According to the book Scaling Up, 94% of companies — all types of companies, not just tech startups — never hit $1 million in revenue in a calendar year, ever. We’ve all heard the stat that most entrepreneurs fail within five years, but there’s a big difference between not failing and not building a seven figure+ revenue business. So, if 94% of all companies never hit $1 million in revenue, it’s safe to say that 99% of tech startups will never hit $1 million in revenue as tech startups are 10x harder than regular businesses (see the difference between innovative and replicative businesses).
As an entrepreneur building a tech startup, here are a few things to think about:
- Find a small, fast-growing market or re-segment an existing one
- Know that the market leader gets 10x the value
- Understand just how valuable it is to hit $1 million in revenue
- Figure out the right type of money to raise
- Remember that it often takes years of grinding it out before things really take off
Knowing that 99% of tech startups never hit $1 million in revenue makes success look even more daunting. The key is to continually learn and improve as fast as possible.
What else? What are some more thoughts on the idea that 99% of tech startups never hit $1 million in revenue?
David Cummings on Startups 
I wonder how many of those entrepreneurs actually tried to go after a market where they could actually make $1Million per year. I bet 90% of entrepreneurs do not do market sizing work before hand to actually have a chance of it.
I bet if the sample was based upon how many people went after a million dollar market based upon research and succeeded, the number of people who hit $1MM per year would be higher than 6%.
Also most traditional brick and mortar businesses require a lot more upfront capital, so testing out multiple traditional businesses within one year, probably is not possible. But within 3 months or so, most tech entrepreneurs should be able to tell whether there is demand and a large market for their product. Allowing for the opportunity to test up to 4 different companies within a year.
You’re so right. I’ve been working with B2B business owners for nearly 20 years. Some brick and mortar.
Many digital. Hundreds of one on one conversations. Interacted with thousands indirectly.
It’s fascinating how many that: 1) are under $1M in annual sales, 2) have been in business for 10-20+ years and are still under $1M or coasting between $1M-$3M.
Most don’t ever come to the realization that you articulated here about market sizing, testing, and research.
I landed on this post because my CPA told me that he heard somewhere that something like 90% of all businesses, worldwide, never reached $1M (USD) in annual sales.
I was searching for a reliable source to support that but still haven’t landed on anything concrete yet 🙂
Just confirming figures – 94% or 99%? Earlier in this interesting post I read the first figure but later the second and I wondered which is correct
It appears 94% is the actual stat with data support it, whereas 99% is something the author made up based on the assumption that tech companies fail at a higher rate than other types of businesses. Could be true or false but there’s not supporting information.
87% of statistics are made up on the spot. #AlternativeFacts