From Boom to Bust: Exploring the Startup Shutdown Trend

• Startup closures rose by 25.6% in 2024, powered by overfunding during the 2020-2021 boom and challenging economic times.
• The hit sustained by early-stage start-ups and industries such as SaaS, fintech, and health tech will likely result in more firms closing their operations in 2025.

The startup industry was hit with a sad reality in 2024, where more companies were not just closed today compared to last year’s records. As unfortunate as this sounds, the number of successful companies’ closures did not affect everyone. The funding momentum, which had kicked into overdrive in 2020 and 2021 due to the economic implications of those hyperactive funding periods, would certainly, in some cat-rearranged way or manner, establish a path and overhanging shadow for the existence of many startups resolved to die other than strive against the exposure of need to live.

2024 also saw a spike in shutdowns from numerous exchanges, while there are already assessments that this contrasts with a spasm of rotting trends for the closing economy in 2025. Here is a cross-validation of the compounding reasons for several stand-down orders and one course for the future of the start-up landscape.

The Shutdowns: The Numbers

In 2024, 966 U.S.-based startups shut down, recording a 25.6% increase over the 769 closures in 2023, according to Carta, a business share management firm. AngelList teetered even further on the edge, scoring 364 shutdowns during 2024 as opposed to just 233 in 2023, showing a 56.2% acceleration. Contrarily, Layoffs. Fyi, with a focus on publicly reported shutdowns, noticed a decreased rate of closures. According to its records, 85 tech companies bit the dust in 2024 as opposed to 109 in 2023.

Despite a controversial source conflict, all relevant experts conclude that the figures provided might fall short of the big picture. Peter Walker, head of insights at Carta, thinks that there are probably more dead companies that are not tracked because they left Carta, as their reason for doing so is not disclosed.

Roots of the Crisis.

The onset of failures among the startups can be linked to the high-risk disbursement of money during the funding surges of 2020 and 2021. Companies received huge rounds of funding only because of the inflated bubble economy without having, in some cases, an isolated, robust business model or profitability in sight.

Also, it suffices to mention that this period witnessed the impasse of due diligence by the venture capitalists. “In consequence, many startups were not able to get further funding when their growth fell short of expectations,” Walker elaborated for this article.

Equally of concern would be the outright neglect of running a profit. Companies felt it was acceptable to make profits later. Indeed, a mindset for corporate growth at all costs in the name of “scale” had become the creed in the days of such breakneck speed growth of startups in the pandemic years. Plus, as other industries arose around them, affecting demand, the startup economy was torn to pieces by the “growth now and get rich” concept. The question of when the profits finally come was missing. Dori Yona, the CEO of SimpleClosure, notes, “Most startups were funded very early, setting them up for failure because they were unable to adjust to the post-pandemic reality.”

The Most Hard-Hit Industries and Stages

There’s a broad range of industries that have been heavily affected. The shutdowns affected enterprise SaaS startups, considering they accounted for 32% of the total. Consumer startups followed with 11%, while health tech, fintech, and biotech were hit hard as well.

The most affected startups were those in their earliest stages of funding; SimpleClosure reported that 74% of the closures from 2023 onwards were seated at either the pre-seed or seed stage. Startups in these early funding stages typically have little runway anyway and thus are very susceptible to economic turmoil.

Economic Headwinds: A Key Dimension

The skyrocketing interest rates and the difficulty in obtaining venture capital funds in 2023 and 2024 formed an unfavourable environment for startup activities. It became increasingly hard to secure follow-on funding, and yet the startups with valuations that were too high had to fight an ever-burgeoning battle to rationalise their worth to the investors.

“However, in the larger picture, Walker said, the immediate cause of failure for many companies is that ‘they ran out of cash and then shut down.’ ‘ However,’ he continued, ‘the core issue might have been a lack of product-market fit; an inability to achieve profitability and business overvaluation is often associated with company shutters.’”

Beholding 2025

Having closures of startups becoming, to an extent, a trend, there are high trends of the continued acceleration of the decline of many startups. At the beginning of 2025, other companies at the end of their 2020-2021 peak-funded financial runways are also expected to shut down. 

While some startups are opening up as refugees or raining down the shutters, some are choosing silence and hollow, and a minuscule proportion of these have been able to return some capital to the creditors. The amount returned is surprisingly high, such as 10%, leaving around 630,000 in their hands, management, or accounts to await the next phase in their life cycle.

According to AngelList CEO Avlok Kohli, there are still numerous optimistic forecasts or scopes for profitable investment, even though many of them might have gone wrong. This viewpoint hints at the survival spirit of some enterprises that are constantly adapting and evolving toward new challenges.

The Transformation of the Startup Landscape

Closure after closure has reshaped the startup field, exposing all equally the downsides of unsustainable scaling strategies and exorbitant valuations. To be outdone, the invisible shadows marked by “the dead body of tech life” and the increasing “start-up graveyard” add to the picture as they too throw opportunities for those disciplined enough to lag along the brilliant and thoughtful paths of investment. 

As we go forward in 2025, the world of startups stands at a crossroads. Perhaps with knowledge accrued over the last few very painful years, we may be able to build a more sustainable and innovative ecosystem—or perhaps, it is going to be another horrible year. Time is going to tell which direction the industry trends toward.