More startups closed in 2024 compared to the previous year, according to multiple sources, and this is not really a surprise considering the crazy number of companies financed on the crazy days of 2020 and 2021.
It seems that we are not almost finished and 2025 could be another brutal startup year that close.
Techcrunch has collected data from different sources and found similar trends. In 2024, 966 startups close, compared to 769 in 2023, according to paper. This is an increase of 25.6%. A note on the methodology: those numbers are for companies based in the United States who were paper customers and left paper due to failure or dissolution. There are probably other arrests that would not be considered by paper, estimates Peter Walker, head of paper intuitions.
“Yes, the arrests have increased from 2023 to 2024 in each phase. But there were more financed companies (with larger rounds) in 2020 and 2021. So we would do it expect Arrest to increase only by nature of the VC of course, “he said.
At the same time, Walker admitted that it is “difficult” to estimate exactly how many other arrests there were or will be.
“I bet we miss a good piece,” he told Techcrunch. “There are a number of companies that leave paper without telling us because they are gone.”
In the meantime, Angellist discovered that 2024 saw 364 start wrapping, compared to 233 from 2023. This is a 56.2%jump. However, the CEO of Angellist Avlok Kohli has a fairly optimistic grip, noting that the Wombo “are still very low compared to the number of companies financed in both years”.
Layoffs.fyi found a tendency in contradiction: 85 technological companies closed in 2024, compared to 109 of 2023 and 58 in 2022. But as recognizes the founder Roger Lee, which the data include only publicly reported arrests “and therefore represent an underestimated” . Of these technological arrests of 2024, 81% were startup, while the rest were public companies or previously acquired that they were subsequently closed by their parents’ organizations.
VCS did not choose “winners”
So many companies were financed in 2020 and in 2021 in evaluations heated with notoriously subtle diligence, which is only logical that up to three years later, an increasing number could not collect more money to finance their operations. The hiring of investments to too high an assessment increases risk so that investors will not want to invest more unless companies grow very well.
“The work hypothesis is that the VC as a class of activity have not improved in choosing the winners in 2021. In fact, the success rate could end to be worse that year since everything was so frenetic,” said Walker. “And if the success rate on good companies remains flat and we finish many more companies, then you should expect many other arrests after a few years. And this is where we are in 2024. “
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 that receive seed funding “probably before they were ready”.
Simply get that money may have imposed them for bankruptcy, Yona explained.
“The rapid infusion of capital sometimes encouraged high burns of burns and growth at all costs, leading to sustainability challenges while the markets moved post-plays,” he observed. As such, “in recent years, many high -profile companies have ceased operations despite the significant financing and early promise”.
The main impulse behind the arrests is obvious.
“Arresting in cash is generally the next cause,” supposes Walker. “But the reasons below are probably a combination of lack of adaptation to the product market, lack of ability to achieve the positive cash flow and an overview that leads to the inability to continue fundraising.”
Looking to the future, Walker also expects that we will continue to see more arrests in the first half of 2025, and then a gradual decline for the rest of the year.
This projection is mainly based on an estimate of the launch of the time from the peak of the loan, which estimate was the first quarter of 2022 in most phases. So, in the first quarter of 2025, “most of the companies will have found a new forward path or has had to make this difficult choice”.
Kohli of Angellist agrees. “They are not all faded,” said startups financed to unreasonably high evaluations during those intoxicated days. “Not even close.”
Already this year we saw Pandion, a delivery startup based in Washington, announced that he was closing. The company was founded during the pandemic and has collected about $ 125 million in fairness in the last five years. And in December, Proptech Easyknock abruptly closed. Easyknock, a startup that became invoiced as the first residential sales leasing provider enabled for technology, was founded in 2016 and had collected $ 455 million in funding by supporters.
Startups that die among the industries, the phases
The types of companies affected last year were in a series of sectors and phases.
The paper data aims at Enterprise Saas companies who have undergone the greatest success, which represent 32% of the arrests. The consumer followed 11%; 9%health technique; Fintech at 8%and 7%biotechnology.
“Those percentages align quite well with the initial financing in those sectors,” said Walker. “It is essentially what this says is that each sector of the startup has seen arrests and none far superperor, which provides support for the theory according to which the main cause of the increase is macroeconomic, that is, the changes of the interest rate and the lack of financing of ventures and 2024. “
Layoffs.fyi The much smaller subset discovered that finance represented 15%of arrests with food (12%) and health (11%) arriving at the second and third.
When it comes to the phase, the SimpleClosure data discovered that 74% of all arrests since 2023 is pre-sex or seed, with plurality (41%) during the seed phase.
Most startups tend to close when the speakers are completely dry, although some see the writing on the wall soon soon to be returned to their investors.
“Most of the startups (60%) who fail have not remained enough capital to return to investors,” said Yona. “The founders who plan to return funds have an average of $ 630,000 of investments – about 10% of the total capital collected, on average.”
Yona also provides that the rate of start -up closure will not slow down soon.
“The technological zombies and a startup cemetery will continue to make news,” said Yona. “Despite the harvest of new investments, there are many companies that have collected at high evaluations and without enough revenue”.
