[2023 National Audit] 66% of Startup Companies Close Within 5 Years

Two out of three domestic startup companies close down within five years of establishment.

According to data received on the 26th from the Ministry of SMEs and Startups by Yang Geum-hee, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises and Venture Businesses Committee from the People Power Party, the five-year closure rate of domestic startups was 66.2%. This figure is 11.6 percentage points higher than the average five-year closure rate of 54.6% among startups in 28 OECD countries.

Yang Geum-hee, Member of the People Power Party. Photo by Kim Hyun-min kimhyun81@

Looking at the survival rates after five years by OECD member countries, Sweden had the highest survival rate at 63.3%, followed by Belgium (62.5%), the Netherlands (61.9%), Luxembourg (55.4%), Austria (53.7%), Greece (53.3%), France (50.8%), Slovenia (50.6%), and the United States (50.2%).

In contrast, South Korea's five-year survival rate was only 33.8%, about half that of Sweden. Among the 28 OECD countries, only Portugal (33%) and Lithuania (27.2%) recorded lower survival rates than South Korea.

By industry, the five-year survival rate of domestic startups was 22.3% in arts, sports, and leisure services, and only 22.8% in accommodation and food services. Additionally, business support services (26.8%) and wholesale and retail trade (29.7%) also had survival rates in the 20% range.

Education services (30.2%) and publishing, video, and information services (35.8%) recorded survival rates in the 30% range, while manufacturing recorded 42.8%, reaching the 40% range. Health and social welfare services exceeded 50% with a survival rate of 55.4%.

Meanwhile, the purchase performance of startups was low in the public procurement system for small and medium enterprises, which is operated to support SMEs facing difficulties in market development.

The public procurement performance of startups was 31% of the target in 2021 and 61% last year, failing to meet the target for two consecutive years. During the same period, women-owned businesses achieved 123% and 126%, and businesses owned by persons with disabilities exceeded the target by achieving 116% for two consecutive years.

Rep. Yang said, "Since startups face difficulties in market development during the early stages of their business, the role of public institutions is important," adding, "The Ministry of SMEs and Startups should focus its capabilities on creating an ecosystem where startups can sustain their businesses by providing practical support for market development, such as public procurement, rather than merely expanding the quantity of startups."

This content was produced with the assistance of AI translation services.