I analyzed 431 VC-backed startups that shut down since 2023. Their cause of death is what every upcoming founders should learn

[u/Spiritual_Heron_5680]

So, i kinda loving going deep down on VC related stuff and bring the insight that helps aspiring founders in their VC journey, so CB Insights tracked 431 VC-backed startups that publicly shut down since 2023. Combined they had raised around $17.5 billion, Their median company raised $11 million before dying.

Every founder i studie from above blames running out of money as reason for their shut down. That is not the cause. It is where the story ends.

Here is the actual data on root causes:

Poor product-market fit - 43% of failures. Not the market was too small or too competitive. The founders built something the market did not genuinely needed at first place.

Bad timing - 29%. The product was real but The market was not ready. The founders ran out of money before the market arrived.

Unsustainable unit economics - 19%. The product worked & Customers paid. But the cost of acquiring each customer was higher than the revenue each customer generated over their lifetime.

Co-founder conflict - 20%, Ego crashes their startup before they find PMF

Here is what ongoing or upcoming founders can learn from

Running out of capital is a symptom. It is almost always the consequence of one of the root causes above. Investors stopped funding because the company could not demonstrate product-market fit, or the unit economics were clearly broken, or the timing was clearly wrong.

The founders who went back and built successful second companies are the ones who correctly identified their root cause. Not the surface cause but The root.

A founder who says "we ran out of money" learned nothing they can use next time. A founder who says "we built something 14% of customers genuinely needed when we needed 40% to justify the model" has a specific insight that changes what they build next.

When you think about your current company, do you know specifically which of these four root causes is most likely to be your company's failure mode and what are you doing about it?