, experience, or, most of all, cohesion. A single toxic hire or unfilled key skill can reverberate up and down the organization.
- Pricing/cost issues – 15%: It is either too expensive and customers will not buy it, or it’s too cheap and you can’t run an operation. Locating that sweet spot is a little more complicated than it seems and price is often shorthand for perceived value.
- Consumers ignored – 14%: As soon as you stop listening to your clients, your product will stop evolving. The gap continues to widen until you’re irrelevant. Continuous iteration is key.
- Bad advertising – 14%: You can’t sell a secret. If you don’t have anyone who knows you, you’re not going to grow. Exposure is necessary and organic reach isn’t going to cut it in today’s economy.
- Bad product – 8%: Even if your idea is good, a buggy or clunky product can lose faith and kill momentum. The experience for users must be frictionless. First impressions matter.
Survival Rate by Industry
Industry plays a big role in startup survival. Some sectors are more forgiving than others. Here’s how they stack up:
| Industry | 5-Year Survival Rate |
|---|---|
| Retail | 58% |
| Construction | 54-56% |
| Healthcare | 55% |
| Food & Hospitality | 55% |
| Tech/Information | 44-45% |
Tech: A lot of hype and a lot of failure. Tech startups either scale fast or fail fast. The payoff can be enormous, but the pressure is immense. Only the most agile survive. The pace of AI, data privacy, and consumer behavior changes makes this a volatile category.
Healthcare: It’s complex and heavily regulated, but there is steady demand for healthcare startups. If you can cut through red tape, there’s long-term potential, particularly with services for the elderly, remote diagnostics, and mental health.
Retail, Construction, Food: Margins are tight, the bar for customers is high, and the competition is fierce. These are industries that require operational excellence and strong local execution.
Common Patterns Among Failed Startups
Sometimes it’s less a matter of what went wrong than how the story played out. Here are some common denominators in high-profile flounders:
- No market feedback: Startups tend to build products in a vacuum. If you’re not speaking with actual users from day one, you’re likely on the wrong path.
- Scaling too fast: Going from 5 employees to 50, or entering new markets without first demonstrating your model, can be deadly.
- Solo founder struggles: It’s lonely, it’s exhausting, and it can actually be dangerous to go it alone. Burnout sets in fast if you don’t have a partner to challenge and support you.
- Mismanagement of cash flow: Not knowing your monthly burn or not planning for slower quarters can kill your streak.
- No differentiation: If users can’t tell why they should choose you over someone else, they won’t. Your product needs to be distinct.
Case Study: Quibi
Quibi debuted with $1.75 billion in financing a new concept for short-form video. But it went bust in about a year. Why? It had a confusing value proposition, bad timing (due to COVID lockdowns), an unclear audience, and didn’t differentiate too strongly from YouTube or TikTok. A case in point that money is not always a product-market fit.
Tips to Beat the 90% Odds
All hope is not lost. There are numerous startups that defy the odds, and they typically share a few common strategies.
- Validate early and often: Talk to your customers. Create landing pages before code. Run pre-orders. Achieve small wins in advance of major launches.
- Build a strong, balanced team: Find people who not only have different strengths but are also strong and balanced in their own right, and who will push your ideas, not just accept them. Diversity and chemistry are essential.
- Stay lean and cash-conscious: Use inexpensive tools. Outsource smartly. Know your burn rate at all times. Treat cash like oxygen.
- Constantly talk to users: Users should be at the heart of your product roadmap, not just your marketing efforts. Establish periodic calls or surveys.
- Join an accelerator or get a mentor: Startups don’t have to be a one-man show. Good mentors or programs that can open doors, catch issues early, and help you correct your course.
- Keep the vision, but know the plan: Pivoting isn’t a failure; it’s adjusting based on what works. Indecisiveness kills more startups than changing the company’s direction.
- Learn from failure – yours and others’: Study the failures. Ask questions. If something isn’t working, determine the reason and make a necessary adjustment.
The Startup Mindset: Traits That Help Founders Beat the Odds
Success is just as much about mentality as it is about tactics. The founders who succeed against all odds frequently share these traits:
- Resilience: The start-up rollercoaster is a legitimate phenomenon. Founders must possess thick skin, a long view, and the ability to rebound from rejection or slow progress.
- Adaptability: Markets change, customer needs change, and surprises never cease. However, the best founders pivot when necessary while staying focused.
- Curiosity: You ask lots of questions. What’s working? What’s not? What are customers saying? You are always learning.
- Focus: You don’t want founders throwing the kitchen sink at any number of ideas. When people succeed, they often do so because they are doing fewer things, but doing them better.
- Self-awareness: Being aware of one’s strengths (and weaknesses) allows you to build a more effective team, delegate more effectively, and keep your ego in check.
- Action orientation: Sweating the details. Execution wins. Founders who build, experiment, and iterate quickly tend to win.
Fortunately, these qualities can be cultivated, not just inherited. Consider them a swinging addition to your startup toolkit.
Final Thoughts
To be clear: There is no guarantee of failure. Yes, the odds are steep. But they’re not insurmountable.
Even the greatest founders failed at first. Some of the best-known companies, such as Airbnb, Slack, and Netflix, almost didn’t survive. It was persistence, learning and a clear-eyed view of the risks that was the difference.
And use these facts as more than just warnings. Let them shape your planning. Employ them in the service of staying humble, staying curious, and staying open to change.
Starting a business is hard. However, it’s also one of the most rewarding things you can do. With the right tools and a mindset based on reality, you’ve already separated the cream from most of the crop.
Here’s to being in the 10%.