

What is the truth behind "9 out of 10 startups fail"? - wh-uws
http://www.quora.com/What-is-the-truth-behind-9-out-of-10-startups-fail

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pg
SBA statistics and so on are meaningless, because startups are such a small
proportion of small businesses generally.

I have no idea where the rule of thumb that 9 out of 10 startups fail comes
from, but it doesn't sound too far off. IIRC about a third of companies that
raise series A from VC funds fail, and most startups that fail do it before
getting VC funding, not after.

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Vivtek
Yeah, it seems that a lot of these statistics refer to _establishments_ \- to
me, an establishment is a startup that has gotten far enough to incorporate,
get funding, and so on, and I don't think that equates to startups in general.

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tytso
The best answer is the one from Christoph Möller, who points out it's really
that roughly speaking for every 10 startups, roughly:

A) 3 will fail outright

B) 3 will return less than the invested capital

C) 3 will return the investied capital

D) 1 will be highly successful and make investing in all 10 startups highly
worth while.

I've heard slightly different breakdowns about categories C and D. which are
sometimes called the "living dead", and point out of the 1 (or sometimes 2)
that actually have a successful exit, only 1 in 100 have an amazingly
successful exit such as Google.

The bottom line is that success or failure metrics vary greatly whether you
are talking about it from the perspective of the VC, the founder, or the
employees who just want to have food with their meals.

The employees might not consider a "living dead" outcome to be a failure, and
depending on the founder's motivations if the "living dead" startup is
providing some great service and he or she is more passionate about providing
that service as opposed to becoming rich beyond the dreams of all avarice, a
founder might not mind all that much either. A good example of this is Cygnus
Support, which was technically in the "living dead" category for a decade
before the Red Hat acquisition.

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daemin
Is this list geared towards Venture Capital backed businesses?

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iuguy
I can see how a statistic like that could apply to someone's first business,
where they don't know what they're doing. After a while you learn to suck less
at running a business, hopefully before the money runs out.

When I first started I hated sales, hated salespeople, hated marketing. That
is not healthy for a business person looking to succeed. I had to become the
salesguy and the marketing guy early on. Later I had learn how to manage
people and conflicts (internal and external). If this is something you can't
or don't want to do, then maybe starting a business isn't for you. If working
long hours, not necessarily getting paid, having a fairly stressful job and
worrying about being able to pay the mortgage in the beginning don't phase you
then ignore the phrase completely and go for it.

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twidlit
I would be more curious to know the number of successful bootstrapped
businesses vs. VC-funded ones...

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joshu
Because self-reported failure data is trustworthy.

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mattmanser
The first answer atm is terrible, switching failure rates to success rates
within one paragraph.

I've said it here a few time, the 9/10 number is total nonsense propagated
because people like to think they're special for lasting.

It's never, ever, ever, ever, ever, ever been that high, it was made up in a
NYT article 10 years ago and been repeated without any challenge in startup
circles for far too long.

Worse still 'failure' rates often include people who have sold their business
for massive profits or have shut the business down after making profit,
neither failures, in fact successes.

So while you are pretty special for starting a business, you're not that
special for still being in business in 5 years time. It's actually pretty
common.

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pyre

      > it was made up in a NYT article 10 years ago
    

I think it's older than that, though it may have been worded as, "9 out of 10
small businesses fail."

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rick888
I believe it.

Especially since many of the startups I see these days are not long-term
businesses. Their only hope for success is to be bought out by a bigger
company, which doesn't happen very often.

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hello_moto
Doesn't matter.

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18pfsmt
If you are scared to fail, go maintain Home Depot's website and iPhone app.
It's ok not to be an entrepreneur.

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18pfsmt
Do the down-voters care to add any actual constructive criticism of my claim?

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apu
Yes: your contemptuous tone is not appreciated. From the guidelines:

 _Be civil. Don't say things you wouldn't say in a face to face conversation._

Would you say your exact sentence to someone who works at a big company or a
research lab, someone who chose not to do a startup?

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18pfsmt
"Would you say your exact sentence to someone who works at a big company or a
research lab, someone who chose not to do a startup?"

Absolutely. Wynkoop Brewery (Denver, CO), every Friday happy hour (well, ~85%
of the time).

