• A 25.6% increase is seen in startup shutdowns in 2024 in comparison to 2023, according to Carta.
  • Enterprise SaaS companies are the ones most affected, representing 32% of closures.
  • Most failures seem to occur at the seed stage, with 74% at the pre-seed or seed level.

The startup ecosystem is bracing for another challenging year as data suggests 2025 will see a continued wave of company shutdowns.

According to Carta's analysis, 966 startups ceased operations in 2024, marking a significant 25.6% increase from the 769 closures in 2023.

This trend can be linked back to the aggressive funding environment of 2020 and 2021 when many companies received substantial investments with minimal due diligence and inflated valuations.

Peter Walker, Carta's head of insights, explains that the surge in shutdowns was predictable given that "VCs as an asset class did not get better at picking winners in 2021."

Enterprise SaaS has been hit hardest, accounting for 32% of shutdowns, followed by consumer startups at 11% and health tech at 9%.

The data reveals that early-stage companies are particularly vulnerable, with 74% of all shutdowns since 2023 occurring at the pre-seed or seed stage.

The primary reason for these failures is straightforward: running out of cash. This is often compounded by a lack of product-market fit and an inability to achieve cash-flow positivity.

Moreover, companies that raised funds at inflated valuations during the boom years are finding it increasingly difficult to secure additional funding.

SimpleClosure CEO Dori Yona notes that many startups funded in 2021 received capital "probably before they were ready," leading to unsustainable growth strategies and high burn rates.

The situation is particularly dire for struggling companies, as 60% of failing startups don't have enough capital left to return to investors.

Experts predict the first half of 2025 will see continued shutdowns before a potential gradual decline in the latter half of the year.

However, with many "tech zombies" still operating on depleted resources and high valuations, the startup graveyard is expected to blossom throughout the year.

Edited By Annette George