Don't Take VC Funding – It Will Destroy Your Company

Re:Don't Take VC Funding – It Will Destroy Your Company by adventured on Sunday July 09, 2023 @11:54AM (#36655549)

Failure is definitely the commonality. The BLS reports typically that 1/2 of all new businesses (in the US) will formally fail within five years. One can safely guess that at least half of those remaining are something between zombies and hanging on by a thread. 1/4 or fewer will make it 15 years or more. And of course it varies by sector, restaurants notoriously have an exceptionally high failure rate. For all businesses the failure rate is around one in five in the first year [0]; for restaurants the failure rate is ~60% in the first year, and ~80% fail within five years.

[0] And again, don't forget to assume the figures are even higher because the figures will never fully account for zombie businesses or quasi-zombies and the equivalent.

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Re:Don't Take VC Funding – It Will Destroy Your Company by Joeri on Sunday July 09, 2023 @12:01PM (#36655622)

I’m wondering about the failure rate for technology companies. It may be higher or lower than restaurants, I have no intuitions.

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Re:Don't Take VC Funding – It Will Destroy Your Company by fbdab103 on Sunday July 09, 2023 @12:51PM (#36656115)

There is somewhat fuzzy on where you even draw the line. Does someone moonlighting on their Wordpress side hustle count as a company? There are many of those which seem unlikely go bankrupt - the most frequent end state is the sole proprietor quits due to lack of work or interest.

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Re:Don't Take VC Funding – It Will Destroy Your Company by timparsa on Monday July 17, 2023 @04:56PM (#36763959)

90%+ for "tech startups," although it's very hard to find data that sorts through all the startups and separates them into tech and non-tech startups. Good source is https://www.failory.com/blog/y-combinator-failures#:~:text=O....

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Re:Don't Take VC Funding – It Will Destroy Your Company by marcosdumay on Sunday July 09, 2023 @02:20PM (#36657306)

Those figures also do not account for selling all of the company's property with some profit and closing it down; the equivalent of an acquihire for small and medium companies is counted as failure. Running it successfully for a couple of years and changing your mind is counted as a failure too.

I don't have a link on hand, but I've seen studies from people that counted how many business actually closed due to money problems. The actual rate of non-problem business after 5 years is close to 80%.

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Re:Don't Take VC Funding – It Will Destroy Your Company by jacquesm on Sunday July 09, 2023 @02:53PM (#36657632)

I would expect it to be close to 100%. The difference between the 80% and the 100% is the ones that grow in spite of and sometimes because of their problems. Every business will run into trouble, sooner or later. In fact I don't recall a year in the past decade without some kind of crisis that needed fixing. Some self inflicted, some just circumstance and some outside malice. Never a dull moment if you run a small company.

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Re:Don't Take VC Funding – It Will Destroy Your Company by DeathArrow on Sunday July 09, 2023 @04:15PM (#36658424)

>Every business will run into trouble, sooner or later.

Even large businesses that have comfortable cushions and safety nets?

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Re:Don't Take VC Funding – It Will Destroy Your Company by jacquesm on Sunday July 09, 2023 @06:36PM (#36659702)

Yes. But they are better positioned to deal with it and will likely survive. But even the IBMs, HPs and Boeings of this world are not immune.

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