Rapid Decline of New U.S.-based IT Startups

The number of new IT startups with headquarters in the U.S. is rapidly declining. There are less and less IT startups founded every year since 2013. I was looking for something else at Pitchbook but stumbled over this massive decline:

Startups founded by year with primary focus on Information Technology ("IT") and headquarter in the USA. Pitchbook includes the following sub-segments in IT: communications and networking, computer hardware, semiconductors, IT services, software, and other information technology. (Source: Pitchbook, as of 07/31/2019)
Startups founded by year with primary focus on Information Technology (“IT”) and headquarter in the USA. Pitchbook includes the following sub-segments in IT: communications and networking, computer hardware, semiconductors, IT services, software, and other information technology. (Source: Pitchbook, as of 07/31/2019)

At the same time, more and more money is pouring into venture capital, as described in a previous blog post, and is still quite concentrated in the Silicon Valley. I don’t quite know yet what that means. Startups are staying private longer and require more private capital longer. Is that where that money is going?

Nearly $500 billion raised in 2018 […] Between 2009 and 2018, over $3 trillion has flowed into PE and VC funds globally.

PitchBook, 07/22/2019, Private Markets: A Decade of Growth

Are we perhaps seeing higher quality startups? Could we measure higher quality in less deaths? Or perhaps in higher median acquisition and exit prices? Would the exit pricing need to be adjusted to the public market growth in the past years?

I’ve witnessed the increase of traffic in the Bay Area over the past few years. And I witnessed the rising prices for engineers and the competition in the Bay Area, Seattle, L.A., New York, Boston, Austin. It felt as if there are more, not less IT startups. Are these fewer startups growing faster than before, and thus consuming more people and resources faster, leading to less people available to start their own thing?

Or do “founders” perhaps experiment more and earlier, and then fail faster before even founding a startup?

Others have reported on the general decline of US entrepreneurship before, related to the decline of IT startups:

We are at a point where a larger VC firm with 10 partners could almost meet — or at least know about or have a Zoom call with — every single new IT startup with a headquarter in the U.S. every year. And together with AI perhaps even gain close to 100% coverage.

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