According to the US Census Bureau, 4.4 million businesses were registered in 2020 alone. By January 2021, almost 500,000 people had submitted paperwork to start a business. Â With a new year upon us and no end to pandemic uncertainty, many people are deciding to take their future into their own hands and start a business. Whether you have an existing business or are thinking of starting one, here are 11 startup stats you need to know in 2022.
1. Only 8% of people who think about starting a business actually do.
61% of people have at least one idea to start a business however only 8% actually launch their entrepreneurial endeavor. Generally speaking, people lack the confidence or the simple know-how in terms of how to start their business and tend to spend more time contemplating ideas than taking action.
2. Two thirds of people start their business to be their own boss.
According to this survey from Cox Business, almost 70% of people want to fire their boss and take their lives into their own hands. The dream of firing your boss might be quite vivid however with a startup failure rate that is significantly high (see below) you should definitely crawl before you walk…out the door that is. I encourage people to start their business part-time and retain their full-time job until they are at revenue in their business and have at least 6-12 months of living expenses saved up. Furthermore, all consumer debt should be paid off before leaping into full-time entrepreneurship.
3. Passion remains a strong number two.
Although the top reason people want to start a business tends to be the same year-over-year, the pursuit of our own passion comes in at a close second to taking control over our destiny by being our own boss. Coming in third comes down to being in the right place at the right time though I would caution that waiting for opportunities to present themselves is much like watching paint dry. Success tends to come to those who voraciously pursue their dreams.
Dave Ramsey, media personality and real estate mogul writes in his bestselling book, Entreleadership, “If you don’t own the goal and it doesn’t come from your dream, then you won’t have the toughness to persevere when the going gets tough.” Ultimately, if you aren’t starting a business because you are passionate and have a burning desire to be your own boss, you are very likely to give up when things get challenging and that is the difference between those who succeed and those who do not.
Top Reasons for starting business:
- Ready to be his/her own boss: 26 percent
- Wanted to pursue his/her passion: 23 percent
- The opportunity presented itself: 19 percent
- Dissatisfied with corporate America: 12 percent
- Laid off or outsourced: 6 percent
- Not ready to retire: 6 percent;
- Other: 5 percent
- Life event such as divorce, death, etc.: 3 percent.
4. Successful founders are likely more mature than you think – age 50-59 top the list!
The average age range for startup founders might surprise you. People in their fifties lead the pack in terms of those who start a venture. At this point, people in this age range tend to have more wisdom, confidence, and potentially the resources to start a business. Furthermore, their kids might be out of the house and they do not feel that they are done with their career. As an aside, at RadiusAI, the company I co-founded with four incredible people, we are in our fifties, forties, and thirties. There is a wealth of diverse experience which lends itself to leadership.
The Age Range of Startup Founders:
- 50-59 years old: 35 percent
- 40-49 years old: 25 percent
- 60-69 years old: 18 percent
- 30-39 years old: 14 percent
- 18-29 years old: 4 percent; and
- 70+ years old: 4 percent.
5. No degree – no problem!
It isn’t the PhD’s who are out there starting the most businesses. The fact is that the more educated one is, the less likely they are to be starting a business. This report from Small Business Trends illustrates that a high school graduate is almost ten times as likely to start a business as someone with their doctorate.
Education:
- High School / GED: 33 percent
- Associates Degree: 18 percent
- Bachelor’s Degree: 29 percent
- Master’s Degree: 16 percent; and
- Doctorate: 4 percent.
6. The startup failure rate is 90%.
The reality is that not everyone should be attempting to build a startup. With a failure rate of 90%, there is significant risk. Those lacking experience or possessing the sentiment that they have all of the answers are most likely to fail. Over the years the most common thing I have heard from investors is that they invest in the team. Successful teams tend to be composed of a healthy mix of technical, business, and regulatory individuals with a breadth of both vertical and nonvertical experience.Â
As a founder or cofounder one of the critical keys to success is knowing when you need to have additional talent and not micromanage your leaders. Furthermore, strong leaders listen to their end users and adapt.Â
7. The number one reason startups fail remains the same – cash flow.
Startup failure remains the same for the past several years. It comes down to one key thing – startups run out of cash. When I am considering investing in a startup or mentoring one, an initial question is – do you have someone managing your cash flow? Next, I ask if they are paying attention to a cash flow statement weekly? Naturally, I want to know what their burn rate is (the amount of money required to handle monthly expenses) and how much runway (how many months of burn) they have in the bank.
After cash flow, here are the following reasons why startups fail:
- 38% of startups fail because cash flow challenges.Â
- 35% fail because there was no market need.Â
- 20% fail because the competition dominated.Â
- 19% fail because of a flawed business model.Â
- 18% fail because of legal and regulatory issues.
8. One third of businesses start with $5,000 or less.Â
This one might be surprising because there is a notion that a business needs to start with a significant investment. Over 30% of startups are funded with less than $5,000 up front. Sara Blakely, legendary founder of Spanx, started her billion dollar plus company with only $5,000. It can be done…if you know what you are doing.
There are many businesses that can start without a capital outlay. Some examples include EBay selling, affiliate marketing, and offering a service that is direct to consumer such as consulting. I would caution though that if you are starting a business where you will be offering services, it is always a good idea to wrap yourself in some form of entity such as an LLC for liability purposes.
9. There are 475 active unicorns in the world.Â
Unicorns are real and there are almost 500 of them globally. A unicorn is a company that has a true valuation of over $1 Billion. The valuation is often determined by either monthly or annual recurring revenue (MRR or ARR). It took, on average, six years to achieve unicorn status.Â
Building a unicorn company such as Tesla, Facebook, Shopify, or Salesforce comes down to experience, fortitude, and a solid network. Unicorns are able to rally the right people – investors and team members – to believe in their concept. As we go further into 2022, it is anticipated that there will be more unicorns as companies continue to reach high valuations in existing and new sectors.
10. 39 unicorns are women founded or cofounded.
Women are still outnumbered however the landscape is changing. There are now 39 women founded or cofounded unicorn companies. This number is fortunately growing and there is still a large mountain to climb. As a female cofounder of an artificial intelligence company, I can attest to the fact that it is still a very male dominated world. That being said, it is refreshing to see change happening and more women leading, and co-leading, startups in the technology sector in addition to health and beauty.Â
If you are thinking about starting a business, or have one that you want to scale, I encourage you to really think about the data. Do you have enough cash and do you have the right person on your team paying attention to cash flow? Do you have a solid sales team or if you are the sales team, do you need to develop your skills? Is the market ready for your solution or do you have more research to do? Do you have the right advisors? Are they specific to your vertical? Do you need to restructure or properly structure? Do you have the right insurance?
I will be launching a learn-on-demand course for people who want help answering these questions and creating a solid path to success with their venture. Make sure you subscribe to my newsletter to be first on the list when the course drops. In any new year, there is ample opportunity to start fresh and I encourage you to carve out some time, consider the questions above, and make this year count.
11. 21% of people list Steve Jobs as their entrepreneurial role model.Â
When it comes to an entrepreneurial role model, Steve Jobs remains number one. Although there seems to be mixed sentiment around Jobs as a human there is no doubt that the man was a genius. Many unicorn founders, including Elon Musk, cite Jobs as someone to be emulated.
If you are thinking about starting a business, or have one that you want to scale, I encourage you to really think about the data. Do you have enough cash and do you have the right person on your team paying attention to cash flow? Do you have a solid sales team or if you are the sales team, do you need to develop your skills? Is the market ready for your solution or do you have more research to do? Do you have the right advisors? Are they specific to your vertical? Do you need to restructure or properly structure? Do you have the right insurance?
I will be launching a learn-on-demand course for people who want help answering these questions and creating a solid path to success with their venture. Make sure you subscribe to my newsletter to be first on the list when the course drops. In any new year, there is ample opportunity to start fresh and I encourage you to carve out some time, consider the questions above, and make this year count.
