Holiday Ayo - A start-up or startup company is a company that has not been operating for a long time. The start-up has a major influence on economic activity. Startup is synonymous with relying on investors or venture capital to get large funds.

But unfortunately, the phenomenon of startup failures leading to layoffs (PHK) is rife in 2022. According to data from the United States (US) Bureau of Labor Statistics, around 20 percent of new businesses fail in their first year.

Fortunately, some new research may shed light on the biggest barriers to startup failures.

As cited from CNBC, Tuesday (24/1), Skynova, which is a company that makes invoicing software for Micro, Small and Medium Enterprises (MSMEs), surveyed 492 startup founders in November 2022. Three of the most common reasons behind startup failures last year were found:

1. Lack of financing or investors

The study noted that 47 percent of startup failures in 2022 were due to lack of financing, nearly double the percentage failing for the same reason in 2021.

2. Out of money

The factor of running out of money causes 44 percent of failures. While it can be caused by poor financial planning, it can also indicate a lack of available funds.

This issue of capital is not surprising, given that last year there were fears of a recession. This caused investment in startups in North America to drop 63 percent compared to previous years.

As a result, anyone looking to start a new business in 2023 may face similar barriers to funding, so long as economic uncertainty persists.

3. The Covid-19 pandemic

The impact of the Covid-19 pandemic is still ongoing. Meanwhile, 33 percent of startup failures were attributed to the effects of the pandemic which spread to the business and economic sectors.

CB Insight data shows, the number of failures is down from 59 percent in the previous year. It's a sign that many small businesses are slowly recovering, although some continue to struggle to return to normal.

While no one can guarantee success, the startup founders surveyed by Skynova have plenty of advice for anyone looking to jump in and launch their own business.

About 58 percent of founders surveyed said they would do more market research before launching. The same percentage said they wished they had put together a stronger business plan.