The pace of startup shutdowns has increased to start 2024. Among startups on Carta that have raised at least $5million in priced equity, 61 shut down in January and February of this year. That's more than the total that closed up shop in Q4 2023 and we haven't added in March yet. Some more dispiriting figures: • January was the highest month of startup shutdowns on Carta for Seed-stage, Series A, and Series B companies. For Series C and beyond, the worst month was February. • More startups that had raised at least $10M shut down in the first two months of 2024 than did in Q4 2023 (prior record quarter). • More startups that had raised at least $20M shut down in the first two months of 2024 than did in Q4 2023 (prior record quarter). • Worst 2-month period for Fintech, SaaS, Healthtech, and Medical Device shutdowns in all of Carta data. What is happening? I do think some of the increase is due to seasonality - maybe founders gave themselves until the end of 2023 to find a different solution. Some is a little noise (the process to shut down a company is lengthy). But a lot of it is structural. 2023 was a year where many startups were kept afloat through bridge financings from their investors. I'd bet that we see fewer bridges this year as attention turns back to primary rounds - which leaves companies that couldn't find their footing with few options. Unfortunately I think our data is also an undercount, as many companies end without letting us know immediately (or at all, sometimes). M&A is another route, of course, but typically companies that attempt to sell themselves as a last resort are disappointed. Hug your founder friends 🙏 #cartadata #startups #founders #shutdowns ___________ More data like this out every week in our Data Minute newsletter - subscribe here: https://lnkd.in/gNa_Dk-F
Too many startups focus on raising capital instead of a path to profitability. The markets expect these early-stage startups to reach profitability within a few years, not grow at all costs, and constantly pivot. The days of excessive funding are gone.
Ooof. Was hoping 2023 was the peak 😞
Small and medium size firms are a good gauge of economic performance. Although failure is good in the long term, in the immediate future it is indicative of either business cycle or economic policy constriction. The permanency of the downward shift will rely on the quality and nature of regulations (ie incentive and barriers markers for the economy). Recent administration has been more labor focused and more direct confronting business. It is likely that high inflation, law and regulatory interventions, and disruptions in labor market are markers of recession
Perfect time to startup.
Curious Peter Walker are you noticing that founders are publicly transparent with their learnings from the shut-down experience, or do most do so in private? There have got to be lessons here that others would benefit from but imagine it's hard to go public with what feels like a big L. What do you think?
Sadly the number will go higher. Even as funding goes back up, this number will inch higher. Hopefully 2024 is the peak though!
2024 will be challenging. With high rates and many companies that took a hit in 2023, I think we will see things pick up pace toward the end of the year.
As per an article from Chamath Palihapitiya , this is supposed to be a good thing as it was the case for the last two waves of startup boom and bust! Not sure if this is what I want to see when I am trying to start one! 😬... maybe fear will keep me away from failure as this will be on my mind! 🤷🏽♂️
Thank you Peter Walker, as always your insights are so valuable. What catches my eye as well is how drastically different the numbers are for 2023/2024 versus 2020, 2021 and 2022. The first 2 months of 2024 are 3.8 times higher than all of Q1 2022. My fingers are crossed that 2024 is a turn-around year for this and for funding of new startups. We need the innovation and careers only startups can offer.
Head of Insights @ Carta | Data Storyteller
2moBTW - if you're a Carta founder thinking about shutting down, let us know here. We want to help make it as painless as possible: https://docs.google.com/forms/d/e/1FAIpQLSeeplHEpSBziNb582RIRNKnbVWBb_-JUyWCySIHt-zv6JLULw/viewform