They say 90% of startups fail, but why is that? We'll delve into the main reasons why startups fail and how to prevent it in this blog.
Businesses have always needed to be resilient, especially startups, but today’s business landscape is not for the fainthearted. With business costs rising and marketplaces constantly changing, adaptability and drive are key for any startup. But at some point, all startups think: ‘Will we succeed or fail?’
But why do most startups fail? And how can startups succeed and beat the dreaded 90% club? In this blog, we’ll delve into how many startups fail each year as well as the reasons, providing you with our top tips to help prevent startup failure.
How Many Startups Fail Each Year?
Research firm Beauhurst has reported that in quarter four of 2024, 198,046 businesses closed their doors; this number is higher than during COVID-19 and the 2008 financial crisis.
Despite this, entrepreneurial ambition remains strong, and over 846,000 businesses were registered in 2024.
What Percentage of Startup Businesses Fail?
It’s an exciting yet daunting time to be a business, let alone a startup. And we’ve all seen the infamous statistic that 90% of startups fail overall, with 10% not getting through the first year of business.
Why Most Startups Fail
1. Lack of Finance, Funding and Investors
Problem: As we’ve seen from Beauhurst’s research, many businesses are closing, partly due to the rising costs associated with running a business. So, to be a startup in 2025, you need to stay on top of your finances.
It’s important to recognise that startups often struggle to access funding and investors. It’s a competitive market, and if you’re relying on funding that doesn’t come through without a backup plan, your startup will fail.
Solution: Plan ahead as much as possible, keep your ears to the ground about funding opportunities and grasp every chance you get to apply for investments. And don’t be afraid to pinch a few pennies; yes, it’s nice to buy all new equipment and use high-end services and programmes, but ask yourself: ‘Do I really need this?’, and you’ll find you save a lot in the long run.
Read more in our blog about why funding is important for startups, and why not join us at our event ‘Meet the Funder: Ruby Godrich’ as part of our Meet the Funder series. You’ll gain valuable knowledge about the Investment Fund for Wales and Ruby will give her insight into investing.
2. Poor Market-fit and Demand
Problem: What is market-fit? Well, first we need to answer the question: ‘Why do we start a business?’ Because we think we have something unique to offer or that we can do something better than what’s already been done. However, passion will only get your startup so far.
A common trap startups often fall into, and ultimately become part of the reason why most startups fail, is because they don’t carry out enough product and market research.
Solution: It takes a lot of time and dedication, but research is a crucial step. Yes, some luck does come into play with demand, depending on what’s going on in the marketplace, but it’s a rookie mistake to go in blind without understanding your customers and their needs.
We’ve delved deeper into what product market-fit means in another one of our useful blogs.
3. Power Plays and Petty People
Problem: Finding the right people can be incredibly difficult, and it can take years to build a team with not only the right skills, but who are also compatible with your business and each other. This doesn’t just go for employees; finding the right investors, mentors and support network is just as important.
Think of your startup as a football team; if the team won’t pass the ball to one another, chances are a goal isn’t going to be scored. So, your team needs to work well together as a unit; if they start having petty disagreements, your startup will soon crumble.
Solution: Fostering a positive culture from the start is essential. Chances are you’ll hire someone who doesn’t quite get on with everyone; what’s important is that you quickly find out who is causing the challenging environment.
To resolve this, try fostering open communication so rumours don’t spread and continue the negativity. Utilising surveys or regular team meetings will help combat this issue. Everyone is different, and not everyone needs to be best friends, but if your team can communicate well, this will greatly help your startup.
You can find out more in our blog ‘What is Accountability in the Workplace’ where we discuss how to foster a positive and sustainable workplace culture. Or if you want to hear about this topic first-hand, join us and guest speaker Bernie Davies for our ‘Mastering DIversity with Bernie Davies’ event. In this final session, Bernie will delve into fostering an inclusive and diverse workplace, based on her book, We Go Together or Not At All.
Having a diverse and inclusive workplace fosters creativity and positive working relationships.
4. No Clear Strategy
Problem: Strategy is just as important in year one as it is in year ten. A strategy helps you to create goals and put objectives in place; it guides your startup and your team to become a success. Without it, your startup will lack focus, direction and motivation. As a founder, it’s your responsibility to ensure everyone knows your goals for the business; don’t assume everyone knows what’s going on in your mind.
Solution: Similar to the problematic people solution, making sure to have regular meetings and fostering open and clear communication is vital; without it, it is one of the main reasons why most startups fail. Letting your team know your plans and aspirations will help them to reach those goals with you. And don’t forget, there’s a reason you hired them, chances are they will be able to add and develop your strategy month on month and year on year as your startup grows.
We have a wide range of resources on offer to help startups build their different strategies; however, your launch strategy is probably one of the most important ones, especially when trying to avoid being in the 10% first-year failure statistic. Find out how to get your startup off the ground in five easy steps in our useful guide.
Want to be inspired by some Startup leaders? Join us for our ‘Founder Academy Showcase Day’ where you’ll get to hear from the latest cohort of tech entrepreneurs as they share what they’ve built, what they've learned and where they’re headed next. You can even sign up to be part of our next Founder Academy cohort. Get in touch and we can tell you more about this innovative programme.
5. Staying Adaptable
Problem: If we’ve learnt anything from Beauhurst’s research, it’s that anything can happen to anyone, including your startup, your marketplace and your customers. Although we’ve placed a lot of emphasis on having a strategy and plan, sometimes things can get in the way, such as costs increasing, a change in the market or an essential team member leaving. What’s important is how you react in these uncertain times. If you can’t adapt, your startup will sink.
Solution: You need to have the entrepreneurial mindset, which means staying up to date with what’s happening both inside and outside your startup. Keep on top of market trends, don’t be afraid to change a process if it’s not working, and stay agile at all times. Startups that can face a challenge head-on will be more likely to beat the 90% failure rate.
You might now be wondering: ‘What is the entrepreneur mindset?’ Well, it’s all about being a good leader, and we have five useful tips on how to be an innovative leader in our blog.
Staying adaptable will ensure you can face challenges head-on.
Those are the five main reasons why most startups fail; it’s not a definitive list, there are countless reasons why startups fail, but hopefully these problems and solutions we’ve provided will help you with your startup.
How Tramsed Tech Can Help Your Startup
As we can see, there are a lot of things to think about when running a startup, and knowing why most startups fail is only part of the battle. Having a supportive network can alleviate the pressures of running a startup, and that’s a hand we can offer.
At Tramshed Tech, we offer an extensive range of programmes for startups to utilise to get them off the ground. Our focus ranges from AI use, investor readiness, founder support and much more. And if you’re a new startup, our Startup Academy is the perfect place to meet like-minded entrepreneurs and gain valuable experience.
Here’s our top five reasons why you should join our Startup Academy.
Join us at Tramshed Tech Palace Swansea.
Did you know we’re also a coworking space? If being surrounded by creativity and innovation inspires you, your startup will thrive in one of our spaces. With a range of locations, including Cardiff, Barry and Newport, our spaces can work for anyone.
And if you’re a Swansea-based business, you’re in luck; we’re opening a new hub in Swansea and are hosting an open evening event to show what the space has to offer. Interested? Join us at the event to find out more.
Or maybe you just want to book out a meeting room or the space for an event, we can accommodate that too.
Whatever your startup needs, we’re here to help.
Written by Lois Ferns on behalf of Tramshed Tech.
