Silicon Valley startups have much higher failure rate than national average
Answer by Dragana Mendel:
SBA and Kauffman foundation track the number of new companies going in and out of the business. They have been tracking this data for decades and trend is pretty consistent: within five years, 50% of businesses close the door. About 10-15% of business officially close the door per year. By going out of business, I mean closing the corporate registration (Inc, LLC) and not filing taxes any longer. However, this number includes all new businesses (bakers, dry cleaners…) and only about a quarter of all new businesses have intellectual property that we can think of potential hi-growh Silicon Valley type of startup.
So, your question peaked my interest. My initial reaction is that survival rate in Bay area has to be much higher than national average because of easier access to capital. BTW, lack of funding is listed as #2 reason for failure (management inexperience is #1). To my surprise, it’s actually much higher! 75%
Money is not everything, right?
Dragana Mendel, a management consultant for startups, small and medium size businesses develops and executes growth strategies for her clients.