But it’s worse than that. Even if you knew the failure rate specifically of venture-funded tech startups, that leaves out a ton of important info. Consumer startups probably fail at a higher rate than B2B startups. Single-founder startups probably fail more than 2-founder ones.
OK, so what you really need to do is look at the failure rate of 2-founder B2B startups, right?
The problem is that nearly all the relevant information about whether your startup is going to succeed isn’t encoded in your membership in some legible subgroup like that.
Instead, it’s encoded in things like: How likely are you to break up with your cofounder? How good will you be at hiring? How determined are you to never ever give up?
Outside view fans anchor far too strongly on the base rate, and don’t update enough on inside views like these.
“If only 10% of startups succeed, how could I claim a 50% chance? That’d imply I’ve observed evidence with a 5:1 odds ratio! How presumptuous!”
(It’s rarer for startups than for names, but still.)
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According to an answer on Quora, “the real percentage of venture-backed startups that fail—as defined by companies that provide a 1X return or less to investors—has not risen above 60% since 2001” (2017 source). Other Quora answers I saw claimed numbers as high as 98% (on different definitions, like ten-year “failure” (survival?) rate), but didn’t cite their sources.
I don’t have a cite handy as it’s memories from 2014 but when I looked into it I recall the 7 year failure rate excluding the obvious dumb stuff like restaurants was something like 70% but importantly the 70% number included acquisitions, so the actual failure rate was something like 60 ish.
It’s apparently not true that 90% of startups fail. From Ben Kuhn:
According to an answer on Quora, “the real percentage of venture-backed startups that fail—as defined by companies that provide a 1X return or less to investors—has not risen above 60% since 2001” (2017 source). Other Quora answers I saw claimed numbers as high as 98% (on different definitions, like ten-year “failure” (survival?) rate), but didn’t cite their sources.
I don’t have a cite handy as it’s memories from 2014 but when I looked into it I recall the 7 year failure rate excluding the obvious dumb stuff like restaurants was something like 70% but importantly the 70% number included acquisitions, so the actual failure rate was something like 60 ish.