As a founder or entrepreneur who has an idea for a company. It is imperative you get as much knowledge about starting or running a business. This knowledge goes beyond academic qualifications. We are not saying that you shouldn’t get a relevant degree. 

However, a 90% failure rate of startups points to the fact that it takes more than a college degree to start and run a successful business. 

But with the “right knowledge”, you can always improve the chances of your company being among the 10% successful startups.  

So what is the right knowledge? It is akin to having “street smart”, this is knowledge you gain by experience and this explains why many successful entrepreneurs have failed a couple of times before having a successful business. 

Why Startups Fail

Startups have three characteristics that make them highly volatile in nature. These are;

1. They don’t have a well-developed business model
2. They generate little or no revenue
3. They depend on external funding

The period of time within which a business transitions from a startup to an established company is very critical and varies from one startup to another. Some startups may take 5 years while others may take as long as ten years before becoming an established company. 

So the first 5 to 10 years will determine if the business will survive and grow or not. Statistically, 10% of startups fail in the first year and 70% fail within 2 to 5 years (source).  

Among the various reasons why startups fail, the top three reasons according to CBInsights are;

1. Running out of fund/capital
2. Failure to meet the market need
3. Outmaneuvered by the competition

Startup failure rate by industry/Sector (source: Failory)

What the stats above show is the relative success or failure rate of a startup depending on the industry or sector it is involved in. 

From the chart, information based startups have the highest failure rate of 63% while finance insurance and real estate startups have the least failure rate of 42%. 

Regardless of the industry, funding and research go a long way to determine if a startup will survive or not. Let’s take a look at funding and what it entails.

Why Funding/Seed Capital Is The Leading Cause of Failure of most Startups

Most startups are initially funded by the founders using their personal funds. Then if this runs out, the founders are forced to look for other means of acquiring funds for their business. 

This could be friends/family, angel investors or venture capitalists. These funds are referred to as seed capitals. When it comes to starting a company, the first source of funding often comes from personal savings. 

This is easier and preferred by about 57% of business owners according to a recent study. Despite being preferred, self-funding is not a reliable means of funding a startup in the long term. 

In fact, it is estimated that most startup founders run out of their personal savings in the first 3 months of the business. 

When this happens, the next alternative are friends and family members. Some founders also rely on their credit cards or take bank loans. 

However, these sources of funding have their advantages and disadvantages, one of which is that in the event of failure, the founder could run into a huge debt. 

It is clear that for a Startup to stay afloat, it needs a reliable source of funding and this is why many Startups turn to investors and Venture capitalist companies. But while many firms will stop at just providing the required capital, Epirus Ventures takes things a step further.

Here’s what you can do to increase your Startup’s chances of success

You don’t need to fail in order to develop street smarts, and you can avoid being a part of the “failure statistics” by leveraging on the knowledge, resources and experience of companies like Epirus Ventures whose mission is to “empower entrepreneurship” by providing the strategies and resources that your company needs to grow.

If you are eager to start your journey, then perhaps you should visit our website and get in touch with us. We recommend you read our blog posts, as well as follow us on social media (Instagram: Twitter:) to gain free insights on how to grow your business..  

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