Authors around the World publish tons of books on how to create your startup and how to scale it to a multi-billion company. People read these books, praise them and try mimicking the strategies written there. Even courses train you to present yourself in front of investors and get the next significant investment for your startup. All of these books give hope and motivation to the current and future generation of entrepreneurs.
Still, year after year, we see the same trend – 90% of the starting companies will fail until their 2nd year. Or in more human-readable wording – 90% of the new companies can not reach the sustainable revenue phase, and their bubble burst until their 2nd year. At the same time, 97% of the latest companies fail until their 5th year. This statistics is quite sad because it shows that all the courses and books on the World are not enough for your startup to succeed. You need experience and first point of view knowledge of how things are working and what is necessary for success.
Many people do not realize how difficult it is to create a startup. It would help if you had lots of experience to make it happen. 99% percent of the population on our planet do not have this experience, and to gain it, they need to fail. And to fail hard and often. Let’s analyze why 90% of the startups fail until their second year of running.
- The average length of an IT project is between 18 and 24 months. If you do not manage to scale your product for this period, then, most probably, your business model does not work, and it will not scale at all.
- The average person has some resources put aside for this period. If you are trying to make a bootstrapped business, this period is your lifeline to achieving any progress.
- In case you manage to gain traction for your startup idea. Many people do not know how to scale it out and make this traction a sustainable business. One of the biggest problems is customer support after you manage to get the initial traction.
- Let’s analyze the stats about startups’ failure. 90% of the startups fail until the second year. It directly says – you will need, on average, nine failures to pass the second year of startup life. If we multiply this number to 18 months (average lifetime of one IT project), then we receive 9 * 18 = 162 months or almost 14 years of working in startups to make one of them successful. That’s why most of the time, one startup needs at least two or three co-founders with enough experience in startups to scale.
In conclusion, making a startup is hard. It is not for everyone, and many people lost time and money trying to create one. Without the proper experience and coaching, the failure of startups will continue. From my personal experience working in startups, some of them, relatively underfunded; if you pass the second year, your chances of success improve dramatically. And yes, the SAS drop rate is, on average, around 94%.