Statistics

Startup Failure Statistics (2026)

Updated · Team Fonda

Short answer

In the US, 78.9% of private business establishments that opened in the year to March 2025 were still open in March 2026, and 47.2% of those opened in the year to March 2021 were still open five years later, according to the Bureau of Labor Statistics. Among venture-backed startups that shut down since 2023, CB Insights found that 70% cited running out of capital and 43% cited poor product-market fit.

Key takeaways

  • About one in five new US employer establishments closes within its first year, and roughly half are gone by year five (BLS, March 2026 data).
  • The first year is the most dangerous. Of the businesses that reached their ninth year, 92.9% made it through the tenth.
  • The claim that 90% of startups fail is not what the official US survival data shows for new businesses in general.
  • Survival differs by industry: five-year survival for the 2021 cohort ranged from 41.4% in information to 56.3% in accommodation and food services among the sectors checked here.
  • For venture-backed startups, running out of money is usually the last step, not the root problem. Poor product-market fit is the next most cited reason, at 43% (CB Insights).

What percentage of new businesses fail?

The most reliable US numbers come from the Bureau of Labor Statistics (BLS), which follows every group of new private-sector establishments from the year they open. Its survival table reports the share still open each March. The figures below are the latest readings, taken in March 2026.

Read the other way round, about one in five new establishments closes in year one, about half close within five years and about two thirds close within ten. That is a long way from the often-repeated line that 90% of startups fail. None of the sources used for this page gives that figure for new businesses in general.

What these numbers count

BLS builds this series from state unemployment insurance records, so it covers establishments that have employees. Its FAQ lists self-employed workers as excluded. The unit is an establishment, meaning one place of employment, so a company with several locations can appear more than once. A closing is recorded when an establishment stops reporting any employment. The data does not record why, and an owner who retires or chooses to stop counts the same as one who ran out of money.

When do most businesses fail?

The risk is front-loaded. The same BLS table shows, for each group of businesses, the share of last year's survivors that made it through one more year. That share climbs quickly with age.

Two things stand out. First-year survival was 79.6% for businesses opened in 1994 and 78.9% for those opened in 2025, so by this measure starting a business has not become much riskier or safer in three decades. The rate does move from year to year: it was 76.3% for businesses opened in the year to March 2022. And a business that gets through its early years faces much better odds each year after. The early period is when you find out whether customers want what you sell, which is why it pays to validate the idea before you spend heavily.

Which industries have the highest failure rates?

BLS publishes the same table for each major industry. The table below compares five sectors using the group of establishments opened in the year ended March 2021, measured in March 2026.

Industry (BLS sector)Five-year survivalSource table
Accommodation and food services56.3%BLS Table 7, sector 72
Retail trade55.2%BLS Table 7, sector 44
Construction52.8%BLS Table 7, sector 23
Health care and social assistance52.1%BLS Table 7, sector 62
All private sector47.2%BLS Table 7, total private
Information41.4%BLS Table 7, sector 51

Establishments opened in the year ended March 2021 and still open in March 2026. Only five of the BLS sectors are shown.

Restaurants are often described as the riskiest business to open. In this data, the sector that contains them (which BLS defines as lodging plus food services and drinking places) survived five years at a higher rate than the private sector as a whole. The information sector, which covers publishing, film and sound recording, broadcasting, telecommunications and data processing, did worse than average. Your own odds depend far more on your market and costs than on a sector average, so use these as context when you write the risk section of a business plan.

Why do venture-backed startups fail?

Official statistics record that a business closed, not why. For reasons, one recent source is a CB Insights analysis published in March 2026. It reviewed post-mortems, founder interviews and shutdown announcements from 431 venture-backed companies that shut down since 2023, and could identify reasons for 385 of them. The four shares it reports add up to more than 100%, so a company can be counted under more than one reason.

CB Insights describes running out of capital as almost always the final cause, not the root problem. The root problems it points to include a product too few people want (product-market fit) and a business that loses money on each sale (unit economics). The same report says two thirds of the product-market fit failures were early-stage companies that never found a market. Money did not protect these companies: the median one had raised $11M, and the median gap between the last fundraise and shutdown was 22 months. This sample covers only venture-backed companies, a small and unusual slice of all new businesses, so do not read these shares as applying to a bakery or a consulting practice.

How hard is it for small businesses to get money?

Cash pressure is not limited to venture-backed startups. The Federal Reserve's 2026 Report on Employer Firms surveyed 6,525 US small employer firms between September and November 2025. It found that rising costs of goods, services and wages was the most common financial challenge, and that reaching customers and growing sales was the most common operational one.

Another 36% received some or most of what they sought, so most applicants got less than they asked for or nothing. If your plan only works when a loan or an investor comes through on time, treat that as a risk and know your runway without it.

What this means if you are starting a business

  • The odds are better than the folklore. Most new employer businesses survive their first year and close to half reach year five. Failure is common, but it is not close to certain.
  • Plan for the first two years above all. That is when closures cluster. Work out how many months you can last with the startup runway calculator, and decide in advance what you need to have proven by the halfway point.
  • Test demand before you build. After running out of capital, the most cited reason in the CB Insights data is a product without a market. Talking to real customers first costs little and tells you early. Fonda's Validate phase has you interview customers before it gives a go, refine or pivot Verdict, and you can get a quick outside view of an idea with the free roast my idea tool.
  • Check that each sale makes money. Write down what it costs to win and serve one customer and what that customer pays you. If the gap is negative, more sales make things worse.
  • Do not count on outside money. Fewer than half of small firms that applied for financing got all of it. Keep fixed costs low until revenue is real, and read how much it costs to start before you commit savings.
  • Treat an industry average as a starting point. Your location, pricing and costs matter more. Size your own market with the TAM SAM SOM calculator.

Frequently asked questions

Is it true that 90% of startups fail?

Not for new businesses in general. BLS data shows that 34.2% of US private-sector establishments opened in the year to March 2016 were still open ten years later, so about two thirds had closed, not nine in ten. None of the sources used for this page gives a 90% figure, and this page did not trace where that claim comes from.

What is the difference between a startup and a small business in these statistics?

The BLS figures cover every new private-sector establishment with employees, from a cafe to a software company. The CB Insights figures cover only companies that raised venture capital. Most new businesses never raise venture money, so the BLS numbers are the better guide for a typical founder.

Do these numbers include freelancers and one-person businesses?

No. The BLS series is built from unemployment insurance records filed by employers, and BLS lists self-employed workers as excluded. A business with no employees does not appear in it. Survival rates for solo businesses may differ, and this page does not give a figure for them.

Does a business closing always mean it failed?

No. The official data records that an establishment stopped reporting any employment, not the reason. An owner who retires or closes a working business to do something else is counted the same way as one who went under. BLS also says it links records across changes of ownership, so a sale is not meant to show up as a closing. The data does not say what share of closings were failures.

How often are these statistics updated?

The BLS survival tables have one reading per year, taken each March, and the latest on this page is March 2026. The CB Insights report is dated March 5, 2026 and the Federal Reserve report March 3, 2026. The figures on this page were checked against the linked sources on November 13, 2026.

Sources

  1. US Bureau of Labor Statistics, Business Employment Dynamics, Table 7: Survival of private sector establishments by opening year (total private)
  2. US Bureau of Labor Statistics, Establishment Age and Survival Data (index of industry tables)
  3. BLS Table 7: Accommodation and Food Services
  4. BLS Table 7: Retail Trade
  5. BLS Table 7: Construction
  6. BLS Table 7: Health Care and Social Assistance
  7. BLS Table 7: Information
  8. US Bureau of Labor Statistics, Business Employment Dynamics: Frequently Asked Questions
  9. US Bureau of Labor Statistics, Industries at a Glance: Information (NAICS 51)
  10. US Bureau of Labor Statistics, Industries at a Glance: Accommodation and Food Services (NAICS 72)
  11. CB Insights, The top 9 reasons startups fail (March 5, 2026)
  12. Federal Reserve Banks, Small Business Credit Survey: 2026 Report on Employer Firms (March 3, 2026)

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