Startup Failure in Europe – Indepth Analysis
When you are involved in the startup world you might have heard someone claim that nine out of ten startups will fail. While the startup world always has agreed to this in general, there is no data to back this up. If you are a founder, an investor, a corporation or a company builder — as we are — you want to understand exactly what is the likelihood of success. And you also want to know how you can increase it. As a founder or a corporation, you might think that an accelerator program could be the answer.
We took the challenge and a closer look at the data!
For our research we primarily used Crunchbase as our source. Crunchbase is one of the largest startup databases available and has listed more than 900,000 companies (as of March 2020). The Crunchbase database generates its data from their investor network, which contains more than 3,500 investors, the community, AI tools and a data team.
We filtered the database for companies in the EU28 area that were founded in 2013 and divided the data into startups that were in an accelerator program and startups that did not go through an accelerator program. In order to get a significant sample, we randomly selected 400 accelerated and 400 non-accelerated startups. We decided to take the data set from 2013 because, depending on the source and geography of data, startups need five to seven years (median) to achieve an exit.
We subsequently classified the startups into the following groups using not only Crunchbase, but also adding data from LinkedIn and publicly available information to our analysis:
- Exits: are flagged as exited by Crunchbase
- Scale-ups: flagged as alive on Crunchbase and 50 or more full-time employees on LinkedIn
- Somewhat alive: flagged as alive on Crunchbase and between ten and 49 full-time employees on Linkedin
- Zombies: flagged as alive on Crunchbase and less than ten full-time employees on LinkedIn
- Dead: flagged as dead on Crunchbase or flagged as alive on Crunchbase, but no operational website or LinkedIn page and no full-time employees on LinkedIn
For analysis and interpretation of the data, we only consider Scale-ups and Exits as being successful. Of course, we know that the number of employees on LinkedIn is a simplified view to cluster startups in different categories and that there are startups that managed to get really big with a relatively low number of employees, Instagram for instance. But in general, it is a good indicator for traction or success of the startup in the European context.
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Co-Founder & Partner