The startup ecosystem is showing clear signs of recovery and maturation, with company shutdowns declining dramatically in 2025. Only 733 startups have shut down through December 31, marking an 81% drop from the 3,903 closures recorded in 2024, according to data from startup intelligence platform Tracxn.
The sharp decline represents the lowest annual shutdown count since 2020, when 1,543 companies closed operations. By comparison, 2021 saw shutdowns peak at 6,494 as the market adjusted to post-pandemic realities, followed by 5,281 in 2022, 2,190 in 2023, and 3,903 in 2024. The data suggests that the worst phase of the funding winter may be over, with surviving startups demonstrating stronger fundamentals and more sustainable business models.
The decline in shutdowns comes alongside signs of funding stabilisation. After plummeting from a peak of $66.8 billion across 4,830 rounds in 2021 to a low of $33.2 billion across 3,760 rounds in 2023, funding has shown modest recovery. Startups raised $37.6 billion across 3,690 rounds in 2024, with 2025 maintaining similar momentum at $38.7 billion across 2,420 rounds.
From Volume to Value
However, the sharp drop in the number of funding rounds, from nearly 5,000 in 2021-2022 to just 2,420 in 2025, indicates investors have become significantly more selective, focusing on quality over quantity.
Sectoral Fallout
Enterprise Applications emerged as the sector with the highest number of shutdowns over the past three years, accounting for 1,803 closures between 2023 and 2025 year-to-date. The sector saw 183 shutdowns in 2025 alone. Retail followed with 1,287 shutdowns over the three-year period, while edtech recorded 968 closures. Healthtech and media & entertainment rounded out the top five sectors with 655 and 629 shutdowns respectively, during the three-year period.
Industry observers note that sectors which experienced explosive growth during the pandemic years faced the harshest corrections as market realities set in and funding dried up. The lower overall shutdown rate in 2025 may also signal a maturation in how startups are being formed, with fewer companies launching merely to chase capital rather than address genuine market needs, they added.