Status
Failed
Failed status indicates companies that have ceased operations, run out of funding, or otherwise been unable to continue as going concerns. In angel investing, failure is expected — the power law of venture returns means most investments will fail while a small number of winners drive overall portfolio returns. Understanding failure patterns helps improve future investment decisions.
Criteria
- Company has ceased operations
- No remaining assets of significant value
- Investment is written off to zero
- Team has disbanded or pivoted to new ventures
Implications for Investors
- Investment is a total or near-total loss
- Tax loss harvesting opportunity
- Lessons learned for future investments
- Portfolio diversification validated
Market Distribution
Value Distribution
- <$100M1
Frequently Asked Questions
What percentage of angel investments fail?
Approximately 50-70% of angel investments result in a total loss. This is why portfolio diversification (20-30+ investments) is critical for angel investors to ensure exposure to the outlier winners that drive returns.
Can I claim a tax deduction for failed investments?
Yes. In the US, you can claim a capital loss when a company formally dissolves or becomes worthless. Under Section 1244, up to $50K ($100K for joint filers) of losses on qualifying small business stock can be deducted as ordinary losses.
What are the most common reasons startups fail?
Top reasons include: running out of cash (38%), no market need (35%), got outcompeted (20%), flawed business model (19%), regulatory/legal issues (18%), pricing/cost issues (15%), wrong team (14%), and bad timing (10%).
