Top 12 Reasons why Startups Fail in 2022

From lack of product-market fit to misunderstanding and quarrels in the team, CB Insights break down the top 12 reasons for startup failure by analyzing 100+ startup failure post-mortems.

After making a list of over 400 startups that failed, the CB Insights team created a list with the top 12 reasons why these startups failed.

The list covers mainly US based startups that received investments between millions and billions of dollars. Altos Labs is an example of a failed startup, that raised $3B alone.

Since many startups offered multiple reasons for their failure, you’ll see that the chart highlighting the top reasons doesn’t add up to 100% (it far exceeds it).

Following the chart is an explanation of each reason and relevant examples from the post-mortems.

The top three reasons why startups failed in 2022 are:

1) Ran out of cash / fail to raise more money

Money and time are finite and need to be allocated judiciously. For the startups on our list, running out of cash — tied with the inability to secure financing/investor interest — was the top reason startups cited for their failure.

2) No market need

Mobile-focused streaming service Quibi, which shut down in October 2020 just 6 months after launching and raising a mammoth $1.8B, found itself in this position.

3) Being outcompeted

Despite the platitudes that startups shouldn’t pay attention to the competition, the reality is that once an idea gets hot or gets market validation, others may try to capitalize on the opportunity. And while obsessing over the competition is not healthy, ignoring it was also a recipe for failure in 20% of the startup failures.

The original CB Insights article can be found here: https://www.cbinsights.com/research/startup-failure-reasons-top/