https://www.fastcompany.com/90933648/venture-backed-startups-are-failing-at-record-rates [p] * * Fast Company Login SUBSCRIBE * Premium * Co.Design * Tech * Work Life * News * Impact * Podcasts * Video * INNOVATION FESTIVAL * * FastCo Works + AWS + Capital One + IBM Login * Premium * Co.Design * Tech * Work Life * News * Impact * Podcasts * Video * INNOVATION FESTIVAL Help Center fastco works * AMAZON BUSINESS * AWS * BOSTON SCIENTIFIC * CAPITAL ONE * COMCAST BUSINESS * Deloitte * EPSILON * FIS * GUARDANT HEALTH * IBM * IEDC * Mckinsey & Company * OPENTEXT * QATAR AIRWAYS * SAP * SIEMENS * VERIZON * WELLS FARGO * FastCo Works An award-winning team of journalists, designers, and videographers who tell brand stories through Fast Company's distinctive lens FC Executive Board collections * Fast Government The future of innovation and technology in government for the greater good * Most Innovative Companies Fast Company's annual ranking of businesses that are making an outsize impact * Most Creative People Leaders who are shaping the future of business in creative ways * World Changing Ideas New workplaces, new food sources, new medicine--even an entirely new economic system * Innovation By Design Celebrating the best ideas in business Newsletter Events * FC Grill at SXSW * Most Innovative Companies Events * Innovation Festival Courses and LearningAdvertiseCurrent Issue Current magazine issue cover advertisement * 08-04-23 Venture-backed startups are failing at record rates Fifty-four companies with private equity or VC backing have already filed for bankruptcy protection this year, according to new S&P Global Market Intelligence data. [Photo: VectorInspiration/Getty Images] * * * * By Mark Sullivan1 minute Read If current trends continue, more VC- or private equity-backed startups will fall into bankruptcy this year than at any point since 2010. In the first half of 2023, 338 U.S. companies filed for bankruptcy protection, according to newly released S&P Global Market Intelligence data, including 54 companies with private equity or venture capital backing. At that rate, 108 VC-backed startups will fail by year's end, besting the 95 that failed during 2010. Why is this happening? Highly leveraged companies are dealing with headwinds they didn't face just a year ago. Because of rate hikes by the Federal Reserve, they're paying higher interest rates on loans. And it's become increasingly difficult to secure new money from investors. As a result, some companies can't bring in enough revenue to keep the business moving toward profitability and eventually a lucrative exit for their backers. Many of the startup bankruptcies come from the healthcare (15) and consumer goods (12) sectors, while 6 information technology companies have filed for Chapter 11 so far this year. advertisement Rising interest rates have stunted venture capital investment worldwide this year. PitchBook data shows that VC investment was nearly cut in half in the first six months of 2023. The firm reports a 48% decline in investment to $173.9 billion, and a 19% drop in deal numbers. The massive excitement over AI has sustained investment rates in that subsector but has not buoyed up the rest of the industry. Pitchbook says private equity and VC investors bet $40 billion on AI startups in the first half of 2023, but that includes a $10 billion chunk of Microsoft money put behind OpenAI, and a $1.3 billion investment in Inflection AI. PluggedIn Newsletter logo Sign up for our weekly tech digest. Privacy Policy About the author Mark Sullivan is a senior writer at Fast Company, covering emerging tech, AI, and tech policy. Before coming to Fast Company in January 2016, Sullivan wrote for VentureBeat, Light Reading, CNET, Wired, and PCWorld More Video advertisement Tech Tech Taylor Swift's Eras Tour is a reminder that social media is not real life Tech Google Maps has become an eyesore. 5 examples of how the app has lost its way Tech Ozempic, other weight-loss drugs face backlash from companies, lawyers. 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