The liquidity party has dried up, and founders are feeling the hangover. Following the pandemic era’s “free money,” startup financing has dwindled. Without a funding lifeline, US startup failures have increased sevenfold since 2019, threatening 4M jobs as the market adjusts.

• During the 2021 funding boom, “capital … [likely grew] faster than the number of startups to absorb it,” creating a bubble that burst with rising interest rates and the collapse of Silicon Valley Bank.
• Venture capitalists (VCs) have raised their expectations, demanding up to 600% annual revenue growth and focusing heavily on AI startups — leaving less glamorous sectors gasping for capital.

The new startup playbook: As the “crazy fundraising environment” corrects, the startup ecosystem learns a painful new lesson. Previously, VCs encouraged founders “to grow at all costs, then to be profitable tomorrow” — assuming a steady flow of funding. However, with mergers and acquisitions activity and initial public offerings drying up, VCs have less money to reinvest. This new landscape is prompting both investors and entrepreneurs to rethink strategies, potentially prioritizing sustainable growth over breakneck expansion.