- Startups raised a ridiculous amount of money in recent years through 2021.
- That year, very few startups failed, making the market look artificially robust.
$4 love to talk about how $4 is essential to $4. They will have a LOT to discuss soon.
The startup failure rate is beginning to increase, from artificially low levels in 2021, and there could be a wave of $4 in the next year where an unusually large number of startups shut down.
"The Mass Extinction Event for startups is underway," according to a $4 from $4, a general partner at IVP, which has backed companies including CrowdStrike, Datadog, Discord, Klarna, Slack, Snap and Twitter. "It is a news footnote most of the time. Don't be fooled. The market has changed. Funding announcements get lots of headlines. Bankruptcy filings…less so." The Wall Street Journal turned his insight into a $4.
As Loverro notes, startups die quietly and slowly. They also shut down a lot. While VCs tweetstorm the latest $4 or $4 exit, there are many more young businesses in their portfolios that wither in the background.
This is $4. VC funds back loads of startups and they expect most to fail. They only need a small handful to become the next Meta or Twitter or Snowflake to generate big returns.
So there's a natural run-rate of startup failures. The problem is that the VC boom that peaked in 2021 put this natural order out of whack. There was a frenzy of investment, where startups raised massive amounts of money and some businesses got funding that maybe shouldn't have. The failure rate plunged as VCs money gushed everywhere. $4 and $4 were major actors here, but there were many others.
The money spigot has run dry
Now, the money spigot has run dry (except if you're an $4). There was so much money raised in recent years that startups have a lot of runway to survive. But, at some point, struggling businesses will run out of cash and no one will want to fund them again.
This will produce a series of painful asset sales, nasty $4 recapitalizations, ultra-cheap $4, and yes, simple shutdowns and $4. You can't see this slow-motion train wreck happening right now because startups are not public companies. There's no stock price that you can watch tumble to see fortunes crumble in real-time.
Looking closer, there are signs of Loverro's "Mass Extinction Event" building:
- WeWork, the epitome of VC largesse, went public via a SPAC in 2021 at the height of the boom. Its stock has plummeted from about $13 to 18 cents now. Here's $4. SoftBank was a huge investor there by the way.
- Zume, a robot pizza delivery startup that raised $500 million from VC investors, got burned and $4 as of this month. Another SoftBank investment there.
- Plastiq, which $4 including Kleiner Perkins and Khosla Ventures, $4 last month.
- Neeva, which offered an awesome search engine and browser, gave up competing against Google, shut down and $4. Sequoia and Greylock backed Neeva.
Crunchbase is tracking $4 so far this year, and the count is up to 72. There will be a lot more. Loverro's firm, IVP, has been urging founders to "$4" to stave off extinction, according to an internal presentation seen by Insider.
We'll leave you with Loverro's honest outlook. "Late '23 & '24 will make the '08 financial crisis look quaint for startups," he wrote in this $4.
Do you have an insight to share? Contact Melia Russell via email at mrussell@insider.com or send a message on encrypted messaging app Signal at 603-913-3085.