RIP Reports – Worldwide Failed startup trends

Let me start this post by making a simple statement. By the time I would finish writing this post, according to latest startup trends, around 11,000 new startup business would get added to this world. Must be wondering how I found that number?

According to a massive research startup study done by Global Entrepreneurship Monitor– around 472 million entrepreneurs worldwide attempting to start 305 million companies, approximately 100 million new businesses (or one third) will open each year around the world.

reynoldsInterestingly, Dr. Paul D. Reynolds, Director, Research Institute, Global Entrepreneurship Center also says,

” The developing countries of Asia and Latin America are far ahead of Europe in starting new businesses, according to a recent survey of global entrepreneurial activity. But few start-ups have the potential to make an impact on jobs and growth, and a negligible number benefit from venture capital, with the vast majority reliant on informal funding. The 2002 annual survey by the Global Entrepreneurship Monitor (GEM) was carried out across 37 countries representing 92% of world GDP. It finds that 286 million people, 12% of the workforce in these countries, are engaged in starting or running a new business, implying a global figure of about 460 million. “We were quite shocked by how high the index is in the developing countries,” admits Paul Reynolds, the GEM project co-ordinator. “Only now do we have a fuller understanding that half of the people in many developing countries are doing it out of necessity because they cannot find work, and that is what drives the rate up so high.” 

Every now and then we keep seeing these lists on buzzfeed or twitter around “17 coolest startups that can change your life” (like this one) and I’m sure a lot of you feel wow about the whole concept of startups. But let me spoil your party, most of these startup companies typically die around ~20 months after their last financing round and after having raised $1.3 million.

Failed startup Companies By Sectorfinal

  • 55% of failed startups raised $1M or less, and almost 70% companies died having raised less than $5M overall.  Not a big surprise. Companies at the earliest stages are the most vulnerable due to limited financial runway, immature products and businesses and general uncertainty about whether the market needs what they’ve built.
  • In each year since 2010, 70% of all dead tech companies have been in the internet sector. This is hardly a surprise as within tech, a majority of funding and deals has gone to the internet sector and so it would follow that the sector would have the largest proportion of dead companies.  The % of companies dying within the internet sector has stayed relatively range bound over the last several years as well.

On his many failed experiments, Thomas Edison once said,

I have learned fifty thousand ways it cannot be done and therefore I am fifty thousand times nearer the final successful experiment.

Well, it seems a lot of our modern day entrepreneurs have taken that quote to their hearts.

The rate at which startups are failing is quite incredible. Media, quite literally has made the whole idea of startup funeral extremely cool. It is hilarious (even bizarre) that the failed entrepreneur wants to grab the same attention like a war hero. The irony however, is that the media (especially the social media) is happily obliging to do it. Public post mortem of a failed Startup seems to have become a general startup trends in the business circles. A lot of professionals find it intellectually stimulating to visit the #RIP sessions of the startups. 

Dead_startup_Funding_Raised

 

Dead_startups_Time_Since_Funding

According to CB Insights report:

  • 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.

But the question which is bugging me continuously is,

Why do so many startups fail? 

Typically, there could be hundreds of possible reasons for a failed startup like:

  • lack of strong value proposition
  • high risk low return business model
  • longer sales cycles
  • non scalable, non profitable business

and many, many more. You could actually read about reasons of startup failure all around the web.

startups_failed_industry_Rankings

 

According to CB Insights startup trends,

“Death is not specific to a particular type of sector or industry. In fact, the companies on our dataset represent a fairly diverse set of subindustries.”

Interestingly, in the following Ted Talk, Clara Brenner, Co-Founder of Tumml talked about why a lot of social startups face such high failure rates.

She has mentioned about the importance of seed funding & how it needs to be utilized in a startup.

Also, the relevance of Impact Investors to Urban Innovation startups can be co-related with the importance of finding the right investor that matches your company’s vision. 

Finding a right investor for a startup is nothing short of doing matrimony match making. A lot of the startups fail even after getting several rounds of seed funding because the investor does not show enough trust or faith in the founding team’s vision.  

Digital Trends for Automotive in 2015

According to a survey conducted by Dimensional Research, an overwhelming 90 percent of respondents who recalled reading online reviews claimed that positive online reviews influenced buying decisions, while 86 percent said buying decisions were influenced by negative online reviews.

 

has-reading-online-reviews-impacted-purchase-decision

 

Without doubt, we can now say that the conventional purchase lifecycle has changed (and continuously changing) with the ever increasing dominance (& relevance) of social media in our daily lives.

For those who are new to digital marketing, here’s a simple video that compares the purchase lifecycle back in 1990s vs 2014.

Unlike mediums like television or radio, internet audience can stumble upon your brand / product from anywhere. In today’s complex digital environment, there are more than 24 possible touch points that any auto buyer can go through in order to make a purchase decision. It would not be an exaggeration to say that the fortune of a brand gets decided somewhere between those never ending twitter feeds & Facebook timelines.

24 research touch points for auto purchase

24 research touch points for auto purchase

Take an example of car buying which is one of the most dynamic purchase life cycle concept in the modern day marketing.

Last year, Google Insights released a report according to which In-market auto shoppers are doing their digital homework. Auto video research is on the rise and mobile usage has increased 35% year over year. ( Read how digital drives auto shoppers in stores)

In this Google infographic, you can learn some of the digital automotive trends showing how consumers use the web to search for and buy cars.

Google_Auto_Trends_Infographic_2014

 

Key Digital Automotive Trends from the above infographics:

  • With more than 48% of car dealer search queries are now coming from mobiles, smartphone is increasingly becoming an important platform using which auto shoppers are doing their research.
  • Digital Search & Product Reviews are becoming an integral part in the auto purchase lifecycle.
  • Auto shoppers checking for product videos & video reviews is on the rise year on year.
  • Online Video is becoming most critical content piece in the entire buying decision.