Dead Startups

In the spirit of Megan McArdle’s book The Upside of Down whose message is that failure is what makes success possible, here is an analysis of dead startups from 2010-2013 by CB Insights.

The main takeaways from CB Insights:
-In each year since 2010, 70% of all dead tech companies have been in the internet sector.

-55% of failed startups raised $1M or less, and almost 70% companies died having raised less than $5M overall.

-While the dead companies on our list raised $11.3M on average, the median funding raised which is a better measure in this case was $1.3M.

-The average company dies ~20 months from its last funding round in the absence of additional funding or acquirers.

Since we don’t know the reason why these failures occurred, we can at least take away the importance of the startup to continually be in the mode of raising money. The next interesting issue to consider is the likelihood of follow up financing. Based this analysisfrom Red Point, the probability peaks at 9 months since the previous raise regardless of round, size or industry.