35 Trillion Won Taken by 3,200 US Startups Now Facing Mass Closures and Wails

Struggling with VC Funding, Startups Closing Down
Startup Investment Hits Lowest in 8 Years This Year

The US venture capital (VC) industry has been hit hard by changes in the macroeconomic environment. Funding has dropped to about half, and 'unicorn' startups that attracted astronomical amounts of investment over the past few years are shutting down one after another.

According to US daily newspapers such as The New York Times (NYT) and CNN, American startups are suffering from severe cash shortages. Even companies that were considered relatively sound are closing their doors.

For example, healthcare startup 'Olive AI' raised $852 million (about 1.1 trillion KRW), truck transportation startup Convoy secured $900 million (about 1.2 trillion KRW), and housing construction startup Vibe raised $647 million (about 850 billion KRW), but all of them filed for bankruptcy protection or shut down within the past six weeks.

The building of WeWork, an office-sharing company that played a key role in the success story of American startups. WeWork filed for bankruptcy last month.
[Image source=AFP Yonhap News]

When central banks around the world lowered benchmark interest rates to nearly zero, a 'unicorn' (startups valued at over $1 billion) boom occurred. However, with rapid changes in the macroeconomic environment such as interest rate hikes, many startups suddenly fell into financial difficulties.

In particular, CNN reported that high interest rates and the Silicon Valley-related banking crisis reduced funding opportunities for early-stage startups and cash-out opportunities for later-stage startups.

Since these startups do not need to disclose when they sell business units or cease operations entirely, it is difficult to grasp the overall level of losses. It is also reported that the gloomy situation in the industry has been somewhat overshadowed by the 'artificial intelligence (AI)' boom, including OpenAI.

According to data from PitchBook, a market research firm related to VC, about 3,200 US companies supported by VC have closed this year. The total amount these companies raised through VC funding reached $27.2 billion (about 35.6 trillion KRW).

Meanwhile, VC funding for startups worldwide has halved compared to the previous year. The scale of funding this year is expected to record the lowest level since 2015.

The NYT stated, "Startup failures have always happened," but added, "Investors are on high alert for the possibility of massive losses as companies that have struggled in recent years are being driven to bankruptcy."

This content was produced with the assistance of AI translation services.