2025 Will Likely Be Another Brutal Year of Failed Startups, Data Suggests

An anonymous reader quotes a report from TechCrunch: 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's 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't be accounted for through Carta, estimates Peter Walker, Carta's head of insights. Meanwhile, AngelList found that 2024 saw 364 startup winddowns, compared to 233 in 2023. That's a 56.2% jump. However, AngelList CEO Avlok Kohli has a fairly optimistic take, noting that winddowns 'are still very low relative to the number of companies that were funded across both years.'

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 'and therefore represents an underestimate.' 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. So many companies got funded in 2020 and 2021 at heated valuations with famously thin diligence, that it's only logical that up to three years later, an increasing number couldn't raise more cash to fund their operations. Taking investment at too high of a valuation increases the risk such that investors won't want to invest more unless business is growing extremely well.

Looking ahead, Walker also expects we'll continue to see more shutdowns in the first half of 2025, and then a gradual decline for the rest of the year. 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, 'most companies will have either found a new path forward or had to make this difficult choice.' 'Tech zombies and a startup graveyard will continue to make headlines,' said Dori Yona, CEO and co-founder of SimpleClosure. 'Despite the crop of new investments, there are a lot of companies that have raised at high valuations and without enough revenue.'

Read more of this story at Slashdot.