US Venture-Backed Tech Startups Face ‘Mass Extinction’

It hasn’t been a good year for private venture-backed tech startups. A New York Times article reported that approximately 3,200 US companies that raised $27.2 billion in venture funding have shuttered this year. 

This number, compiled by PitchBook, likely undercounts the total and excludes a number of the more spectacular failures like WeWork (which raised more than $11 billion in funding), and those that were still able to find buyers like Hopin.

The gloom in the sector, obscured by the recent success in artificial intelligence, is driven partly by the reality that investors, no longer interested in just promises, are trimming fat all around, deciding which once-promising startup to save and which ones to shutter or sell (and likely at a staggering loss, like Hopin, which raised more than $1.6 billion and was once valued at $7.6 billion, but was only able to sell its main business for $15 million). 

Venture capitalists are reining in their tech investments after a decade-long boom that saw investments in private US startups grow eight times to $344 billion from 2012 to 2022. According to EY, VC funding was down from $183.9 billion in the first nine months of 2022 to almost half at $104.5 billion in the same period this year. 

After two years of trying to survive in a drought of funding by cutting costs and laying off employees, many startups have run out of time and money. WeWork filed for bankruptcy in November. Around the same time, Convoy, the “Uber for trucking” which raised over $1 billion, threw in the towel.

Tom Loverro, a general partner at investment firm IVP, has compared the past year to a “mass extinction event.” And it isn’t over yet.

“As an industry we should all be braced to hear about a lot more failures,” Jenny Lefcourt, an investor at Freestyle Capital, told the Times. “The more money people got before the party ended, the longer the hangover.”


Information for this story was found via the New York Times, Business Insider, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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