7 Surprising Stats About Modern Startups
What constitutes a startup? Who runs them? What causes most startups to go south? What factors matter the most during development? Some of the ideas we have about these subjects contradict each other. Depending on what founders you’re observing and what experts you’re listening to, the answers can be entirely different. Below are some general trends about the majority of startups that may surprise you. If you run or work at a startup, some of these may even cause you to reconsider your hiring process.
Old folks rule.
Today’s tech and business culture paints a picture of young, bold startup founders fresh out of college. Famous young entrepreneurs like Mark Zuckerberg are fawned over with attention and front-page features. But this focus has more to do with our cultural obsession with getting rich quick while we’re young, and less to do with the reality of today’s startup landscape. Older, more experienced founders are still dominant. It’s common for founders to be in their 30s, 40s, and even older.
What’s even more puzzling is the reported decline in founders under age 30. There are fewer 20-something founders than there have ever been in the past 20 years. This finding reflects the reality of millennials’ financial struggles rather than the false perception of young people regularly striking it rich.
Another demographic you might be surprised to find in the startup world is immigrants. Studies showed one-third of venture-backed companies from 2006-2012 were founded by at least one immigrant. Despite the struggles that often come with immigration (language barriers, poverty, education gaps, double marginalization), many immigrants are taking advantage of opportunities. Pakistani businessman Shahid Khan became one of the richest people in America after founding an auto parts supplier. As co-working spaces and startup incubators pop up around the world, individuals in developing nations are more equipped to build solid foundations for their startups.
Most products tank.
If you’re somewhat knowledgeable about startups, it’s probably no surprise that many startups fail. However, the fact that a whopping 90 percent of new products fail is a brutal reminder of just how difficult it is to succeed in business.
This stat, drawn from The Startup Owner’s Manual by Steve Blank & Bob Dorf, has sparked continuous analysis of successful startups and what sets them apart. Everything from marketing strategies to the number of co-founders has been said to have an impact.
Growth is everything.
What makes a startup a startup? Is a small business the same as a startup? According to Paul Graham, programmer, investor, and co-founder of Viaweb, the only factor that defines a startup is its a potential for rapid growth. Thus a major determinant of a startup’s success is how quickly that growth occurs. One study showed “companies with growth rates greater than 60 percent upon reaching $100 million in revenues — which McKinsey refers to as “supergrowers” — were eight times more likely to reach $1 billion in revenues than those whose growth was less than 20 percent.”
Education doesn't matter.
You might expect those with the highest level of education to perform best in business. However, there is little evidence of this. One study showed just 37 percent of startup owners had bachelor’s degrees. 28 percent had earned technical or trade school degrees, and 10 percent had only high school diplomas. The percentage with master’s degrees was only 17 percent, showing that formal education doesn’t necessarily determine a founder’s propensity for entrepreneurship.
Friends and family are a risk.
When trying to pinpoint the most common factors in startup failures, one study found a surprising and somewhat depressing trend: co-founding with friends/family can turn ugly. Unless you’ve already collaborated successfully in a professional setting, co-founding with friends/family members is a shot in the dark. You don’t know if you’ll agree on different business decisions — especially the financial ones. Once a serious dispute occurs, you are not only terminating a business relationship, but a personal one as well.
New startups create more jobs.
Of course startups create more jobs, but the surprising piece is that newer startups create far more jobs than older, more established startups. A study found that “on average, one-year-old firms create nearly one million jobs, while ten-year-old firms generate 300,000.” This goes against the common assumption that startups have a greater impact on job creation as they mature.