According to multiple sources, in 2024, more emerging companies from the previous year go out of business, but given the insane companies that were funded in the frenzy era in 2020 and 2021, this is the case. Is not so surprising.
We don’t seem to be approaching the end yet, and 2025 can be a cruel year when startup companies are closed again.
TechCrunch collected data from multiple sources and found a similar tendency. According to Carta, 966 startup companies went out of business in 2024, but 769 in 2023. It is an increase of 25.6%. Note on methodology: These figures are based on Carta customers, but are based in the United States, leaving Carta due to bankruptcy or dissolution. Peter Walker, Carta’s analysis, speculates that there are other closures that cannot be explained in Carta.
“Yes, the closure increased in all stages from 2023 to 2024, but in 2020 and 2021, more companies were funded (in a larger round), so the nature of VCs. He is expected to naturally increase, “he said.
At the same time, Walker admitted that it would be “difficult” to accurately estimate how much closed in the future and how much it would be closed in the future.
“It must be a considerable part,” he told TechCrunch. “There are many companies who left Carta without telling me why I left Carta.”
Angellist, on the other hand, discovered that 364 startups ended in 2024 compared to 233 cases in 2023. This is an increase of 56.2%. However, Angellist’s CEO AVLOK KOHLI has a fairly optimistic perspective, pointing out that the end is “very low compared to the number of companies that have been funded through both years.”
Layoffs.fyi discovered a conflicting tendency. In 2023, 109 companies and 58 in 2022, 85 high -tech companies were out of business in 2024. However, as founder Roger Lee acknowledges, this data contains only publicly reported closed businesses, “which indicates underestimation.” Of the technology closed in 2024, 81% were emerging companies, the rest were listed companies, or were laterly closed by parent organizations.
VC did not choose “winner”
In 2020 and 2021, a large number of companies were able to raise money to procure business funds up to three years later, as they were funded with a well -known thinly diligent. It is natural to increase. Investors will not want to invest anymore, unless investing at a too high evaluation value, as long as the business is not growing very well.
“The work hypothesis is that VC as an asset class does not improve the ability to choose the winner in 2021. In fact, all of them were very enthusiastic, so the hit rate was ultimately worsening. Walker may do it, “said Walker. “And if we have a flat rate of good companies, we will provide more money to more companies, and more companies are expected to be closed in a few years. And that is our current situation.
Dori Jonah, a CEO and co -founder of SimpleClosure, a startup aiming to automate the shutdown process, believes that many startups received seeded funds before being ready.
Jonah explained that simply getting the money could fail.
He pointed out that “rapid capital injections have encouraged the idea of growing at a high burn rate, which led to the task of sustainability after the pandemic market.” Therefore, “In recent years, many famous companies have stopped their business despite the large amount of money and early promises.”
The main opportunity behind the closure is clear.
“Usually, cash shortage is a direct cause,” Walker speculates. “However, the fundamental reason may be a combination of lack of compatibility between products and market, lack of ability to make cash flow plus, and overestimated combinations that make it impossible to continue funding.”
Walker expects the number of closed cases to increase in the first half of 2025 in the first half of 2025, and will gradually decrease this year.
The forecast is mainly based on the time lag estimation from the peak of funding, and he estimates that the peak of funding is in most stages in the first quarter of 2022. Therefore, by the first quarter of 2025, “Most companies will find a new way or have this difficult choice.”
Kohli of Angellist also agrees with this. “Not everything has been washed away,” he said, about an emerging company that was funded by an unreasonably high valuation in that busy era. “I’m not near.”
Already this year, we have seen the pandion -based pandion -based pandion has been closed. The company was established in the middle of a pandemic and has raised about $ 125 million in the past five years. In December, Proptech Easyknock was suddenly closed. Easyknock is the first startup that claims to be a residential sale provider for technology, which was established in 2016 and raised $ 455 million from supporters.
Startup that disappears beyond the industry and steps
The types of companies affected last year were in various industries and stages.
Carta’s data indicates that enterprise SaaS companies are the biggest blow and account for 32% of the closure. Consumers continued at 11%. Healthstec is 9%. FinTech is 8% and biotechnology is 7%.
“These ratios are quite consistent with the initial funds to those sector,” said Walker. “And essentially, this is the fact that all startup sector has been closed, but there is no large outper -stressed sector, which is the main cause of the increase. It supports the theory that the macro economy, that is, a change in interest rates and the shortage of venture funds available in 2023 “. “
According to Layoffs.fyi’s smaller subset, 15%of the closure accounted for the finance, followed by food (12%) and medical care (11%).
According to the SimpleClosure data, 74% of all shutdowns after 2023 are presoaded or seeds, of which multiple (41%) are in the seed stage.
Most emerging companies tend to close the safe when they are completely empty, but some startups have noticed that they were written on the wall enough to return to investors a little.
“The majority of failed startup companies (60 %) have no enough capital to return to investors,” said Jonah. “The average investment of $ 630,000 is left for the founders who plan to return funds. This is equivalent to about 10 % of the totaled capital.”
Jonah also predicts that the startup closing rate will not slow down for the time being.
“Technology zombies and startup graveyards will continue to decorate headlines,” said Jonah. “There are many companies that are raising funds with high praise without sufficient profits, despite the increasing number of new investments.”