Was 2023 really "that bad" for US startup shutdowns?
Yes.
In prior shutdown graphics, I've just charted the growth in total shutdowns by quarter. And some folks have pushed back by saying "you should express this shutdown data in terms of a failure rate instead of a simple count".
Good feedback!
Issue is, an exact failure rate is pretty difficult to come by. There are startups that join Carta every day, so the denominator in that rate is constantly updating. You also get into debates about whether all startups should be counted or only those that have moved beyond the idea stage, etc.
So here's what I did:
1. Looked at all US companies on Carta incorporated between 2017–2022 that have raised at least $1 million so far.
2. Then filtered down to the companies within each incorporation cohort that have gone out of business.
3. Charted the percentage within each cohort by the year they closed up.
Visualized by founding year, the severity of 2023 shutdowns becomes obvious. For startups founded in 2018 that raised $1M+ and have since gone out of business, over 𝗵𝗮𝗹𝗳 did so in 2023.
Now you may not think this shutdown rate by year would be equal - but the giant jump across every single incorporation cohort tells a very loud story.
Sadly, it doesn't look like this story is over either. The Q1 2024 numbers (incomplete, obviously) are foreboding.
The sea change from rising interest rates (and a hundred other things, I'm sure) swamped many startups last year. Here's hoping founders who were caught in this tide take another crack at it in the near future 🙏
If you're a Carta customer and thinking about this shutdown process, let us know and we can help streamline the administrative burden with you: https://lnkd.in/gJ_xAPu2
#cartadata #shutdowns #startups #founders ____________________
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