A few years ago, a startup raised nearly $400 million in funding.
It had a big vision, customers, momentum.
And then, seemingly overnight, it shut down for good.
What happened? Simple. It ran out of money.
If you study enough startups, you’ll see a pattern with the ones that don’t make it. It’s not that the founders weren’t smart, the idea was bad, or the market was too small.
It’s that the company ran out of runway.
This Is the #1 Reason Startups Fail
According to CB Insights, a research company that focuses on the private markets, here’s the #1 reason that startups fail:
They run out of cash.
Here’s the chart from CB Insights:
As you can see, it’s not about competition, bad timing, or lack of “product-market” fit.
It’s about the bank account running dry.
And once you know this fact, you’ll see it everywhere.
Case Study #1: Olive — Raised Billions… Still Ran Dry
Take Olive, a healthcare AI company.
After it raised billions of dollars, it expanded aggressively. It looked like a winner.
But beneath the surface, it was bleeding cash. Then, after the pandemic, funding dried up. The company couldn’t raise more capital.
It started selling off assets just to survive. But eventually, it had no choice. It shut down.
The official reason: “Ran out of capital.”
Case Study #2: Convoy — Great Idea, But Losses Mounted
Convoy was one of the most promising logistics startups in the world.
Its technology aimed to fix inefficiencies in the trucking industry, which is a massive opportunity.
It raised billions of dollars. But when the economy turned in 2022–2023, things changed fast. Demand weakened, capital markets tightened, and the company’s losses mounted.
Convoy couldn’t raise more money, and it couldn’t find a buyer. It was forced to shut down.
Again, the root cause was simple. It ran out of capital.
Case Study #3: Bowery — The Cost Trap
Bowery was building the future of agriculture: high-tech vertical farms.
It had partnerships with major retailers, strong branding, and massive investor backing.
Unfortunately, it also had huge upfront costs, high energy expenses, and labor-intensive operations. The business simply required too much capital to reach scale.
When funding slowed, Bowery couldn’t keep up. It shut down in 2024.
The root cause once again? It ran out of capital.
The Hidden Truth About Startup Failure
On the surface, these companies had three different problems:
- Olive expanded too aggressively.
- Convoy got hit by macro conditions.
- Bowery had flawed unit economics.
But they all ended the same way. Because ultimately, every startup is playing the same game:
Can it stay alive long enough to turn the corner and win?
If it runs out of money before it can figure things out, it’s game over.
How To Avoid the Losers
This is where most investors get it wrong.
They focus on a flashy product, or a big, fast-growing market, or charismatic founders.
Sure, factors like that can help create success. But they don’t prevent failure.
In the end, here’s what actually matters:
Which companies are least likely to run out of money?
Introducing “The Risk of Ruin”
At Crowdability, we built a software-based tool to answer that specific question.
It’s called “The Risk of Ruin,” and it’s part of our proprietary software, CrowdabilityIQ.
Here’s what it looks like:
And here’s how it works:
The Risk of Ruin is a metric designed to estimate a startup’s probability of running out of capital — and therefore failing.
It analyzes each company across nine key factors that have been statistically linked to survival:
- Domain Experience — Experienced founders are less likely to burn through capital
- Capital Efficiency — Some business models simply require less cash to operate
- Multiple Founders — Teams move faster than solo founders
- Balanced Team — Technical + business founders outperform lopsided teams
- Founder Education — Correlates with better decision-making and execution
- VC Backing — Increases the odds of raising follow-on capital
- Revenue — Self-funding reduces dependence on investors
- Growing Revenue — Signals traction and sustainability
- Predictable Revenue — Recurring revenue adds stability
After analyzing these factors, CrowdabilityIQ ranks each startup relative to all other active deals, and assigns it to one of five risk categories.
In other words:
It can help you identify, in advance, which startups are most likely to survive.
The Bottom Line
Startups don’t tend to fail due to a dramatic mistake they’ve made.
They fail because the clock runs out.
And once the money’s gone, nothing else matters.
The good news?
By focusing on companies that are built to last, you can stack the odds in your favor.
If you’d like to see how CrowdabilityIQ can help you do exactly that, you can learn more here »
Because in startup investing, survival isn’t everything… but it’s the first thing.
Without it, there can be no winners.
Happy Investing,
Founder
Crowdability.com
