2026 New Business Formation: How AI Is Reshaping Who Starts a Business in America

Introduction

Gusto’s sixth annual New Business Formation Report documents a year of technological transformation and demographic evolution. The 2025 entrepreneurial landscape was shaped by AI becoming a mainstream tool for launching businesses, a generational shift in who is starting companies, and a meaningful change in how those companies are being funded. 

The 1,051 founders we surveyed gave us a unique depth of insight into what it was like to start a business in 2025. Here’s what we learned (click the image below or here to download the full report).

Key findings

• Sixty percent of new business owners used AI to help launch their business in 2025, double the rate from two years ago.

• Only 3% of new business owners said they likely would not have started their business without AI, but 50% said AI made the process significantly faster or less expensive.

• For the first time, Gen Z entrepreneurs started more businesses than Baby Boomers, accounting for 9% of new business starts in 2025 versus 5% for Boomers. 71% of Gen Z entrepreneurs used AI to launch their business.

• Compared to last year, more new businesses are relying on private capital financing and fewer are relying on loans from family and friends.

• New businesses that use AI in regular operations are twice as likely as those that don’t to receive VC/Angel funding.

• AI was ranked low as a reason among businesses not planning to add headcount in 2026; more businesses cited uncertain customer demand and non-AI productivity improvements. 

AI adoption doubled across sectors since 2023

Sixty percent of new business owners used AI to help launch their business in 2025, with the technology playing a particularly prominent role in Professional Services. Among those who used AI, three-quarters (75%) used it to develop business ideas, while roughly half applied it to administrative or legal tasks (53%) or setting up operations (51%).

Zooming out to ongoing operations, AI adoption industry-wide grew from 21% in 2023 to 44% in 2025. Professional Services led with 56% adoption, followed by Goods-Producing at 43% and Community Services at 36%. Personal Services was the only sector to show flat growth.

For most founders, AI functioned as an accelerator rather than an enabler. Only 3% said they likely would not have started their business without the technology. But 50% said AI made the process significantly faster or less expensive, suggesting it is primarily compressing the time and capital required to launch, not creating entirely new categories of founders.

Gen Z overtook Baby Boomers — and leads the AI-native generation of founders

For the first time, Gen Z entrepreneurs started more businesses than Baby Boomers, accounting for 9% of new business starts in 2025 versus 5% for Boomers. The generational gap in AI adoption is equally striking: 71% of Gen Z founders used AI to launch their business, compared to 42% of Baby Boomers. Gen Z entrepreneurs were also five times more likely than Baby Boomers to say they likely would not have started their business at all without AI.

Private capital is replacing friends-and-family funding

The vast majority of new business owners (78%) needed some form of startup financing in 2025, with personal savings remaining the most common source. But the composition of external funding has shifted meaningfully. VC and angel investment grew from 8% of new businesses in 2023 to 13% in 2025, while reliance on family and friends loans fell from 15% to 8% over the same period.

AI adoption is strongly correlated with investor attention. New businesses using AI in regular operations were twice as likely to receive VC or angel funding (18%) as those that don’t (9%). The Information sector saw the highest rate of private investment, with 46% of new firms receiving VC or angel backing. Among Gen Z founders specifically, AAPI entrepreneurs stood out: 46% received VC or angel funding, six times the rate of White Gen Z entrepreneurs.

Financial stability has surpassed “being your own boss” as the top motivation

The reasons founders are starting businesses shifted notably in 2025. Building financial stability or a future asset became the top motivation, cited by 51% of entrepreneurs — up from 42% in 2024. The desire to “be my own boss,” long the defining driver of entrepreneurship, slipped to 46% from 48%.

Younger entrepreneurs were more likely to cite opportunity and purpose: Gen Z founders led on seizing a business opportunity (32%) and making a positive community impact (40%). Older entrepreneurs leaned on financial necessity; Baby Boomers showed the highest rate of starting a business to increase income (21%), while Gen X was most likely to cite job loss as a motivator (10%), reflecting the pressures of a labor market demanding new skills at what would otherwise be a prime savings period.

AI was ranked low among the reasons new businesses cited for not planning to hire

AI-driven productivity gains ranked low among the reasons that new businesses cited as a reason for not hiring more employees over the next year. Fears about soft customer demand and costs led the rankings for explanations given by business owners planning flat headcounts. Productivity gains associated with technology other than AI was more commonly referenced – particularly among new businesses in the Wholesale Trade and Accommodation and Food Services industries. 

Women’s entrepreneurship dipped — but Gen Z women are closing the gap

After achieving near parity in 2024, when women started 49% of new businesses, their share fell to 44% in 2025. The decline was driven largely by a shift in industry mix: more new businesses formed in the Goods-Producing and Professional Services sectors, which have historically attracted more male founders, while the Community Services sector — where women are overrepresented — continued a three-year decline.

Beneath the headline, Gen Z women made meaningful progress. Women’s share of Gen Z new businesses jumped from 38% in 2024 to 47% in 2025, the biggest single-year gain of any generational cohort. Baby Boomer women moved in the opposite direction, dropping from 36% to just 23% of their cohort. Millennial women also pulled back, a trend the report attributes to caregiving responsibilities during core family-forming years.

Black and AAPI women continued to drive entrepreneurship within their communities. Women started 69% of new Black-owned businesses in 2025 — outnumbering Black male entrepreneurs for the third consecutive year — and 51% of new AAPI-owned businesses.

Immigrants remain a cornerstone of American entrepreneurship

More than one in three new entrepreneurs in 2025 — 37% — were first- or second-generation immigrants. First-generation immigrants accounted for 12% of new business owners and second-generation immigrants for 24%, a slight uptick from 2024. This sustained contribution underscores the continued importance of immigration to the dynamism of the U.S. economy.

Conclusion

The 2025 new business landscape reflects an ecosystem that is becoming more technologically enabled, more generationally diverse, and more institutionally funded. AI is the defining force of the moment — not because it is creating entrepreneurs who otherwise would not exist, but because it is lowering the cost and time required to start. 

As digital-native Gen Z founders grow to dominate entrepreneurship, and as private capital flows toward AI-enabled ventures, that dynamic is likely to accelerate. The data suggests that the future of entrepreneurship is broader, faster, and more varied than any prior generation.