Why startups failed in 2022

By EcoAction at May 4th, 2023

Why startups failed in 2022

According to data from the U.S. Bureau of Labor Statistics, around 20% of new businesses fail within their first year. Recent research by Skynova (/2023/01/20/top-reasons-why-startups-failed-in-2022-study.html) sheds light on the biggest obstacles that have led to startup failures in 2022. The study surveyed 492 startup founders and analyzed data from CB Insights. The research found that 47% of startup failures in 2022 were due to a lack of financing, while running out of cash was behind 44% of failures. Economic uncertainty, among other factors, has caused investments in North American startups to plunge 63% in 2022 compared to the previous year. The ongoing Covid-19 pandemic also contributed to 33% of startup failures in 2022. However, this is down from 59% a year earlier, indicating that many small businesses have recovered from the worst of the pandemic in 2022.

The founders surveyed by Skynova advised aspiring entrepreneurs to do more market research before launching their own business and to put together a stronger business plan. They also emphasized the importance of being able to think on one's feet and make necessary changes if plans don't work out as expected. 79% of those surveyed advised hopeful entrepreneurs to "learn from your mistakes."

The ability to pivot and make necessary changes to avoid failure is a skill that successful entrepreneurs possess. According to CB Insights, a failure to pivot is one of the most common reasons why startups fail. Startup founders who can't or won't make changes when necessary often lead to money-losing investments. In many cases, these founders refuse to admit that their original business plan needs updating to survive.

While the study conducted by Skynova provides valuable insights into the reasons behind startup failures in the US, it cannot be transferred to Europe one-to-one. The startup ecosystem in Europe differs from that in the US, and factors affecting startup success or failure can vary greatly. However, some of the indications provided in the study may still be helpful for aspiring European entrepreneurs to consider. For example, the importance of securing financing and having a solid business plan are universal factors for startup success, regardless of the region. Additionally, the study highlights the significance of pivoting and making necessary changes to avoid failure, which can be applied in any entrepreneurial context.

European projects like ECOACTION have increasingly been focusing on supporting startups within universities as a means of fostering innovation and entrepreneurship. This approach can be seen as more suitable than traditional methods of startup support because universities provide a unique environment that can nurture entrepreneurship in various ways. For example, universities offer access to a diverse range of resources and expertise, including research facilities, mentorship, and networking opportunities, that can be crucial to a startup's success. Furthermore, startups within universities often benefit from a collaborative culture, where the exchange of ideas and knowledge-sharing can be facilitated, leading to innovative and creative solutions. Additionally, by supporting startups within universities, the European projects can help bridge the gap between academia and industry, leading to the creation of more innovative and impactful products and services. Overall, this approach to startup support can be seen as a valuable investment in the future of entrepreneurship in Europe.

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content_author: Prof. Dr. Bernhard Kölmel