{"id":650990,"date":"2025-01-26T19:25:13","date_gmt":"2025-01-26T16:25:13","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/2025-will-likely-be-another-brutal-year-of-failed-startups-data-suggests\/"},"modified":"2025-01-26T19:25:13","modified_gmt":"2025-01-26T16:25:13","slug":"2025-will-likely-be-another-brutal-year-of-failed-startups-data-suggests","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/2025-will-likely-be-another-brutal-year-of-failed-startups-data-suggests\/","title":{"rendered":"#2025 will likely be another brutal year of failed startups, data suggests"},"content":{"rendered":"
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More startups shut down in 2024 than the year prior, according to multiple sources, and that\u2019s not really a surprise considering the insane number of companies that were funded in the crazy days of 2020 and 2021.\u00a0<\/p>\n

It app<\/a>ears we\u2019re not nearly done, and 2025 could be another brutal year of startups shutting down.<\/p>\n

TechCrunch gathered data from several sources and found similar trends. In 2024, 966 startups shut down, compared to 769 in 2023, according to Carta. That\u2019s a 25.6% increase. One note on methodology: Those numbers are for U.S.-based companies that were Carta customers and left Carta due to bankruptcy or dissolution. There are likely other shutdowns that wouldn\u2019t be accounted for through Carta, estimates Peter Walker, Carta\u2019s head of insights.<\/p>\n

\u201cYes, shutdowns increased from 2023 to 2024 in every stage. But there were more companies funded (with bigger rounds) in 2020 and 2021. So we would expect<\/em> shutdowns to increase just by nature of VC naturally,\u201d he said.\u00a0<\/p>\n

At the same time, Walker admitted that it\u2019s \u201cdifficult\u201d to estimate exactly how many more shutdowns there were, or will be.\u00a0<\/p>\n

\u201cI bet we\u2019re missing a good chunk,\u201d he told TechCrunch. \u201cThere are a number of companies who leave Carta without telling us why they left.\u201d<\/p>\n

Meanwhile, AngelList found that 2024 saw 364 startup winddowns, compared to 233 in 2023. That\u2019s a 56.2% jump. However, AngelList CEO Avlok Kohli has a fairly optimistic take, noting that winddowns \u201care still very low relative to the number of companies that were funded across both years.\u201d<\/p>\n

Layoffs.fyi found a contradicting trend: 85 tech companies shut down in 2024, compared to 109 in 2023 and 58 in 2022. But as founder Roger Lee acknowledges, that data only includes publicly reported shutdowns \u201cand therefore represents an underestimate.\u201d Of those 2024 tech shutdowns, 81% were startups, while the rest were either public companies or previously acquired companies that were later shut down by their parent organizations.<\/p>\n

VCs didn\u2019t pick \u201cwinners\u201d<\/strong><\/p>\n

So many companies got funded in 2020 and 2021 at heated valuations with famously thin diligence, that it\u2019s only logical that up to three years later, an increasing number couldn\u2019t raise more cash to fund their operations. Taking investment at too high of a valuation increases the risk such that investors won\u2019t want to invest more unless business is growing extremely well.\u00a0<\/p>\n

\u201cThe working hypothesis is that VCs as an asset class did not get better at picking winners in 2021. In fact, the hit rate may end up being worse that year since everything was so frenzied,\u201d Walker said. \u201cAnd if the hit rate on good companies remains flat and we fund a lot more companies, then you should expect many more shutdowns after a few years. And that\u2019s where we are in 2024.\u201d<\/p>\n

Dori Yona, CEO and co-founder of SimpleClosure, a startup that aims to automate the shutdown process, believes that in 2021, we saw a large number of startups receiving seed funding \u201cprobably before they were ready.\u201d<\/p>\n

Merely getting that money may have set them up for failure, Yona explained.<\/p>\n

\u201cThe rapid capital infusion sometimes encouraged high burn rates and growth-at-all-costs mentalities, leading to sustainability challenges as markets shifted post-pandemic,\u201d he noted. As such, \u201cin recent years, many high-profile companies ceased operations despite significant funding and early promise.\u201d<\/p>\n

The primary impetus behind the shutdowns is an obvious one.<\/p>\n

\u201cRunning out of cash is typically the proximate cause,\u201d Walker surmises. \u201cBut the underlying reasons are likely some combination of lack of product-market fit, lack of ability to get to cash-flow positive, and overvaluation leading to an inability to continue fundraising.\u201d<\/p>\n

Looking ahead, Walker also expects we\u2019ll continue to see more shutdowns in the first half of 2025, and then a gradual decline for the rest of the year.\u00a0<\/p>\n

That projection is based mostly on a time-lag estimate from the peak of funding, which he estimates was the first quarter of 2022 in most stages. So by the first quarter of 2025, \u201cmost companies will have either found a new path forward or had to make this difficult choice.\u201d<\/p>\n

AngelList\u2019s Kohli agrees. \u201cThey\u2019re not all washed out,\u201d he said of the startups funded at unreasonably high valuations during those heady days. \u201cNot even close.\u201d\u00a0<\/p>\n

Already this year, we\u2019ve seen Pandion<\/a>, a Washington-based delivery startup, announce it was shutting down<\/a>. The company was founded during the pandemic and had raised about $125 million in equity over the last five years. And in December, proptech EasyKnock abruptly shut down. EasyKnock, a startup that billed itself as the first tech-enabled residential sale-leaseback provider, was founded in 2016 and had raised $455 million in funding from backers.<\/p>\n

Startups dying across industries, stages\u00a0<\/strong><\/p>\n

The types of companies impacted last year were across a range of industries, and stages.<\/p>\n

Carta\u2019s data points to enterprise SaaS companies taking the biggest hit \u2014 making up 32% of shutdowns. Consumer followed at 11%; health tech at 9%; fintech at 8%, and biotech at 7%.<\/p>\n

\u201cThose percentages align pretty well with the initial funding to those sectors,\u201d Walker said. \u201cAnd essentially what this says is that every startup sector has seen shutdowns and none vastly outperformed, which gives support to the theory that the main cause of the increase is macro-economic, i.e. interest rate changes and the lack of available venture funding in 2023 and 2024.\u201d<\/p>\n

Layoffs.fyi\u2019s much smaller subset found that finance accounted for 15% of the shutdowns with food (12%) and healthcare (11%) coming in second and third.<\/p>\n

When it comes to stage, SimpleClosure\u2019s data found that 74% of all shutdowns since 2023 are either pre-seed or seed, with the plurality (41%) at the seed stage.<\/p>\n

Most startups tend to shut down when the coffers are completely dry, though some see the writing on the wall early enough to give a bit back to their investors.<\/p>\n

\u201cThe majority of startups (60%) that fail don\u2019t have enough capital left to return to investors,\u201d Yona said. \u201cFounders that do plan on returning funds have an average $630,000 of investments left \u2014 about 10% of total capital raised, on average.\u201d<\/p>\n

Yona also predicts the rate of startup closures will not\u00a0slow down anytime soon.<\/p>\n

\u201cTech zombies and a startup graveyard will continue to make headlines,\u201d Yona said. \u201cDespite the crop of new investments, there are a lot of companies that have raised at high valuations and without enough revenue.\u201d<\/p>\n<\/div>\n

If you liked the article, do not forget to share it with your friends. Follow us on\u00a0Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n

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If you want to read more like this article, you can visit our Technology<\/a><\/span> category.<\/strong><\/p>\n<\/blockquote>\n

Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

More startups shut down in 2024 than the year prior, according to multiple sources, and that\u2019s not really a surprise considering the insane number of companies that were funded in the crazy days of 2020 and 2021.\u00a0 It appears we\u2019re not nearly done, and 2025 could be another brutal year of startups shutting down. TechCrunch…<\/p>\n","protected":false},"author":1,"featured_media":650991,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/techcrunch.com\/wp-content\/uploads\/2025\/01\/Graveyard-with-dollar-signs.jpg?resize=1200,900","fifu_image_alt":"","footnotes":""},"categories":[18],"tags":[153901,151522,61594,153902,153903,70917],"class_list":["post-650990","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology","tag-angellist","tag-carta","tag-exclusive","tag-failures","tag-simpleclosure","tag-startups"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/650990","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=650990"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/650990\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/650991"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=650990"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=650990"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=650990"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}