This year, 3,200 private venture-backed US companies have folded.
In total, these defunct startups — each one undoubtedly touted as the next big thing or “gamechangers” in their glossy pitch decks — had raised US$27.2 billion (AU$40.5 billion) worth of funding prior to their respective collapses.
So where did it all go wrong?
Startup culture has traditionally been a bloated beast fattened by greed, and their limitations consistently obscured by the intangibility of “upside potential” (especially when it comes to tech), that same beast was served a brutal reality check in the form of 22-year high-interest rates.
As the US Federal Reserve put the squeeze on the global economy, naturally, the cost of capital became increasingly expensive. All of a sudden, apps that monitored the moods of house pets didn’t seem like a great investment. Nor did real estate companies that — [checks notes] — didn’t own any real estate.
Those who could fend for themselves did. Everyone else, on the other hand, was left without lifejackets. Here are a few of 2023’s greatest casualties…
WeWork
What It Was:
The aforementioned real estate unicorn, backed by Masayoshi Son’s SoftBank, that didn’t actually own any real estate.
The Damage:
Valued at US$47 billion (AU$70 billion) during the peak, US$11 billion (AU$16.4 billion) in funding secured.
The Tickler:
Former CEO Adam Neumann received a golden parachute worth roughly half a billion, still retains a net worth of US$1.7 billion (AU$2.5 billion), and has since established yet another multi-million-dollar real estate startup dubbed Flow.
Bird
What It Was:
The electric scooter provider, and fastest startup to ever land a US$1 billion (AU$1.5 billion) valuation, was delisted from the New York Stock Exchange after failing to maintain a market capitalisation above US$15 million (AU$22 million) for 30 consecutive days.
The Damage:
Valued at US$2.5 billion (AU$3.7 billion) during the peak, US$776 million (AU$1.2 billion) in funding secured.
The Tickler:
The entire operation is now worth US$7 million (AU$10.5 million) — less than a third of the US$22 million (AU$32.8 million) Miami mansion purchased by its founder, Travis VanderZandern, in 2021.
RELATED: The Graveyard Of NFTs — Dead Hype & Major Losses
Hopin
What It Was:
A virtual events business that was obviously hot during the COVID-19/lockdown years.
The Damage:
Valued at US$7.6 billion (AU$11.3 billion) during the peak, over US$500 million (AU$745 million) in funding secured.
The Tickler:
Its primary business units were recently sold for just US$15 million.
SmileDirectClub
What It Was:
A telehealth company that aimed to shake up the orthodontics industry (and plagued the internet with an onslaught of ads; you know what I’m talking about).
The Damage:
Valued at US$8.9 billion (AU$13.3 billion) during the peak, US$427 million (AU$636.5 million) in funding secured.
The Tickler:
Despite the complete shutdown (and lawsuit filed by unsatisfied customers), patients who’ve been making payments under the SmilePay plan are still “expected to continue to make all monthly payments until payment has been made in full.”
Now keep in mind: there are countless others.
From home construction startup Veev (US$647 million/AU$963 million raised) and automated healthcare player Olive AI (US$852 million/AU$1.3 billion raised); to automated pizzeria Zume (US$500 million/AU$745 million raised) and “Uber for trucking” Convoy (US$1 billion/AU$1.5 billion raised) — they’ve all packed it in.
And it doesn’t seem like anybody has learned their lesson with a new shiny toy like artificial intelligence.
As outlined by Morning Brew, as of August 2023, over 25% of all capital invested towards US startups this year had something to do with AI. In fact, funding of AI startups has more than doubled from 2022 to 2023, according to Crunchbase, with the expectation of a larger increase.
If it looks like a bubble and smells like a bubble…
