Startup shutdown counts are a floor, not a total

The record

Carta's Q1 2024 data report, published 16 July 2024, counted 254 companies on its platform that closed their accounts for the stated reason of going out of business in the first quarter — a 58% increase over Q1 2023, which itself had risen 124% over Q1 2022. An earlier Carta update, dated 28 September 2023, put the running total for that year at 543 shutdowns, already ahead of the 467 recorded for all of 2022, and found that about half of the companies that closed had never raised a venture round at all.

What the sources establish

Both reports establish a rising, accelerating count of startup closures across 2022, 2023, and into 2024, drawn from the same underlying source: companies that formally closed their Carta accounts and gave going out of business as the reason. The September 2023 update adds a stage breakdown: 90% of that year's venture-backed shutdowns had raised only seed or Series A money, though later-stage failures also rose — 34 companies that had raised a Series B or later shut down that year against 25 in all of 2022, and 87 that had raised at least $10 million against roughly half that the year before. Failure, on this data, reached later-stage and better-funded companies more than in the prior cycle, even as it stayed concentrated at the earliest stages.

Scope and revision

Carta states its own limitation directly: the count covers companies that closed their accounts "for the stated reason of going out of business," which are "confirmed closures," but "many companies leave the platform without specifying a cause," and some unspecified share of those are likely closures too — meaning, in Carta's words, "it is therefore very likely that this data undercounts the true number of startup shutdowns." The series also reflects only companies that were using Carta in the first place, a population that has itself been growing, which can inflate raw shutdown counts independent of any change in the underlying failure rate; Carta notes the increase in closures has outpaced growth in its customer base, but the reports do not publish a shutdown rate normalized against the full tracked population for every period shown.

The decision in front of you

Editorially: a founder, investor, or journalist citing a shutdown count from this or any similar provider should treat it as a lower bound on actual failures, not a census, and should ask what population it is measured against before comparing counts across years or providers.

• Does the count include only confirmed closures, or does it estimate unspecified departures as closures too?
• Is the reported increase in shutdowns outpacing growth in the underlying tracked population?
• What funding stages are driving the change — the earliest stages, later and better-funded companies, or both?

A rising confirmed-shutdown count, by the provider's own account, is a floor rather than a ceiling on how many startups actually failed — useful for direction, on this data clearly upward through mid-2024, but not for a precise total.