Quick Answer
How many startups are created each year?
Globally, 305 million startups are created every year.
Startups are known for their ultra-high mortality rate. On average, only about 10% of all startups survive and become full-fledged business enterprises.
The remaining 80% to 90% find themselves in the blackhole containing all other startups that unfortunately did not survive this highly competitive industry.
Despite this, many aspiring entrepreneurs are still willing to go to lengths to see how far they could go.
This is why the number of startups created annually just keeps building up year after year, making it among the fastest-growing trend in the business world today.
How Many Startups are Created Each Year?
You might not believe it, but 305 million startups are created each year, worldwide.
Although hundreds of millions of startups sprout every year, not all make the cut. Moreover, it takes so long before these businesses become profitable.
The first few years undergo “birthing pains”, trying to carve their own path, find their niche, and build a business strategy.
Of all these new businesses, the United States is home to the highest number of startups today.
The country is home to more than 70,000 startups ranging from tech and gaming to blockchain and artificial intelligence.
Distribution of Startups by Industry
Although startups build ideas from practically anything, fintech remains the most popular industry in startup categories worldwide.
Well, there is no question to this—PayPal was also another “backyard project” before it became the billion-dollar business that it is today.
Consequently, there has been greater attention towards digital banking and digitization, especially among developing countries in the past decade.
This is the exact opportunity that fintech startups want to capitalize on.
Take a look at this data on the distribution of startups worldwide based on industry and their respective percentage of the total.
- Financial technology (FinTech) – 7.6% of all global startups worldwide come from this industry
- Life sciences and healthcare – 6.8% of all global startups worldwide come from this industry
- Artificial intelligence (AI) – 5.0% of all global startups worldwide come from this industry
- Gaming – 4.7% of all global startups worldwide come from this industry
- Advertising technology (AdTech) – 3.3% of all global startups worldwide come from this industry
- Education technology (EdTech) – 2.8% of all global startups worldwide come from this industry
- Clean technology or environmentally-friendly practices and technologies (CleanTech) – 2.1% of all global startups worldwide come from this industry
- Blockchain – 1.5% of all global startups worldwide come from this industry
- Robotics – 1.3% of all global startups worldwide come from this industry
- Cybersecurity – 0.7% of all global startups worldwide come from this industry
- Agriculture technology (AgTech) – 0.6% of all global startups worldwide come from this industry
All About Startup Funding
Startups require a huge amount of cash which requires the need to pique investors’ interest most of the time.
Funding is critical in the ability of the business to get started since most startups are founded by individuals who have little to no entrepreneurial experience, and therefore do not have enough cash to fund their operations.
There are five stages of funding namely pre-seed funding, seed funding, Series A funding, Series B funding, and Series C funding.
Seed and Series Funding
During the pre-seed funding, founders themselves exhaust their money to get the business idea up and running. They may also get the backing of family and friends.
Many startups managed to get by and meet success by just “bootstrapping” or starting their firms with their savings and a little help from their tight-knit circle, without the aid of outside investments.
Seed funding is the start of the real deal. Here is usually where angel investors come in and pledge a couple of thousands of dollars to a million to fund a lucrative business idea.
This comes with a trade-off of having partial ownership of the company.
Lastly, the series funding will help the business grow and survive moving forward.
50% of startups fail after their fifth year in the market that’s why the series funding is important in their ability to survive this high mortality rate.
A Startup’s Quest Towards Profitability
Startups go at a different pace when it comes to reaching profitability. Some rake money faster than others.
On average, these kinds of enterprises take about four years to become profitable.
But to be able to stay in a steady money-making business that does more than just having to pay the bills and salaries of executives could be between 7 to 10 years.
This means businesses need to keep it cool and be patient while waiting to reach this place.
Meanwhile, some of the world’s most successful startups managed to achieve a faster route than average.
Automobile giant Ford only took 5 months to make a profit back in 1903, while Apply Inc attributes its massive success to the blockbuster hit of Apple I and Apple II.
The iPhone-maker reported its first net profit in 1978, just two years after its founding.
Today, Apple Inc is the largest tech company by revenue and is the first publicly-traded firm to hit a $3 trillion valuation.
Facebook Took Five Years Before Turning a Profit
Both Intel and Alphabet Inc took three years to make a profit, with the latter reporting its first profit in 2001, a year after releasing its first advertising program.
But Meta, Facebook’s parent, took a long way towards success.
Originally wanting to become the main platform of communication among university students, Facebook exploded and fulfilled more than what it initially envisioned.
On the other hand, the company turned its first positive cash flow in 2009, only upon opening its social media platform to audience over 13 years old.
Most Profitable Startup Types
For those planning to start their own startups this year, here are the most profitable startup types according to TechCrunch.
- E-commerce – online commerce has experienced massive growth in 2020, at a time when economic movement is limited due to mobility restrictions
- Chrome extensions – platforms that can be installed on Google Chrome to make certain tasks and functions more convenient for users
- Mobile applications – platforms that can be installed on mobile phones to perform certain tasks
- Enterprise software-as-a-service – businesses can use an internet application on demand, as a paid service
- Small to medium software-as-a-service – SaaS for small to medium enterprises
Conclusion
305 million is the number of startups worldwide that are created every year.
Each of these enterprises is competing for investors’ attention to survive the high mortality rate involved in this type of industry.
Out of these millions, only the best startups make it to the top.
It takes a lot of patience, grit, and investment to be considered a disruptive enterprise and do what has not been done by other businesses before.
After all, Apple Inc, Facebook, and Alphabet, among others, did not reach where they are right now if not for the genius of their founders and the people that helped them thrive along the way.
Thanks for reading our article on how many startups are founded each year.
