Startups are gaining popularity in the US, but so are bankruptcies

Despite the influx of latest businesses into America, the variety of business owners filing for bankruptcy has also increased.

The variety of Americans turning to entrepreneurship has grown significantly this 12 months, with greater than three million latest business applications filed in 2024, reports that number has exceeded levels in eight of the past 10 years, with 420,802 applications filed in July. The monthly average is now 92% higher than the number before the COVID-19 pandemic.

According to Carta, a provider of services to personal corporations, 254 startups are backed by enterprise capitalists went bankrupt in the first quarter of 2024. This is seven times greater than the 2019 rates.

Despite this, there remains to be a growing problem of startup closures, which regularly puts lots of of individuals out of labor.

“Business closures have been on a steady rise for the past two years,” the company said in a press release. “Between Q1 2022 and Q1 2023, closures increased by 124 percent year-over-year. Between Q1 2023 and Q1 2024, closures increased by an additional 58 percent.”

A September 2023 study by the Pew Research Center found that greater than 1 in 5 Black adults in the U.S. consider that “owning a business is essential to financial success.” There are an estimated 3.7 million Black-owned businesses in the U.S.; in 2021, about 3% of companies in the U.S. were Black-owned.

In 2023, Inc. reports that startups “saw the lowest amount of venture capital funding since 2018,” which many consider is directly related to the rising variety of failed businesses across the country. With higher rates of interest and bank failures, traditional loans are not an option for a lot of businesses, especially Black-owned businesses, which have been widely missed for financial support as they scale and grow their businesses.

Unfortunately, as a result of systemic racism and lack of access to resources vital to survive and thrive, Black-owned businesses know all too well what it’s wish to be denied funding by VC firms. Now, other businesses are going through the same thing as investors pull back on funding.

Experts point to the overall state of the economy as a reason for the decline in VC firms backing startups across America. Still, DropboxDocSend senior data and trends analyst Justin Izzo stays hopeful about the future.

“If the company is looking to raise money in the next six to eight months, I think the climate will be better than it has been in the last 18 months,” Izzo told Inc. “It’s more likely to be a steady inflow of funds and then turn into a stream.”

Still, alarmingly high bankruptcy rates aren’t stopping aspiring entrepreneurs from hoping for a bit of the American dream pie.