Carta says 254 of its VC-backed clients went bust in Q1 2024 and the startup bankruptcy rate is over 7x that of 2019, as funds from the 2021-2022 boom run out
Private company shutdowns jump compared with last year despite AI funding frenzy, threatening millions of jobs at VC-backed firms
Context & Ripple Effects
The rise in failures follows a funding reset already visible in slower global VC fundraising in early 2024, after the 2021–2022 financing wave extended many startups’ runways.
It also sits after a broad 2023 washout, when thousands of venture-backed US companies closed, indicating that the funding-cycle correction was continuing rather than ending.
First-order effects
- Startups unable to replace expiring boom-era capital face shutdowns, putting their employees, customers and remaining assets into wind-down or transition.
- Carta’s client data gives founders and investors a sharper signal that failure risk has moved well above the pre-boom baseline.
Second-order effects
- Investors are likely to concentrate follow-on capital on portfolio companies with credible paths to additional financing or sustainability, while weaker companies face tougher bridge-round terms or closure.
- The closures reduce the pool of active venture-backed customers and suppliers, while releasing experienced startup workers and assets into the wider market.
Third-order effects
- If elevated failures persist, venture portfolios may become more concentrated around companies able to endure longer fundraising gaps, rather than those built for rapid successive rounds.
- The pattern points to a more selective venture market in which the availability and durability of capital matter more than headline funding enthusiasm in a single sector.
The trend: The venture market is shifting from boom-era runway extension toward a capital-endurance test that separates financeable startups from those dependent on continual new rounds.