Monday, January 28, 2013

Failure rates in startups with funding above $1M

According to the Wall Street Journal (Sept 20, 2012):
...findings are based on data from more than 2,000 companies that received venture funding, generally at least $1 million, from 2004 through 2010.
About three-quarters of venture-backed firms in the U.S. don't return investors' capital, according to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School.
There are also different definitions of failure. If failure means liquidating all assets, with investors losing all their money, an estimated 30% to 40% of high potential U.S. start-ups fail, he says. If failure is defined as failing to see the projected return on investment—say, a specific revenue growth rate or date to break even on cash flow—then more than 95% of start-ups fail, based on Mr. Ghosh's research.
In part, startup incubators allow companies fail fast without getting a lot of VC money.

tags: business, technology, market, entrepreneurship, startup

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