October 20, 2014 9:23 am

The Success of Startups

It looks extremely simple and easy from the outside when you see someone with the latest technological innovations and venture capital funding, becoming a billionaire in his 20s. The evidence points to the contrary. It actually suggests that venture backed startups that fail are far higher than what the industry usually shows.

startups iit delhi The Success of Startups

According to research done by Shikhar Ghosh, a senior lecturer at Harvard Business School, about three quarters of venture backed firm in America do not show any return on investments. Venture capitalists claim that, in every 10 startups, only three or four fail completely, another three or four return the original investment and one or two shows substantial returns. The National Venture Capital even stated that 25% to 30% of venture backed business tends to fail.

Mr. Ghosh says the discrepancy is mostly because there is a dearth of in-depth research into the startup failures. His research is based on data from more than 2,000 companies that were recipients of venture funding, normally around $1 million, from 2004 to 2010.

Crowdfunding platforms like Kickstarter and Indiegogo also offer unique chances for people to invest in startups. Kickstarter has launched 117,751 projects out of which 49,920 have been successfully funded, and their current success rate stands at 43.91%. Categories like dance and theatre have the highest success rates of 71.37% and 64.36%, respectively while fashion and publishing lag behind with 29.11% and 32.25%, and from their unsuccessfully funded projects only 11,525 received no funding at all.

According to the latest report by The Verge, only 9.3% of the 142,301 projects that were launched on Indiegogo reached their goal of 100% funding or higher which is well below the success rate of Kickstarter. Out of all the Indiegogo campaigns, approximately 80% of the projects got stuck at 25% of their funding while only 46% of Kickstarter’s projects burnt out at 20%.

Keep visiting us for more reviews and updates about startups.

By G+ Author: Chrissy Reese.