Startup failures rise 60% as founders face hangover from boom years
Start-up failures in the U.S. surged 60% in the past year, threatening jobs and driven by rising interest rates and reduced venture capital, with AI start-ups attracting most investment.
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Start-up failures in the U.S. 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. Notable recent failures include fintech company Tally, healthcare start-up Olive, and trucking firm Convoy. The rise in bankruptcies is attributed to rising interest rates and a decline in venture capital investment, particularly after the collapse of Silicon Valley Bank. Many start-ups that previously received large investments are now struggling to secure additional funding, leading to a painful adjustment period. Analysts note that while investment in artificial intelligence start-ups is increasing, those in less trendy sectors face a tougher landscape. The overall venture capital environment has shifted, with only 9% of funds raised in 2021 returning capital to investors, compared to 25% of funds from 2017. Despite these challenges, some funding activity is beginning to recover, particularly for AI-focused companies, which have attracted a significant portion of the available capital.
- Start-up failures in the U.S. have increased by 60% in the past year.
- The surge in bankruptcies threatens millions of jobs in venture-backed firms.
- Interest rate hikes and reduced venture capital investment are key factors in the failures.
- Investment is increasingly concentrated in artificial intelligence start-ups.
- Only 9% of venture funds raised in 2021 have returned capital to investors.
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2 commentsI have to wonder if they ever think about how they'd be sitting on >$10m if they just stayed where they were, kept their equity and enjoyed the stability.
Startups are a young man's game for a reason. When you're young you're usually too stupid to realize what you're giving up, but it doesn't matter because you have all the time in the world to start over. Starting all over in your 40's is just depressing.
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