Why Thousands of Startups Failed in 2024 — And What It Means for 2025

In 2024, more startups shut down than in the previous year. This sharp increase in failures isn’t surprising when we look at how many startups were funded during the investment boom of 2020 and 2021. Back then, money was flowing fast, and many businesses got millions of dollars without proven plans or strong teams. Now, the results are showing—and it’s not looking good for many startups.

The Reality Behind the Numbers

According to updated data, 966 U.S.-based startups closed in 2024, compared to 769 in 2023. That’s a 25.6% increase. These numbers come from Carta, a platform that tracks startup activity. When startups leave Carta due to failure or insolvency, the company logs them as closures. However, experts believe the actual number of shutdowns may be even higher because not every business shares the reason for leaving.

AngelList, another trusted platform in the startup world, reported a similar trend. 364 startup shutdowns were recorded in 2024, a major jump from 233 in 2023. That’s a 56.2% rise. This confirms a clear pattern: startup failures are accelerating.

Why So Many Startups Are Closing Down

So, what’s causing this wave of startup closures?

1. Overfunding in 2020 and 2021

In 2020 and 2021, venture capital firms poured money into startups at record levels. Many startups received huge investments before they had a working product or stable growth plan. This created unrealistic expectations and set businesses up for failure when they couldn’t deliver results fast enough.

2. High Valuations Without Results

Startups that raised money at very high valuations found it hard to raise more later. Investors didn’t want to pour more funds into companies that weren’t growing fast or making money. As a result, many startups ran out of cash and had no choice but to shut down.

3. Growth-at-All-Costs Mindset

Many founders believed they had to grow fast, no matter the cost. They hired large teams, spent heavily on marketing, and focused only on scaling. But when the market changed and funding dried up, they couldn’t maintain those costs—and couldn’t survive.

Industries Most Affected by Startup Closures

Startups in many industries were hit hard. According to Carta’s 2024 report:

• SaaS (Software as a Service): 32% of closures

• Consumer companies: 11%

• Healthcare tech: 9%

• Technology (general): 8%

• Biotech: 7%

Finance, food, and healthcare also faced significant losses. The data shows that shutdowns were widespread. No single industry was safe. The pressure of high interest rates, reduced funding, and tough market conditions affected all sectors.

Early-Stage Startups Struggled the Most

According to data from SimpleClosure, 74% of all shutdowns in 2023 and 2024 happened at the pre-seed or seed stage. That means most of these companies were still in their early stages and hadn’t raised larger funding rounds.

Here are some other key points:

• 41% of closures happened at the seed stage

• Many founders shut down without having enough money left to pay back investors

• On average, companies that did return funds only had about $630,000 left, which was just 10% of the total money they had raised

This shows how dangerous it can be to raise too much money too early. Startups need a strong foundation, not just funding.

What to Expect in 2025

Experts predict that the number of startup shutdowns may continue to grow in 2025. Many businesses are still raising money at high valuations without solid business models or real profits. Unless they can prove growth and attract follow-up investments, they may end up shutting down just like many others in 2024.

There’s also a new warning for founders: investors are now more cautious. They’re asking for real numbers, proof of growth, and long-term plans. This means startups need to be smarter, leaner, and more prepared before seeking big funding.

Final Thoughts: What Founders Can Learn

The startup world has changed. The days of easy funding and fast growth are over. Now, startups must focus on:

• Building a strong and scalable business model

• Managing money wisely

• Growing based on real performance, not hype

• Raising funding at the right time, with realistic valuations

Many companies that raised money in 2020 and 2021 without solid plans are now shutting down. But for founders who learn from these mistakes, there’s still a path forward.

2025 will reward smart, focused startups—the ones that solve real problems, grow steadily, and manage risk wisely.