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Why tech startups fail the most
Tech startups have the highest failure rates, the $13 billion bankruptcy of Arrival, and more...
SearchVentures
February 19, 2025
Tech startups have the highest failure rates
Startups in the tech industry have the highest failure rates, with with 63% shutting down operations within just four years.
Why do these startups fail?
This Week’s Trends
High failure rates among tech startups
The bankruptcy of $13 billion Tech Startup
Northvolt sells business to Scania and more
Read Time 3 minutes
The Startup Trend
Failure rates in different industries
The information technology (IT) sector has the highest startup failure rate, with 63% of IT startups failing within the first four years.
> The information industry has low entry barriers and is filled with high-risk startups that demand significant investment.
> Within the industry, cryptocurrency and digital healthcare startups have the highest failure rates at 95% and 98%, respectively.
💡 The top reason of tech startup failure is misreading market demand, with 34% not achieving product-market fit.
Startup Feature
Why Arrival Collapsed from a $13 Billion Valuation to Bankruptcy
Arrival once promised to change the electric vehicle industry. Founded in 2015 by Denis Sverdlov, the UK-based startup planned to build electric vans and buses in small, decentralized production sites instead of large-scale factories. The idea attracted major investors, including BlackRock, which invested $118 million, and UPS, which placed an order for 10,000 vehicles. In 2021, Arrival went public through a SPAC merger, reaching a $13 billion valuation.
Three years later, the startup filed for bankruptcy. Manufacturing delays, financial losses, and a failed US expansion left Arrival with billions in debt and no path to recovery.
“We underestimated the challenges of scaling production while maintaining financial stability.”
A $13 Billion Idea That Never Scaled
Arrival promoted a different way to build electric vehicles. It claimed that small production sites would reduce costs and increase efficiency. The startups first factory in Bicester, England, produced only a few vehicles by late 2022. Supply chain disruptions, rising material costs, and production delays made it impossible to meet delivery deadlines.
In 2022, Arrival shifted its focus to the United States, where it hoped to secure more investment and benefit from government incentives. This move led to job cuts and the suspension of several projects. The startup focused on electric delivery vans, but without enough funding, it never moved beyond prototypes.
“This is not where we thought we would be at this point and we still have a long way to go and many hurdles to overcome.”
Billions Invested, No Vehicles Delivered
Despite raising billions, Arrival failed to turn its technology into a business. The startup reported losses of more than £560 million in 2022 and was running out of cash by early 2024. Its stock was delisted from the Nasdaq, investors pulled out, and last-minute funding efforts failed. In May 2024, Arrival filed for bankruptcy in Luxembourg with over $5 billion in debt.
“Arrival's ambitious strategy of attempting to produce all components in-house... faced significant execution challenges.”
Arrival’s failure highlights a growing problem for European tech startups. Without the deep late-stage funding available in the United States, many of Europe’s most ambitious startups struggle to compete at a global scale.
Sponsored by Analytica Investor
Crypto Order Sparks National Digital Asset Focus
A newly signed executive order aims to build a national digital asset stockpile, highlighting the strategic potential of blockchain. DeFi Technologies Inc. (US: DEFTF & CAD: DEFI.NE) stands at the forefront by offering regulated exchange traded products that simplify digital asset access. As the U.S. takes strides in crypto policy, discover how DeFi’s approach may align with this emerging infrastructure.
Headline News
This Week In Startups ✍️
Founders
> Northvolt, which declared itself bankrupt in November last year, has sold its industrial battery division to truck manufacturer Scania.
> Luminance raises $75m as it doubles down on AI agents for legal sector to automate contract generation and negotiation for enterprises’ legal departments.
> Karl Tuyls, the cofounder of Paris-based agentic AI startup H Company, is joining Meta’s artificial intelligence lab in Paris as director of AI research.
Investors & VCs
> VC funding in European defence and security tech surges to record $5.2 billion a 24% increase from 2024, outpacing growth in VC for AI over the past two years.
> NaturalX Health Ventures, a Berlin-based VC firm, has launched a €100 million fund to focus on consumer-centric health management startups in Europe.
> Junction Growth Investors closes first fund at €115 million to focus on startups working on the energy transition.
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Cheers,
Odin Lund & Hari Mohandas
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