New Businesses Staying Afloat

Despite weak revenue most U.S. startups survive beyond their first year, a study finds.

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Though more than half of all new U.S. businesses lose money for the first 12 months, most survive for at least another year, a new study shows.

Data on 5,000 startups tracked by the Kauffman Foundation found 37 percent made no revenue from 2004 to 2005, while 55 percent reported losses. Another 44 percent had no debt financing during their first year, and only a fraction used external sources of investment, the study found.

Despite such weak revenue, only nine percent of the businesses analyzed closed in 2005. Figures on subsequent years are expected to be released in April, researchers at the Kansas City, Mo.-based entrepreneurship advocacy group said.

"New businesses play an important but not-well-understood role in our dynamic economy," Robert Litan, the group's vice president of research and policy at Kauffman, said in a statement. "These insights into the earliest years of a firm's existence are essential for creating public and private programs that encourage new business development, innovation and sustainability," he said. 

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