Startup Firms

Firms less than five years old, defined by the Fed as “startups”, ‘account for 34% of all small employer firms and play an outsized role in U.S. innovation and productivity.’ Many never survive into maturity. Approximately one-third of new establishments fail within their first two years, and half fail within five years, according to the Fed’s Small Business Credit Survey 2016. However, about half of 3-5 year old firms have achieved profitability, not far short of the 60 percent of mature firms that have done so. Yet startups have a stronger need for financing: 52% of startup firms applied for financing in 2016, compared to 42% of mature firms.