More startups using Carta closed down in Q1 2024 than in any other quarter. 254 startups shutdown in Q1 vs 161 in Q1 of 2023 - 58% higher. To tackle an expected objection: 𝘁𝗵𝗶𝘀 𝗶𝘀 𝗻𝗼𝘁 𝗮 "𝘀𝘁𝗮𝗿𝘁𝘂𝗽 𝗳𝗮𝗶𝗹𝘂𝗿𝗲 𝗿𝗮𝘁𝗲". I do think that the failure rate is higher (see the other panes in this slideshow to see more on this) but apologies in advance for folks who want the failure rate only. It's pretty tough to get an exact failure rate given the denominator changes with companies joining Carta. However, most companies join Carta these days at the pre-seed stage (through our free Carta Launch program) so the population for priced round companies is more stable. 𝗢𝘁𝗵𝗲𝗿 𝗞𝗲𝘆 𝗣𝗼𝗶𝗻𝘁𝘀 • Shutdowns rose across the board, but the increase was higher for companies who had already raised a priced round vs those that have yet to get into priced equity fundraising (click to the second slide for this). • Shutdowns rose 102% from Q1 2023 to Q1 2024 for companies in the Priced Seed stage. Really challenging moment for founders at that point. • Shutdowns rose 133% for Series B companies over the past year. It's not just the smaller companies closing up shop. This is a very difficult moment for many startups, brought on by interest rates changes flowing to fundraising slowdowns, on and on. Hug your founder friends - so much respect for those trying to push forward through the muck 🙏 #cartadata #startupshutdowns #shutdowns #startups #fundraising
All the hugs to all of the founders. How do you think this shakes out over the next four quarters?
Is there any data on number of shutdowns as a percentage of existing start-ups at a similar stage? For example, while 2024 Q1 had the most shutdowns of those using Carta, were there a lot more start-ups to begin with?
All of the hugs - this is tough to read, tough to watch, and it's a time to support not tear down ❤️
When will it ever stop again… positive vibes to all founders out there grinding each day 🚀
This is awesome data. Love the way you guys use your inside knowledge at Carta to bring more transparency into this niche part of the economy. We're launching a startup soon that will likely be using Carta to manage our Cap Table, and one of the reasons is this transparency & the company's approach to positioning as a thought leader in the space. Really love The Data Minute content. I wish more Main Street businesses used Carta so we could get similar insights into that part of the economy too 😜
It's fascinating to watch the data support what I am seeing across my client base too. It is a challenging time to be a founder for sure. Time to reevaluate the often held belief among founders that work is absolutely everything (in terms of time allocation and headspace) when failure rates are so so high.
Sounds like it's becoming dangerous to use Carta. Oh, wait...
Not sure if this is actually a bad news. Resources are directed better as a result.
Really solid breakdown by funded/not funded and by stage. I commented on this chart six months ago when we only had data through Q3 2023, and as I expected, it has gotten worse. At this point, I’m not sure whether it will get worse, stay steady, or start to get better. Though I suspect we have two more quarters of this same level of failures or possibly another increase.
Corporate Development Leader / M&A / Divestitures / Strategic Investments
2moI wonder, of those 254 that shut the doors, how many would have found a permanent home via acqui-hire in a better market? It's a shame for the strategics that are on the sideline, but also other early stage companies that could pick up technology and engineering teams at an attractive price point...