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

Explore Startups

How WeWork Makes Money
Flat style, one half with the main logo and color of the app and the other one with a shadow and a material icon pointing functionality
How Airbnb Makes Money
How FanDuel and DraftKings Work
Tesla Forms Special Committee on Going Private
Group of friends in the street with smartphone
Social Networking Service (SNS): Characteristics and Risks
How Slack Makes Money
How Paribus Makes Money
Post-Money Valuation: Definition, Example, and Importance
Franchise vs. Startup: Which Way to Go
Funding Platforms for Marijuana Startups
Cropped hands holding tablet with a 3D graphic of charts and bars emerging from it
Jumpstart Our Business Startups (JOBS) Act
Business people discussing in creative office
Valuing Startup Ventures
An entrepreneur explaining project to bank managers during meeting in creative office.
5 Questions to Ask Before Investing in a Startup
Full Frame Shot of Paper Currencies on Table
Taboola: How "Content You May Like" Makes Money
Group of ambitious young professionals working together on their joint project.
Business Startup Costs: It’s in the Details
Man and woman looking at computer in modern office.
Lean Startup: Defined, How It Differs From a Traditional Business
Canopy Growth vs. Tilray: How Do They Compete?
Drive-By Deal
Two businessmen working together at the computer
Startup Capital Definition, Types, and Risks
Which Company Is Behind the Popular E-Cigarette JUUL?
Focused Engineer Examining Microchip With Flashlight
Fabless Company
PowerToFly: How It Works and Makes Money
Business People Discussing Plans in Modern Office
Junior Company
Drip Feed
Investing In Social Media Startups? Read This First
A businessman getting into backseat of exclusive cab.
How Uber Uses Your Ride Data
Venmo: Its Business Model and Competition
Goldman: Wall Street is Underestimating Netflix
What Is the Development Stage in the Life Cycle of a Business?
Twit Pitch
Young Asia Student Study in the Public Library
Concept Company
Soft Metrics
4 Challenges Uber Will Face in the Next Years
4 Reasons Why Riders Choose Uber
How Tinder Makes Money
An Inside Look at Pinterest's Business Model
Instagram phone app
Instagram: What It Is, Its History, and How the Popular App Works
Why Is Silicon Valley A Startup Heaven?
Square vs. Stripe
man presenting to a group of people in a conference room with a monitor that shows charts and graphs
How to Raise Seed Capital and Grow Your Startup
smiling colleagues in an conference room at a workplace
How Many Startups Fail and Why?
Page Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Bureau of Labor Statistics. "Survival of Private Sector Establishments by Opening Year."

  2. Small Business Administration. "2020 Small Business Profile."