SFCED | San Francisco Center for Economic Development


What’s Killing Startups in 2015?

If it seems like a lot of startups have been closing up shop lately, that’s because they have. By tracking blog posts, CB Insights estimates that to date, 34 startups have shuttered publicly in 2015. And, as analyst Anand Sanwal noted, “that number is likely to climb.”

Why? The math is simple: Over the past two years, the quantity of startup funding has reached its highest levels since 2000. In April, the National Venture Capital Association reported that capital invested in the startup ecosystem exceeded $10 billion for the fifth consecutive quarter.

Despite several large investments worth $100 million or more, the majority of those deals were early stage rounds to young companies, noted Bobby Franklin, President and CEO of NVCA. “Balancing the investment in megadeals, venture capital investors remain focused on building the next generation of companies,” Franklin wrote in a report.

“Startups have become fashionable and a bit sexy,” added Sanwal. “And as more companies get funded, more will have to die. There’s a Darwinism in the startup world.”

According to CB Insights, which tracks startup closure announcements and other indicators like dormant websites, companies typically close within 20 months of their most recent rounds of financing, with 70 percent dying before raising $5 million. The majority, 55 percent, die before raising $1 million. The reasons for failure can be difficult to quantify year-over-year — but the reasons that founders provide publicly can serve as a window into common issues in the ecosystem.

Read more: San Francisco Business Times What’s killing startups in 2015? Burn rates, lawsuits