The 2025 Startup Shutdown: More Capital, Later Stages, and the First AI Reckoning

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SANTA MONICA, Calif.--(BUSINESS WIRE)--Dec 23, 2025--

SimpleClosure, the leading solution for venture-backed startup dissolutions, released its 2025 State of Startup Shutdowns report, revealing significant shifts in how, when, and which companies are winding down.

The data tells a clear story: 2025 is not a year of collapse—it is a year of maturation. Companies shutting down are older, have raised more capital, and are further along in their lifecycle than ever before. Series A shutdowns jumped from approximately 6% to 14% of all closures—a 2.5x increase year-over-year—signaling that the correction has moved from failed ideas to failed models.

Among the report's most striking findings: the first major wave of AI company shutdowns has arrived. While AI remains one of the largest categories, representing nearly 16% of closures, the dominant pattern is clear—AI wrappers and application-layer tools built quickly on commoditized models, without deep defensive moats, are facing the sharpest correction. Infrastructure and developer tool companies fail less frequently, but when they do, they have raised roughly twice the capital of their wrapper counterparts.

"The 2021-2022 vintage is working through its filter moment," said Dori Yona, CEO and Co-founder of SimpleClosure. "Founders don't shut down because they're done building. They shut down to clear the path for what comes next. The founders winding down these companies are often the same ones who will found the next generation of startups—with clearer differentiation, tighter burn, and a more realistic view of where value accrues."

Key findings from the report include:

Later-stage corrections: Series A shutdowns increased 2.5x year-over-year, while pre-seed and seed make up a smaller share of the total. Many companies now shutting down are 7 to 10 years old, dating back to fintech, insurtech, and marketplace waves founded before the AI boom.

Geographic concentration: The correction is heaviest where the ZIRP-era boom was strongest. California and New York dominate closures, while Pennsylvania and Colorado show sharp increases as their 2020-2021 vintages face funding constraints.

Industry normalization: AI's share edged down from 17.7% to 15.9% as other sectors hit their own reality checks. B2B SaaS rose from 5.2% to 7.7%. Capital-intensive sectors like biotech, healthcare, and climate are showing increased closures as 2020-2021 enthusiasm meets today's fundraising environment.

The AI selection event: The AI ecosystem is moving from novelty to selection. The market is now filtering aggressively for companies with proprietary data advantage, real unit economics, and deep integration into enterprise workflows—not tools that simply sit on top of them.

About SimpleClosure

SimpleClosure helps venture-backed startups shut down efficiently and 100% compliantly. Their in-house experts guide founders through every step, from filings and compliance to investor and creditor communications, while their platform provides full visibility into what's been handled and what remains. Today, over 1,500 founders and their stakeholders rely on SimpleClosure.

The full 2025 State of Startup Shutdowns report is available at simpleclosure.com.

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KEYWORD: UNITED STATES NORTH AMERICA CALIFORNIA

INDUSTRY KEYWORD: PROFESSIONAL SERVICES TECHNOLOGY LEGAL START-UP SOFTWARE CONSULTING ARTIFICIAL INTELLIGENCE

SOURCE: SimpleClosure

Copyright Business Wire 2025.

PUB: 12/23/2025 09:00 AM/DISC: 12/23/2025 09:00 AM

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