Why 95% of Startups Fail…and How to Beat the Odds

Why 95% of Startups Fail…and How to Beat the Odds

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In 2022, funding for IT startups fell 35%, compared to the previous year, creating additional pressure on cash-strapped IT startups to work with qualified recruiters to find ideal candidates for their companies. The startup landscape is riddled with the remains of once-promising companies. According to CB Insights, the startup post-mortem report, 253 startups failed in 2021 alone. The causes of failure are numerous, from a faulty business model and poor product-market fit to running out of cash or a lack of passion and perseverance. However, one of the most critical and overlooked reasons startups fail comes down to poor hiring and talent acquisition practices.

Joel Peterson, CEO of BrainCloud Recruiting, a talent acquisition firm focused on staffing tech startups, states, “The price of a mistake has always been high, but now it’s exceptionally high, especially for startups in the early stages of funding.” With investment in tech startups falling 35% in 2022, compared to 2021, the pressure to make the right hires the first time has never been greater.

Startup tech failures seem to be omnipresent today. From once-small companies like Palm, which at its peak, had a $53.3 billion in 2000, and went out of business just over a decade later in 2011, to startup Jawbone, the consumer electronics giant once valued at $3.2 billion, which liquidated in 2017, the startup landscape is littered with the carcasses of the once-great. Failure isn’t happening in isolated cases, though; according to, 95% of startups fail.

Startups tend to make several key mistakes in hiring that contribute to their downfall. The first is moving too slowly and being overly cautious, afraid to make a hiring misstep. But waiting too long to scale your team leads to overburdened staff, loss of productivity, and burnout.

The second mistake is a propensity to hire friends and family, regardless of skill or experience. While loyalty is essential, skills and qualifications matter more, especially in a startup. Hiring solely based on relationships often leads to a team lacking in key areas of expertise.

A third mistake is emphasizing hiring for “culture fit” over skills. Culture fit matters but should never trump abilities. Peterson notes, “Startups need a mix of personalities and skill sets. Some dissent and friction, in moderation, is healthy. You need visionaries and pragmatists, risk-takers, and risk-mitigators.” A homogenous team usually spells trouble.

The final mistake is failing to define key performance indicators and accountability. Startups often move fast and loose, but establishing KPIs and performance reviews, even for early hires, is vital. Lacking clear expectations and accountability leads to resentment, reduced motivation, and subpar work.

So how can startups beat the dismal 95% failure rate and build a team poised for success? The answer lies in partnerships with recruiting firms specializing in startup talent acquisition. These firms take the time to understand a startup’s vision, talent needs, and key technical and soft skills required for each role. They have a pool of qualified candidates interested in the risks and rewards of startup life. And they ensure a good skills-culture fit, finding candidates with the experience and mindset to thrive in a fast-paced environment.

BrainCloud Recruiting uses a unique talent acquisition strategy and has a proven track record with helping companies survive and thrive. BrainCloud Recruiting and Peterson have helped tech startups find the talent they needed to reach key milestones and beyond. His advice? “Move fast but thoughtfully. Don’t be afraid to take risks on high-potential candidates. Establish KPIs and reviews early. Seek dissenting voices. And partner with recruiters who understand startups have to get hiring right the first time because there may never be another chance. With the right team, a startup can achieve greatness. But with the wrong team, they’ll be just another statistic.”

For any startup, the stakes have never been higher and talent has never mattered more. Hiring precision and sound talent acquisition may well be the difference between a place in the startup graveyard or achieving startup stardom. Startups, choose your partners and team wisely. Your future depends on it.


BrainCloud Recruiting helps start up founders hire up their critical early teams twice as fast as internal recruiters using AI and proven talent acquisition methods. Joel Peterson, Founder and CEO is a multiple award winning recruiter. BrainCloud Recruiting worked on State Farm’s social good InsurTech startup to scale the company employees with higher talent density than Google and Goldman Sachs and a company culture with an almost flawless reputation on Glassdoor. Forbes recently selected him as one of the 45 Founding Recruiters on their transformational new recruiting platform. To learn more visit,


Joel Peterson
[email protected]

SOURCE: BrainCloud Recruiting

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