The Startup Apocalypse Continues

2024 was a bloodbath for startups, and 2025 is shaping up to be even worse. According to data from Carta, 966 U.S.-based startups shut down in 2024—a staggering 25.6% increase from 2023. And that’s just the tip of the iceberg. Peter Walker, Carta’s head of insights, warns, “We’re missing a good chunk of shutdowns. Many companies leave Carta without telling us why.”

“The working hypothesis is that VCs as an asset class did not get better at picking winners in 2021. In fact, the hit rate may end up being worse that year since everything was so frenzied.”

Peter Walker, Carta

Why Are Startups Failing?

The root cause? A toxic cocktail of overvaluation, reckless funding, and unsustainable growth. The pandemic-era funding frenzy of 2020 and 2021 pumped billions into startups that weren’t ready for prime time. Dori Yona, CEO of SimpleClosure, explains, “Rapid capital infusion encouraged high burn rates and growth-at-all-costs mentalities, setting many startups up for failure.”

• Overvaluation: Startups raised at sky-high valuations, making it impossible to secure follow-on funding.
• Lack of Product-Market Fit: Many companies failed to solve real problems or attract paying customers.
• Cash Burn: High burn rates left startups with empty coffers and no lifeline.

Who’s Getting Hit the Hardest?

No sector is immune. Carta’s data reveals enterprise SaaS took the biggest hit, accounting for 32% of shutdowns. Consumer startups followed at 11%, with health tech, fintech, and biotech rounding out the top five. Layoffs.fyi’s data adds another layer: finance (15%), food (12%), and healthcare (11%) were the hardest-hit industries.

“Tech zombies and a startup graveyard will continue to make headlines. Despite new investments, many companies raised at high valuations without enough revenue.”

Dori Yona, SimpleClosure

The Domino Effect

Startups funded during the 2021 frenzy are now hitting their three-year mark—the typical lifespan before a shutdown. Walker predicts more shutdowns in the first half of 2025, followed by a gradual decline. “By Q1 2025, most companies will have either found a new path forward or shut down,” he says.

Real-World Casualties

Already, high-profile startups are falling. Pandion, a delivery startup that raised $125 million, shut its doors. Proptech giant EasyKnock, with $455 million in funding, abruptly closed in December. These aren’t isolated incidents—they’re symptoms of a systemic issue.

What’s Next?

The startup graveyard will keep growing. Yona predicts, “The rate of closures won’t slow down anytime soon.” For founders, the message is clear: focus on sustainable growth, real revenue, and product-market fit—or risk becoming another statistic.

“They’re not all washed out. Not even close.”

Avlok Kohli, AngelList

Key Takeaways

• Startup shutdowns surged by 25.6% in 2024—and 2025 could be worse.
• Overvaluation, lack of product-market fit, and cash burn are the main culprits.
• Enterprise SaaS, consumer, and health tech are the hardest-hit sectors.
• Founders must prioritize sustainability over growth-at-all-costs.

The startup world is in crisis. Will 2025 be the year of reckoning? Only time will tell.