Startup failures rise 60% as founders face hangover from boom years

Start-up failures in the United States have surged by 60% over the past year, as many founders exhaust the capital raised during the technology boom of 2021-2022. This trend poses a significant threat to millions of jobs in venture-backed firms and could impact the broader economy. Data from Carta indicates that 254 venture-backed companies went bankrupt in the first quarter of 2024, marking a bankruptcy rate more than seven times higher than in 2019. High-profile closures include Tally, Caffeine, Olive, and Convoy, reflecting a painful adjustment following interest rate hikes in 2022. Venture capital investment in early-stage companies has declined, and many start-ups are struggling to secure additional funding. Analysts note that an unusually high number of companies raised large amounts of money during the boom years, leading to inflated valuations. The shift in venture capital advice from aggressive growth to immediate profitability has left many start-ups in a precarious position. While funding activity is beginning to recover, it is heavily concentrated in artificial intelligence, leaving companies in other sectors facing a challenging landscape. Only 9% of venture funds raised in 2021 have returned capital to investors, compared to 25% of funds from 2017 at the same stage.

- Start-up failures in the US have increased by 60% in the past year.

- The surge in bankruptcies threatens millions of jobs in venture-backed firms.

- Many start-ups are struggling to secure additional funding after the boom years.

- Investment is increasingly focused on artificial intelligence start-ups.

- Only 9% of venture funds raised in 2021 have returned capital to investors.