The unfortunate truth is that popular business media often perpetuates myths or half-truths about startups. Understandably, this doesn’t do first-time startup founders any good. In this article, we’ll use 15 surprising startup statistics to help clear things up.
Table of Contents:
1. Surprising Startup Founder Statistics
Myth: the best time to become an entrepreneur is in college, and dropping out is not a bad choice.
Truth: you’ll have a higher chance of success in the second half of your professional life.
The reason for this effect is actually quite simple. More work experience and domain knowledge, a well-developed and powerful professional network, and access to personal capital can contribute a great deal to the success of a venture.
That said, working on an entrepreneurial project straight from college is not a bad idea – this is the best way to learn and will increase your future chance of success. Moreover, a lack of family responsibilities means you’ll be able to commit more time to your project.
That said, dropping out is a smart idea only once your project is showing indisputable signs of traction. Dropping out preemptively is usually a bad move – 90% of startups fail, and you’ll more than likely have to find a real job.
- 95% of entrepreneurs have at least a bachelor’s degree. (EMK Foundation)
- 39 is the average age of tech startup founders. (Ewing Marion Kauffman Foundation)
- A 2018 study shows that a 60-year-old entrepreneur is 3 times more likely to build a successful startup than a 30-year-old founder. (Source)
- Entrepreneurial experience is very important: founders with previous entrepreneurial success have a 30% chance to succeed with a new venture. Founders who have previously failed have a 20% chance to succeed, and first-time founders just have an 18% chance of success. This means that a successful entrepreneur is almost twice as likely to succeed as a first-time founder, but even a successful entrepreneur will most likely fail. (source)
- Funding from experienced VCs increases the chance of success, but only for entrepreneurs without a successful track record. (source)
Myth: entrepreneurs are constantly over-worked.
Truth: you can be an entrepreneur with a work-life balance, but putting more
effort increases your chance of success a great deal.
One of the things that attract some entrepreneurs is the ability to set their own working hours.
For example, almost half of the 673 respondents of a survey about SaaS founders
(with projects that are successfully generating revenue) are working on their
business part-time.
It’s entirely possible to dedicate a small amount of time to a business and to make it worthwhile. That said, this approach can give you a good supplementary income, but it is unlikely to result in a unicorn. True innovative high-growth startups usually require unimaginable efforts to get off the ground.
- A significant number of founders (almost half of the respondents of the SOIS report) work less than full-time.
- There is a strong correlation between hours worked by a founder and revenue growth (SOIS report 2021)
Myth: the important thing for startup success is a single visionary founder.
Truth: two or three co-founders are much more likely to create a successful business than a solo-founder.
A single founder = a single point of failure. This increases the riskiness of an already risky venture. Moreover, two heads are better than one – a startup requires a lot of work and a lot of smart decisions. Having a partner can help in both aspects.
That said, there is a point at which there are too many cooks in the kitchen. Empirically, this point seems to be above 4 founders.
- More founders correlate with higher growth, but the trend reverses with 4+ founders (SOIS report 2021)
2. Suprising Startup Funding Statistics
Myth: step 1 is to have an idea. Step two is to fundraise.
Truth: the vast majority of startups are self-funded.
Fundraising is very hard and empirically you are unlikely to be successful. You can vastly increase your chances if you make your business into an attractive investment by proving your concept and gaining traction. This implies, however, that you’ll be able to bootstrap through the early startup phases.
- The most popular financing method for startups costs in 2018 was personal funds at 77%. (Lendio 2018 survey)
Myth: the less money you want to raise, the more likely you are to raise it.
Truth: startup investors are happy to pay a premium for high-quality businesses.
Startup investment is concentrating on the more popular, less risky investments. VCs are mostly investing in growth-stage projects, which is pushing the average value of each round. The amount that you are raising during the round is becoming less of a determining factor compared to the apparent proven potential of your business.
- (That said, requiring a small funding amount can make it much easier to fundraise from friends and family.)
- The average Series A in 2010 was $4.9 million. By 2017, it reached $12.1 million. (TechCrunch)
- Individual venture capital firms receive more than 1,000 proposals a year and are mostly interested in businesses that require an investment of at least $250,000. (Money Crashers)
3. Surprising Startup Industry Statistics
Myth: all it takes to succeed is a great idea.
Truth: there is no way to know if your idea is great until you test it.
And you better do it fast and cheap, because you’d usually have to go through at least a couple of iterations and even pivots before you find the right product-market fit.
Moreover, the whole startup field is becoming more sophisticated. The availability of learning resources and organizations that support entrepreneurs means that the bar is constantly moving higher. If you want to set yourself apart, you’ll have to do a great job of validating your ideas and gaining traction. This is especially important if you hope to attract investors, as you would be in direct competition with other startup projects which are very likely to be making the right moves.
- In 2021, only 16% of SAAS founders didn’t validate their idea before building. In 2020 this number was 30%.
Myth: the dinosaurs in the traditional business fields are unaware of the potential of startups.
Truth: digital, disruptive tech is mainstream.
During the dot-com bubble, tech startups were on the fringe. Nowadays, the tech giants are some of the most powerful entities on the planet.
The power of scalable, disruptive technology is on the mind of everyone. This is especially true after COVID accelerated startup trends that were already gaining significant momentum even before the effects of the pandemic, which forced a lot of people to interact with the world digitally.
Digital is the new normal. This means that there are a lot more funding and partnership opportunities than before for high-quality digital tech projects, but it also means that the competition is insanely high. Because of this, it pays dividends to enter the arena prepared with the right knowledge and partners. This is our main goal here at VXP – to partner up with new startup projects and provide them with everything needed in order to succeed.
- About 80% of financial institutions implemented a fintech partnership. (McKinsey Panorama Report)
- About 31% of commercial real estate investors plan on investing in proptech companies and 26% plan on partnering with protech companies. (Statista)
- A new dawn of digitization – companies are 3x more likely to conduct 8 in 10 customer transactions digitally. (McKinsey)
- Ecommerce penetration reached a whopping 33% by the mid of 2020, against a forecast of 24% by 2024! (McKinsey)
4. In Summary
If you want to succeed as a startup founder, you need to act intelligently. Investors and founders are becoming more sophisticated, and the efficiency of the whole startup process is raising. The opportunities are much more numerous than they were in earlier years, but success and capital are concentrating in the hands of the outstanding projects, rather than the average ones.
To succeed, you need a good idea and great domain knowledge, but you also need proficiency in the actual process of running a successful startup.
