Many Start-Ups Are Being Forced by VCs to Shut Down As They Run Out of Cash

IBL News | New York

Over 3,200 private venture-backed U.S. companies, which raised $27.2 billion, have gone out of business this year, according to The New York Times.

Moreover, investors fear that the failure and collapse of once-promising tech start-ups will increase in the coming months.

VC firms are deciding which young companies are worth saving and urging others to shut down or sell.

Many companies are being forced to shut down before they run out of cash, returning what remains to investors. Others are stuck in “zombie” mode — surviving but unable to grow.

In the last six weeks, high-profile companies have filed for bankruptcy or shut down.

Among them is WeWork, which raised over $11 billion, the health care firm Olive AI ($852 million raised), the freight start-up Convoy ($900 million raised), and home construction start-up Veev ($647 million).

In August, Hopin, a start-up that raised more than $1.6 billion and was once valued at $7.6 billion, sold its main business for just $15 million.

Last month, Zeus Living, a real estate start-up that raised $150 million, said it was shutting down. Plastiq, a financial technology start-up that raised $226 million, went bankrupt in May. In September, Bird, a scooter company that raised $776 million, was delisted from the New York Stock Exchange because of its low stock price.

From 2012 to 2022, investment in private U.S. start-ups ballooned to $344 billion. The flood of money was driven by low-interest rates and successes in social media and mobile apps.