How many startups shut down last year compared to the year before? A lot. | Equity Podcast

11 Mar 2024 (9 months ago)

Startup Shutdowns

Sunset, a company that automates legal, compliance, tax, and HR tasks associated with winding down a business, raised $1.4 million in funding.
Layoffs.fyi, a website tracking layoffs and company closures, reported a 70% increase in company closures from 2022 to 2023.
Pitchbook estimates that 3,200 venture-backed startups shut down in 2023, likely an underestimate.
Company dissolutions also occur when a company is acquired, as most acquisitions are structured as asset purchase sales where the acquirer only buys certain parts of the business.
Company shutdowns have traditionally been kept quiet, but there is now more transparency, with Founders openly discussing their experiences.

Sunset helps startups wind down their businesses and has gained attention for its unique approach.
Sunset primarily raises Angel money instead of venture capital, giving founders more optionality and avoiding pressure to sell due to growth expectations.
Sunset has a referral structure where investors can earn more equity by referring companies to the platform, aligning incentives and rewarding active investors.

Recent layoff trends in the tech industry affect all sub-industries, unlike the 2020 wave concentrated in transportation, travel, and retail due to COVID-19 shutdowns.
Layoffs in the tech industry significantly increased in 2022 compared to 2021, with over 165,000 employees laid off.
The trend continued in 2023 with an even higher number of 263,000 layoffs, making it the worst year on record for tech layoffs.
Tech layoffs in 2023 were 3 times higher than in 2020 and 60% more than in 2022.
The surge in hiring during the pandemic era contributed to the high layoff numbers in 2022 and 2023.
Layoffs tend to spike in January and February due to annual budgeting and planning cycles.
It is projected that the number of layoffs in 2024 will be lower than in 2023.

AI plays a role in both job growth and layoffs, with some companies using AI to replace human workers.
AI-related job postings have seen quarterly salary increases of around 10% due to high demand for talent.
Comprehensive, co-founded by Roger Lee, offers software to help companies manage employee compensation.