Startups are facing an "extinction event" - true or false?
As usual, the answer is more nuanced. Let's dig into the data.
Chart below shows startups that left the Carta platform by quarter for the reasons "bankruptcy or dissolution". This gives us the minimum number of startups that shutdown in a given time period (the real figure is likely higher but this is a stable metric to track over time).
Important note - this only looks at startups that have raised at least 1 priced round already. Many more startups in the pre-seed stage also failed over this time period.
So - are more startups going out of business? Yes.
39 startups on Carta went bankrupt / dissolved in Q2 of 2021.
81 did so in Q2 of this year, a jump of 107%.
There has also been a slight trend towards later-stage startups taking more share of the bankruptcies. When we looked at this using a separate metric (total cash raised at time of dissolution), there were more startups that raised $25M+ that failed in Q2 2023 than ever before.
Now - is this an extinction event? Depends on your perspective. Certainly a number of companies raised lots of money in the past 2 years that wouldn't have been able to raise in a more "normal" environment.
But at the end of the day, I bet the percentage of startups that fail over the coming year remains roughly in line with prior years.
Important to look at this failure rate, but not a fun topic. Big appreciation to any and all founders going through this decision - we are better off for you trying at all.
#cartadata #startupfailure #bankrupcties #dissolutions #startups
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