More startups were closed in 2024 than a year ago, according to numerous sources, and this is no really surprise taking into account the crazy number of companies that were funded in the crazy days of 2020 and 2021.
It seems that we are not over and 2025 may be another brutal year of closing startups.
Techcrunch collected data from several sources and found similar tendencies. In 2024, 966 startups were closed, compared to 769 in 2023, according to Carta. This is an increase of 25.6%. A Note on the Methodology: These numbers are for US -based companies that were Carta clients and left Carta due to bankruptcy or dissolution. There are likely to be other closures that will not be counted through Carta, estimates Peter Walker, Carta’s knowledge head.
“Yes, the closures increased from 2023 to 2024 at every stage. But there were more funded companies (with larger rounds) in 2020 and 2021. So we will EXPECT The closures should only grow by the nature of the VC naturally, ”he said.
At the same time, Walker admitted that it is “difficult” to evaluate exactly how many other closures there were or will have.
“I bet we are missing a good part,” he told Techcrunch. “There are a number of companies leaving Carta without telling us why they left.”
Meanwhile, Angelist found that 2024 without 364 closures of startups, compared to 233 in 2023. This is an increase of 56.2%. However, Angelist Avlok Kohli’s CEO has a very optimistic stance, noting that the closures “are still very low compared to the number of companies that have been funded for two years.”
Layoffs.fyi found a contradictory tendency: 85 technological companies were closed in 2024, compared to 109 in 2023 and 58 in 2022. an underestimation. ” From those technology closure in 2024, 81% were startups, while the rest were either public companies or previously purchased companies that were later closed by their parent organizations.
QVs did not select “winners”
So many companies were funded in 2020 and 2021 with extremely low zeal estimates that it is logical that up to three years later, an increasing number could not raise more money to fund their operations. Getting investments in a very high estimate increases the risk so that investors will not want to invest more if the business is not increasingly growing.
“The job hypothesis is that VCs as a class of assets did not become better in selecting winners in 2021. In fact, the rate of shock may end up being worse that year as everything was so frantic,” said Walker. “And if the shock rate for good companies remains flat and we fund much more companies, then you have to expect much more closure after a few years. And here we are in 2024. ”
Dori Yona, CEO and co-founder of SimpleClurse, a startup aiming to automate the closing process, believes that in 2021, we saw a large number of startups who received the starting funds “before they were ready”.
Simply getting those money could have put them in failure, Yona explained.
“The rapid infusion of capital sometimes encouraged high burning rates and growth mentalities at all costs, leading to challenges of sustainability as the markets moved after the pandemic,” he noted. As such, “in recent years, many high -profile companies ceased to function despite considerable funding and early promises.”
The main impetus after closure is visible.
“Keep without money is usually the close cause,” assumes Walker. “But the underlying reasons are probably a combination of lack of product adaptation to the market, the lack of ability to reach the flow of positive money, and the overvaluation that leads to the inability to continue collecting funds.”
Looking forward, Walker also expects that we will continue to see more closure in the first half of 2025, and then a gradual decline for the rest of the year.
This projection is mainly based on an assessment of the time delay from the height of funding, which he estimates was the first quarter of 2022 in most stages. So until the first quarter of 2025, “most companies will either have found a new road ahead or will have to make this choice difficult.”
Angelist Kohli agrees. “They are not all washed,” he told the startups funded with unreasonable high ratings during those difficult days. “Nor close.”
Already this year, we have seen Pandion, a Washington -based distribution startup, to announce it is closing. The company was founded during the pandemic and collected about $ 125 million capital over the past five years. And in December, Easyknock proptech was suddenly closed. Easyknock, a startup who described himself as the first provider of rented to technology housing, was founded in 2016 and had raised $ 455 million from supporters from supporters.
Strands dying through industry, phases
The types of companies affected last year were in a variety of industries and stages.
Carta data show that Saas enterprise companies get the largest hit – accounting for 32% of the closures. Customer followed by 11%; health technology at 9%; Fintech with 8%, and biotechnology with 7%.
“These percentages match quite well with the initial financing for those sectors,” Walker said. “And basically what this says is that every startup sector has seen closures and none have overcome, which gives support to the theory that the main cause of growth is macroeconomics, ie changes in interest rates and the lack of available funding in enterprise in 2023 and 2024. ”
Layoffs.fyi much smaller subgroup found that finances account for 15%of food closures (12%) and health care (11%) in second and third place.
When it comes to phase, SimpleClurst data found that 74% of all closures since 2023 are either pre-seed or SEED, with the plural (41%) in the seed phase.
Most startups tend to close when the crates are completely dry, though some see the writing on the wall quite early to return to their investors.
“Most startups (60%) that fail do not have enough capital to return to investors,” Yona said. “Founders planning funds returning on average $ 630,000 investment – about 10% of total capital collected, on average.”
Yona also predicts that the startup closure rate will not slow down soon.
“Technology and an initial cemetery will continue to be titles,” Yona said. “Despite increasing new investments, there are many companies that have increased with high estimates and without sufficient income.”
