Startups are new businesses that are trying to disrupt a market. These companies have a high rate of failure, but the most successful startups have become legends of the business world.
Frequently Asked Questions
  • How many startups fail and why?

    As of March 2021, only 80% of startups survived after one year. The Small Business Administration (SBA) defines a "small" business as one with 500 employees or less. According to business owners, reasons for failure include money running out, being in the wrong market, a lack of research, bad partnerships, ineffective marketing, and not being an expert in the industry. Ways to avoid failing include setting goals, accurate research, loving the work, and not quitting.

  • Why are there so many startups in Silicon Valley?

    Silicon Valley, located in the South San Francisco Bay Area of California, is a global center of technological innovation. Many of the reasons for this region's success have to do with the social and cultural aspects of the tech community that has grown there. Similar markets and industries tend to become concentrated in a particular area. The entrepreneurial environment of Silicon Valley is characterized by innovation, collaboration, and risk-taking. It provides the essential motivational framework required for tech startups. Local opportunities and insights, legal support, and joint industry strength are other reasons that there are so many startups in Silicon Valley.

  • How do I make the most of the stock options as a startup employee?

    Equity is a great perk of working for a startup, but employees are often confused about the best way to maximize the equity they’re given. One of the key things to understand when it comes to equity is that it takes time for your options to vest. The typical vesting schedule for most startups is four years, including a one-year cliff. Another important thing to keep in mind is your company’s exit strategy. If it appears to be headed toward an IPO, you may want to have a plan in place for exercising your options. Perhaps the most crucial factor when it comes to equity decisions is timing. Choosing to exercise options after an exit is often the simplest way to cover costs and manage tax liabilities.

  • How do I exercise my stock options without paying out of pocket?

    A common way to finance the purchase of shares is by borrowing funds from friends and family. Another popular form of financing is a personal loan. This can be a good option if you’d like to borrow a larger amount of money and if you’re comfortable committing to a monthly repayment schedule. However, it’s worth noting that the interest paid on personal loans can make exercising your options much more expensive. If you’re hoping to cover your costs without having to borrow money, selling some of your shares on a secondary market can help you get the funds you need.

  • How do I raise seed capital for my startup?

    Seed capital is the initial investment into a business provided by venture capitalists or angel investors to help it grow. Many investors that provide seed capital are involved in the business in more than just a financial way. When seeking seed capital, a business must be prepared with a solid business plan, avenues for growth, and cost and revenue projections. Networking is an important part of obtaining seed capital, and mentorship programs such as incubator firms help as well. Crowdfunding is an increasingly popular and quicker route to obtaining seed capital.

Key Terms

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Page Sources
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  1. Bureau of Labor Statistics. "Survival of Private Sector Establishments by Opening Year." https://www.bls.gov/bdm/us_age_naics_00_table7.txt

  2. Small Business Administration. "2020 Small Business Profile." https://cdn.advocacy.sba.gov/wp-content/uploads/2020/06/04144224/2020-Small-Business-Economic-Profile-US.pdf