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

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

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.
  •, 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 Startup

  • 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.

Layoff Trends in the Tech Industry

  • 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's Role in Job Growth and Layoffs

  • 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.

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