In a huge 2003 study tracking more than 21,000 startups, researchers at Oxford and other universities calculated the percentage of companies that “succeeded” in each of 48 industries.
They had an interesting definition of success — it wasn’t related to cash flow or even sales growth. It was simply whether the startup had been acquired, acquired another company, or IPO’d.
And the Winners Are
By far, you’ll find the greatest chance of succeeding, nearly 50%, in the Software business, that perpetual nursery of newborn companies and the greatest single source of M&A targets.
Next is Internet Services at about 30% followed by Information Technology (a vague term) at about 20%. See the chart below. It seems digital engineers are highly mobile packets of entrepreneurial creativity and busyness.
Veil of Tears
We next looked at where start-up misery lives, the 10 industries where the probability of success is nearly non-existent. Toughest of all are Natural Resources and Agriculture/Farming, both at 1%. They may have earned that distinction due to their requirement for massive scale. What’s surprising is how difficult it is to succeed in the biotech business despite its allure to early-stage investors. That difficulty may be a measure of notoriously demanding government approval processes and the embryonic nature of the industry overall — you need lots of creativity, science, time, money, and chutzpah.
Of course, which industry you choose is not the only predictor of success. Founders’ personality and, surprisingly, the number of co-founders in a startup play important roles too. See Kuhncap M&A Factoid #11 for details.
For dozens of fact-filled articles on growing and preparing a mid-market tech company for sale, see our M&A Resource Hub on the Kuhn Capital website
Source: McCarthy, P.X., Gong, X., Braesemann, F. et al. The impact of founder personalities on startup success. Sci Rep 13, 17200 (2023). See online.