What happened to more than 15,000 startups that died in 5 years?

Almost two years ago, we systematically analyzed the deaths of startups.

At that time, the "capital winter" brought a great cooling to the market, many star companies and entrepreneurs walked off the altar, and everyone began to suspect that the golden age of entrepreneurship had passed.

Now, two years later, the pandemic seems to have changed everything. So, what about the startup market?

We pulled out information on more than 15,000 new economy innovation and entrepreneurship death companies in IT Orange, trying to understand the innovation and entrepreneurship situation in the past 5 years from these aspects:

What has changed about the deaths of innovative startups because of the pandemic?

For what reasons did these startups fall?

Which tracks have brought down more startups?

Which cities are more likely to die from entrepreneurship?

Overall review: The number of dead startups in 2021 is 1/7 of 2019

In the past five years, an average of 3123.8 innovative startups have died every year.

While many businesses are making it more difficult to operate under the pandemic, the number of startups that will die in 2021 hit a new low in nearly five years. In 2021, 819 startups were on the verge of endgame, and that number was just 15% of what they did in 2019 (5,613).

2019 is the peak of the death of startups in recent years, the media year-end summary has brought the keyword of "capital winter", once claiming to be a second-hand housing industry subversive and revolutionary Aiwu Yoshiya, Wang Sicong's founded Panda Live and many other well-known startups, have not survived the winter of 2019.

We try to explain the decline in startup deaths in two ways.

On the one hand, in the past few years, there has been a decline in entrepreneurial enthusiasm, with fewer entrants and fewer natural moves towards the endgame.

In our 2019 article analyzing startup death data, we have found that the number of new startups added each year has begun to decline since 2015. The sudden outbreak of the epidemic in 2020 has made many people stabilize in the short term and temporarily give up entrepreneurship.

On the other hand, the capital winter seems to have passed.

The data inventory of Ene Niu shows that the number and amount of financing in the domestic venture capital market have fallen all the way since 2018, but have maintained positive growth for three consecutive quarters since Q1 2020. In 2021, the domestic venture capital market disclosed more than 3,000 financings for two consecutive quarters, which has returned to the average level before the capital winter in the first half of 2018.

Reason: Before the epidemic, many of them fell due to industry competition, and died after the epidemic, they died of active industrial and commercial cancellation

We also looked at the causes of death of startups over the past five years and found that competition, cash burns, and lack of financing capacity were the most prevalent.

In the past 5 years, 8836 startups have died due to industry competition. "Standing on the outlet, pigs can fly" is an entrepreneurial golden sentence quoted by many people, and it also reflects everyone's entrepreneurial philosophy from the side. Once there is an outlet in the market, there will be countless entrepreneurs pouring in. Although everyone expects to be the ultimate son of the wind, investors and the market are limited, and the more the wind blows, the more fierce the final frying of peers.

Industry competition is a relatively "general" generalization of the cause of death, how did startups lose? Looking down, it is mainly because of the lack of "banknote capacity". Among the 5 causes of death of entrepreneurship with the strongest sense of existence, the three of them are related to funds, such as burning money, insufficient financing ability and broken cash flow.

It is normal for a business to need capital to maintain its operations, but in the startup market, financial strength is particularly important.

The outlet will spawn entrepreneurs and attract an influx of capital. Gradually, "throwing money" became a means for startups (especially direct-to-consumer startups) to quickly win, obtain users by burning money, and continue to raise funds to continue to burn money - until the opponent could not burn and automatically exited.

For example, in the previous few years, Didi and Kuaidi's money-burning war, in order to seize the market to obtain users, online car companies will issue many coupons every day. Cheng Wei, the founder of Didi, once said that from 2012 to 2018, Didi never made a profit, losing 39 billion yuan in 6 years.

However, after experiencing the baptism of capital winter and the epidemic, the entrepreneurial market has undergone some changes in the past two years.

An important change is that in the past, innovative startups were fighting with their peers on the cusp, fighting for your life and death, and today's innovative companies are more about playing games with themselves and the environment. It can be seen that the active industrial and commercial cancellation has become the biggest cause of the death of startups in the past two years, the industry competition has retreated to the 3rd place, and the cause of death such as insufficient marketing has also withdrawn from the top 5.

Another change is that the market is less short of money. As long as there are good projects, you can find the support of capital. In 2020-2021, insufficient financing capacity as the cause of death fell to 4th place.

Industry: E-commerce has fallen the most startups, and financial entrepreneurship has the most money

Purely from the number of deaths of innovative start-up companies, the e-commerce industry can be regarded as the biggest black hole in the entrepreneurial circle in recent years, with 2109 startups in the industry coming to an end in 2017-2021.

E-commerce is indeed a delicious cake, online consumption to the total retail sales contribution ratio is increasing, new retail is also full of imagination space.

But a closer look at the death list reveals a lot of well-known names and beautiful backgrounds. Founded by well-known host Li Jing and strategically invested in Vipshop, Lebee.com stopped operating in 2019 after burning more than 1 billion yuan; Feifan.com, led by Wanda and jointly funded by Baidu and Tencent, carried all the e-commerce aspirations of Wanda Group and left the market in 2020; in 2021, Global Tesco and Yier 23, which had been the head in the field of cross-border e-commerce and shared wardrobes, also announced its closure.

This seems to show that even if you have a lot of money, ideas, and even a high starting point in the right time and place, it is difficult to come to the end of the e-commerce industry.

In terms of survival time, startups in the blockchain industry have the shortest average survival time, only 35.5 months. However, the first 3 companies that survived the shortest were all from the local living industry, and Jishou Tongcheng only survived for one month, and then went out of business because of burning money. Startups in advanced manufacturing, on the other hand, survive longer.

We also intimately helped you readers who want to start a business, looked at the threshold of burning money in various industries, and sincerely suggested that if the financing ability is not strong, you may want to avoid the finance, automobile transportation and logistics industries. The average amount of financing before the death of startups in these three industries is in units of 100 million yuan.

From the perspective of time dimension, in the past few years, there have been social networks, games, entertainment media and other industries to break into the forefront of the black hole of death, the hot spots of death in the past two years have been very stable, e-commerce, corporate services, education, local life and finance firmly occupy the TOP 5 position.

Behind the TOP 1 causes of death of startups in various industries, there are hidden characteristics of the industry.

Enterprise services, advanced manufacturing, games, entertainment media, etc., before truly owning revenue, need to invest a lot in infrastructure, copyright works, etc., so the biggest cause of death is burning money; local life, e-commerce and other industries, the limelight, players, startups mainly died of industry competition; tool software, advertising marketing and real estate business, now the story is difficult to sexy, mainly due to insufficient financing capabilities.

Startups in the financial industry in recent years have mainly focused on Internet finance, such as p2p and Internet insurance. These directions require a lot of financial support, so the amount of financing far exceeds that of other industries. In addition, in recent years, the state has increased the supervision of Internet finance, and many illegal Internet financial startups have died.

The head effect of social network products is obvious, if you can't seize the opportunity to quickly enter the market and obtain customer sources, it is easy to be imitated and lose the opportunity.

City: Beijing has the most dead start-ups, and Hangzhou surpasses Guangzhou

Cities where startups die are actually more thriving.

In 2017-2021, as many as 4,935 startups died in Beijing, far surpassing Shanghai and Shenzhen in the second and third places. In Hangzhou, the number of startup deaths in the past 5 years has exceeded that of Guangzhou, and it has been squeezed into the entrepreneurial F4 - to a certain extent, it also represents Hangzhou's strong innovation vitality.

It also makes sense for dead startups to gather hot spots in the industry. Corporate services, e-commerce and local life are really popular, so they have become the three major pieces of entrepreneurship in various cities, and everyone has it.

In addition to these three major pieces, more specifically, Beijing is good at education and entertainment media; Shanghai, Shenzhen and Guangzhou are similar in entrepreneurship hotspots, in addition to the three major pieces of necessity, they also promote finance and games; Hangzhou, Xi'an and Chongqing are considered to be a class, and the enthusiasm for education and financial entrepreneurship is relatively high; Chengdu and Wuhan are similar in the hot areas of entrepreneurship, and they are also good at education and games; Nanjing is more special, in addition to education entrepreneurship, there is also a boom in automobile transportation entrepreneurship.

Write at the end

It can be seen that the innovation and entrepreneurship market that has experienced the cold winter of capital and then encountered the epidemic is not bad. Entrepreneurial enthusiasm is indeed declining, whether it is the entrepreneurs who blindly enter the market with hot heads or the hot money that surges in speculation, they are decreasing, and the market is also much calmer.

The other side of calm seems to correspond to silence, and we rarely see reports of entrepreneurial stars who have turned out to be born, and it is difficult to hear stories of vigorous entrepreneurial failures.

In our 2019 startup analysis article, we quoted Zhou Kui, a partner at Sequoia Capital China Fund, as saying of the cold winter, "The cold winter is usually cyclical, and every time you experience a cold winter, it will be renewed."

Two years on, the innovation and entrepreneurship market has indeed become new: less dramatic, more rational and cautious.

But we are still willing to look optimistically at this fertile land, where innovators who really work hard and create value in a market that is not as noisy as before can get better opportunities.