Why We’re Heading Into the “Perfect Storm” of Startup Closures.

How many cliched comparisons can I bundle into a single blog post? We’re about to find out…

WSJ’s Berber Jin asked me for some comments around startups closing their doors, as part of a trend story trying to assess the health of the market. Failure is always part of our business — one might go so far as to say it’s the ‘natural state’ of a startup — they are likely to fail until they prove they can succeed. Jin’s resulting article “ Startups Are Dying, and Venture Investors Aren’t Saving Them” includes a portion of what I shared with him (Cliched Comparison #1: Perfect Storm):

Hunter Walk, an early investor in Toolchain, said that as the market changed, investors wanted to see evidence of dollars over usertraction, making it difficult for the company to raise money. The investing mania that ended early last year has added to the pile of startups that are now shutting down as fundraising prospects dwindle, he said.
“What we have right now is a perfect storm resulting in more than usual shutdowns,” he said.

Let’s unpack this a bit because there are three distinct cohorts of shutdowns occurring, which is some ways remind me of the ghosts from A Christmas Carol ( Cliched Comparison #2). Yes, it’s the ghosts of Startups Past, Startups Present and Startups Future, all visiting us during a…