Roughly 90% of innovative startups fail. For all new US businesses, 2024 Bureau of Labor Statistics data puts first-year failure at 20.4%, rising to 49.4% at five years and 65.3% at ten. This post covers startup failure rate statistics for 2026: survival by year, the reasons startups shut down, industry and tech breakdowns, and venture-backed outcomes.
Startup Failure Rate Statistics — TL;DR
The headline numbers measure two different groups. The 20.4% figure tracks all registered businesses; the 90% figure applies only to scalable, innovative startups.
- 20.4% of new US businesses fail in year one, 49.4% by year five, 65.3% by year ten (BLS, 2024).
- About 90% of innovative startups fail over their lifetime (Startup Genome).
- No market need (42%) and running out of cash (29%) cause 71% of startup shutdowns (CB Insights).
- 75% of venture-backed startups never return cash to investors (Shikhar Ghosh, Harvard Business School).
- Only 1% of startups reach unicorn status, and 0.05% ever raise VC funding.
The gap between 20.4% and 90% is not a contradiction. The BLS counts every new business, including traditional shops with steady local demand. The 90% reading isolates high-risk ventures chasing product-market fit. Many of the latter run from home offices, and a well-organized workspace is one of the few variables a solo founder fully controls.
What Percentage of Startups Fail in 2026?
2024 BLS Business Employment Dynamics data covers all new US businesses, not only tech startups. Roughly one in five does not survive year one.
Failure climbs with age. By year ten, almost two-thirds of businesses have closed, though that count includes voluntary closures, acquisitions, and pivots, not only insolvencies.
| Time Period | Failure Rate | Survival Rate |
|---|---|---|
| End of Year 1 | 20.4% | 79.6% |
| End of Year 2 | ~30% | ~70% |
| End of Year 5 | 49.4% | 50.6% |
| End of Year 10 | 65.3% | 34.7% |
| Innovative / scalable startups | ~90% | ~10% |
| Reach unicorn status ($1B+) | Only 1% succeed | — |
Source: U.S. Bureau of Labor Statistics, 2024; Startup Genome Project; CB Insights
The BLS reports first-year survival ranging from 74.9% to 87.5% by industry. That spread widens to 24.5%–50.5% survival by year ten, based on Commerce Institute analysis of 2024 BLS data.
Why Do Startups Fail? Top Reasons
CB Insights analyzed 483 startup post-mortems. No market need led at 42%, ahead of running out of cash at 29%.
The two top causes together account for 71% of cited shutdowns, a split that has held across CB Insights cohorts since 2019. Cash exhaustion is often the symptom; weak product-market fit is the underlying cause.
| Reason for Failure | % of Startups Citing | Category |
|---|---|---|
| No market need | 42% | Market |
| Ran out of cash | 29% | Finance |
| Wrong team | 23% | Team |
| Outcompeted | 19% | Competition |
| Pricing / cost issues | 18% | Finance |
| User-unfriendly product | 17% | Product |
| No business model | 17% | Strategy |
| Poor marketing | 14% | Marketing |
Source: CB Insights “483 Startup Failure Post-Mortems,” 2024
The “wrong team” cause shows up in 23% of post-mortems, which is why co-founder fit and hiring matter early. Distributed teams now run from technical founders’ home workspaces as often as shared offices, and disciplined remote work routines shape how fast small teams ship.
Tech Startup Failure Rate Statistics
Tech startups fail faster than the broad average. 63% close within five years, against the all-industry rate of 49.4% over the same window.
Revenue milestones thin the field further. Only 28% of software and online-services companies reach $100 million in revenue, and 97% of tech startups never reach $1 billion.
| Technology Metric | Rate / Figure |
|---|---|
| Tech startups failing within 5 years | 63% |
| Software firms reaching $100M revenue | Only 28% |
| Tech startups failing to reach $1B revenue | 97% |
| High-growth firms unable to sustain growth | 85% |
| Fintech startups globally (2024) | ~30,000, up from 12,200 in 2019 |
| Global VC funding, Q1 2025 | $113 billion, highest since 2022 |
| US bankruptcy cases filed (2024) | 517,308 (+14.2% from 2023) |
Source: BLS and CB Insights data, 2025; RevenueMemo citing court bankruptcy filings, February 2026
Of roughly 3,000 companies analyzed, only 17 reached $1 billion in revenue as independent firms. Global venture funding hit $113 billion in Q1 2025 and about $91 billion in Q2, easing the cash-exhaustion risk that drives 29% of shutdowns. Many of these bootstrapped teams build from home offices before raising a round.
Startup Failure Rate Statistics by Industry
Survival varies sharply by sector. Agriculture, forestry, fishing and hunting record the lowest first-year failure rate at 12.5%.
The information industry posts the highest ten-year failure rate of any BLS-tracked sector. Low entry barriers raise competition density, and most high-risk innovative startups sit inside it.
| Industry | Year 1 | Year 5 | Year 10 |
|---|---|---|---|
| Agriculture, forestry, fishing | 12.5% | 33.8% | 49.5% |
| All industries average | 20.4% | 49.4% | 65.3% |
| Technology (5-year) | — | 63% | — |
| Information industry | Above average | Above average | Highest |
Source: BLS 2024 via Commerce Institute, November 2025; tech data via BLS / Embroker compilations, 2025
Venture-Backed Startup Failure Rate Statistics
Venture funding reaches almost no one. Only 0.05% of all startups raise VC money, so these figures apply to a narrow group.
Among those that do raise, 75% never return cash to investors, and investors lose their full stake in 30% to 40% of cases, per Harvard Business School lecturer Shikhar Ghosh using a dataset of 2,000 venture-backed startups.
| Venture-Backed Metric | Figure |
|---|---|
| Never return cash to investors | 75% |
| Investors lose entire investment | 30%–40% of cases |
| Startups that receive VC funding | 0.05% of all startups |
| First-time founder success rate | 18% |
Source: Shikhar Ghosh, Harvard Business School, cited in WSJ; Fundable
UK data points the same way on the upside. Startups made up 46% of total insolvencies in 2024, the first reading below 50% in a decade, against a ten-year average near 60%, per PwC analysis. Record company formations raised the denominator while startup insolvencies grew more slowly. Founders running lean from a home-based setup keep burn low while testing demand.
FAQs
What is the startup failure rate in 2026?
About 90% of innovative startups fail overall. For all new businesses, 2024 BLS data shows 20.4% fail in year one, 49.4% within five years, and 65.3% within ten years. The two groups are measured differently.
What is the top reason startups fail?
No market need accounts for 42% of failures, per CB Insights’ 2024 analysis of 483 post-mortems. Running out of cash follows at 29%. Together these two causes explain 71% of cited shutdowns.
What percentage of venture-backed startups fail?
75% of venture-backed startups never return cash to investors, and investors lose their full stake in 30% to 40% of cases, per Harvard Business School data on 2,000 startups. Only 0.05% of startups raise VC at all.
How do tech startup failure rates compare?
63% of tech startups fail within five years, against the 49.4% all-industry rate. Only 28% of software firms reach $100 million in revenue, and 97% never reach $1 billion. The information sector has the highest ten-year failure rate.
What was global startup funding in 2025?
Global venture funding reached $113 billion in Q1 2025, the highest quarterly total since 2022, and about $91 billion in Q2. The recovery eased the cash-exhaustion risk that drives 29% of startup shutdowns.
Sources:
https://www.bls.gov/bdm/entrepreneurship/entrepreneurship.htm
https://www.commerceinstitute.com/business-failure-rate/
https://www.cbinsights.com/research/report/startup-failure-reasons-top/
