Startup shutdowns are at a record, and most of them happen quietly. There’s no dramatic collapse, just a company that never lines up its next round. If you want to avoid that ending, it helps to know what the data actually says, and what it doesn’t.
A Record Year for Shutdowns
On September 18, a16z’s “Charts of the Week” noted that “an historic number of businesses are shutting down,” with “the largest share of shutdowns” coming from “the peak-ZIRP vintages.” On October 5, Foley & Lardner partner Louis Lehot summarized it this way: “This year, more venture-backed companies shut down than at any point on record, according to data published last week by Andreessen Horowitz. The largest share of those closures comes from companies founded between 2019 and 2021.”
Neither piece gives a raw count, so treat “record” as a description of the trend, not a precise number. Lehot’s headline also offers the right frame: “Record Startup Shutdowns Reflect a Market That Is Moving Forward.”
The 2.28-Year Pattern
The most useful fresh data comes from SimpleClosure’s H1 2026 Shutdown Report (August 20). SimpleClosure handles formal wind-downs, so its numbers describe the companies it closed, a self-selected group rather than every startup.
Among companies SimpleClosure closed, the median time from last raise to closure was 2.28 years, in both H1 2025 and H1 2026. In the report’s words: “They went two years without another raise, with no next round to extend it.”
That figure isn’t a survival rate. It doesn’t mean startups typically last 2.28 years. It says that companies that did shut down typically did so a little over two years after their last round. The risk sits in the gap between rounds.
The Bar Has Moved
SimpleClosure also reports: “Of companies that raised a seed round of $1 million or more in 2023, only 24% made it past seed. Through 2020, the historical rate was 55% or higher.”
At the same time, the strongest companies are moving faster. Per SVB data cited by a16z, the median age of new unicorns is “just a shade over 4 years, reflecting a 37% decline since 2023.” The 2022 founding cohort went from $2.8 million to $5.6 million in median revenue between years 3 and 4.
So the gap between the companies that raise again and the ones that don’t is widening.
Who’s Closing, and Why
The shutdowns aren’t mostly AI companies. In SimpleClosure’s H1 2026 data:
- B2B SaaS made up 27.3% of shutdowns, “nearly twice the share” of AI companies at 14.4%.
- More than half of the SaaS closures were incorporated before 2023.
- Among companies that gave a reason, 28.1% closed for insufficient capital or cash flow, and 27.6% closed by founder choice (22.2% a change in priorities, 5.4% conflict or burnout).
Cash at closure varies by group. The full report puts the median at $30,000 for AI companies versus $13,000 for non-AI companies, and 91% of AI companies still had cash when they closed. The press release puts the B2B SaaS median at $11,900, with one in five reaching $0.
That founder-choice number deserves attention. Many founders are deciding to stop while they can still close well.
Closing Well: Tally
On March 17, 2026, Dennison Bertram announced that Tally, the DAO governance platform used by Uniswap, Arbitrum, ENS and 500+ DAOs (per CoinDesk), was shutting down after more than five years.
Tally had nearly finished a token sale and called it off: “we weren’t confident that we could fulfill the promises we would be making to token holders.” Bertram’s conclusion: “There isn’t a venture-backed business in governance tooling for decentralized protocols. At least not yet.” The team worked “with our major partners to establish continuation plans for enterprise clients,” and said publicly that the team was exploring new opportunities.
That’s what a responsible founder-choice shutdown looks like: honest, early and protective of the relationships that matter. As Lehot writes, investors “tend to remember founders who handle difficult news with honesty and care.”
What Founders Can Do Now
- Start the next round the day this one closes. Use the first months after a close to meet the investors who could lead your next round.
- Map the bar early. Find out, from people who know them, which milestones your likely next lead wants to see.
- Track two clocks. Months of cash, and the number of warm paths to your next check.
- Model, test, adjust. Revisit your plan every quarter as you learn what investors respond to.
- Close well if you need to. Tell investors early, pay people what they’re owed and help your team land.
What GPs Can Do Now
- Triage through your network. For companies 18–24 months past their last raise, introductions to follow-on leads, acquirers and acquihire buyers matter most. PitchBook-reported AI/ML acquihires rose from 181 in 2024 to 322 in 2025 (cited in the SimpleClosure report).
- Underwrite the gap between rounds. Before you invest, ask who leads next and how the founder gets to them.
- Report at-risk companies early. LPs trust managers who flag problems before a write-off.
The Relationship Clock
Most shutdowns don’t come from one bad month. They come from two years without a next round. What fills that gap is relationships: the follow-on lead who already knows the founder, the strategic buyer a board member can call, the acquihire that keeps a team together.
Much of that network is public. Form D filings list a company’s related persons and investors, Form ADV shows advisers and their funds, and business registries show shared boards. ConnectLab.live maps those paths alongside your own contacts, so you can see who already sits between you and your next round, long before runway forces the question.
Connection is the currency of the 21st Century. Your next round starts the day this one closes.
What would you do differently this month if you knew your next lead had to come from relationships you start building today?
If you’d like help with that, here’s an open invitation:
- Founders: map your warm paths to your next round at https://connectlab.live/founders
- Fund managers: claim your fund on ConnectLab at https://connectlab.live/join/funds
- Subscribe to Raise Smarter for daily fundraising signals: https://www.linkedin.com/newsletters/raise-smarter-7514657628552183808/
All the best,
Ken McArthur
Best-Selling Author and Producer