2024 New Business Formation Report: Entrepreneurship Continues to Surge as New Technologies Open the Door for a More Diverse Set of Founders

Liz WilkePrincipal Economist, Gusto

Key Findings

  • Half of New Business Owners Are Women: 49% of the new business owners in our survey were women, while 45% were men. That represents a big shift from 2019 when just 29% of new business owners were women.
  • Black / African American and Hispanic / Latinx Entrepreneurship Remains Elevated: Black or African American entrepreneurs made up 6% of new business owners in 2023, double the 3% rate seen before the pandemic. Hispanic entrepreneurs made up 13% of new owners, compared to 8% last year. 
  • Investors Are Increasing Their Support for Black-Owned Businesses: 12% of Black or African American entrepreneurs who started a new business in 2023 received a private capital investment, up from 4% in 2022. But Black or African American entrepreneurs are still less likely to receive large funding rounds than white entrepreneurs.
  • New Businesses Are Using AI to Increase Efficiencies: More than 20% of new businesses are using generative AI tools. Marketing is by far the most popular use case, as 76% of new companies that are using generative AI are applying it to marketing tasks. 
  • The Rise of the Side Hustle Continues: Workers who are looking to earn extra cash or pursue their passions are increasingly turning to side hustles to supplement their day jobs. 44% of entrepreneurs who started a new business in 2023 did so while working for another employer, up from 27% in 2022. 
  • If You’re Tired of the Office, Join a Start-Up: As big companies push their employees to work in the office more, new businesses continue to embrace remote work. More than a third of new businesses (35%) hired fully remote employees in 2023, up from 22% in 2022.
  • Technology Opens the Doors to a Diverse Set of New Business Owners:  Entrepreneurs with a disability were the most likely to say that technology advances lowered the barriers to starting this business – citing this reason at twice the overall rate of entrepreneurs (12% vs. 6%).

2023 Entrepreneurs: An Overview

Last year, entrepreneurs filed more applications for new businesses in the US than at any time in the twenty years the government has tracked this data. The surge in entrepreneurship that the country has seen in the years since 2020 is holding strong and shows no signs of slowing down. 

The rise of new technologies, including Generative AI, has helped level the playing field – female entrepreneurship continues to skyrocket, Latinx entrepreneurship is also on the rise, as is entrepreneurship among immigrants and the disabled community. 

We’re also seeing investors take a larger interest in Black-owned businesses. While progress still needs to be made around equitable distribution of funding, it doesn’t seem to be holding anyone back from taking a leap of faith and striking out on their own. 

All of those factors shaped entrepreneurship in 2023, driving the type of businesses these entrepreneurs create and their plans for the future.

At Gusto, we surveyed 1,300 business owners who started their companies in 2023 – our fourth annual survey of entrepreneurs – to gain a deeper understanding of who these entrepreneurs are and what drove them to start their companies. 

Women Continue to Drive the New Wave of Entrepreneurship

The trend of increased women entrepreneurship that began during the pandemic has stuck. Nearly half of the new business owners in our survey (49%) were women, while 45% were men. In 2019, women accounted for just 29% of new business owners. That share shot up to 49% in 2020 and has stayed near that level since. 

Yet, while women are leading in business creation, they’re not receiving as much interest from investors as men. In 2023, just 3% of women entrepreneurs received a private capital investment to start their business, compared to 9% of male entrepreneurs.

That gap doesn’t solely reflect differences in the industries where men and women tend to start businesses. Within the Professional Services sector, 9% of men reported receiving a private capital investment, compared to 2% of women.

Women Are Starting Businesses at Record Rates




2023


2022


2021


2020


2019 Census

Men

45%

53%

42%

49%

71%

Women

49%

47%

49%

49%

29%

* Note: Totals may not sum to 100% as some participants do not identify as male or female or declined to state. 

Women entrepreneurs care deeply about having more freedom to decide how they work. 70% of women who started a new business in 2023 cited flexibility as one of their top motivators.

Women Cite Flexibility as a Motivation for Entrepreneurship More Often Than Men Do

FlexibilityWanted or needed to supplement household incomeWanted financial stability/build assetLost job/partner lost jobSeized business opportunityTechnology advances lowered the barriers to starting this business

All

66%

16%

37%

7%

37%

7%

Men

66%

18%

38%

10%

46%

8%

Women

70%

16%

37%

5%

30%

7%

New Business Creation among Black, Hispanic, and AAPI Entrepreneurs Remains Elevated

Entrepreneurs of color continue to drive the new wave of business creation. In 2023, 6% of entrepreneurs identified as Black or African American, double the 3% rate seen in 2019. Furthermore, 13% of entrepreneurs identified as Hispanic or Latinx, the highest rate in the three years of this survey and above the 8% pre-pandemic rate.

Share of Black / African American & Hispanic / Latinx Entrepreneurs Remains Elevated










2023




2022




2021




2019 Census

White
60%69%69%78%

Black/African-American
6%5%9%3%

AAPI
14%14%9%12%

Hispanic
13%8%10%8%

While the desire for flexibility remains the top motivator for both Black / African American and Hispanic / Latinx entrepreneurs, financial motivations play a much greater role for these new business owners than for others: 60% of Black or African American entrepreneurs and 42% of Hispanic or Latinx entrepreneurs started a business because they wanted financial stability or to build an asset, compared to 37% of all respondents. 

Black and Hispanic Entrepreneurs Are Much More Likely to Cite Financial Motivations as Driving Their Entrepreneurship






FlexibilityWanted or needed to supplement household incomeWanted financial stability/build assetLost job/partner lost jobSeized business opportunityTechnology advances lowered the barriers to starting this business

All

66%

16%

37%

7%

37%

7%

White

67%

17%

37%

9%

40%

7%

Black

67%

 25% 

 60% 

4%

32%

10%

Hispanic

70%

10%

 42% 

6%

29%

7%

AAPI

71%

22%

33%

6%

31%

10%

Men

66%

18%

38%

10%

46%

8%

Women

70%

16%

37%

5%

30%

7%

Investors Are Showing More Support for Black-Owned Businesses

Historically, Black or African American entrepreneurs have struggled to raise money from venture capitalists and other private investors, but that trend may be starting to change. In 2023, 12% of Black or African American entrepreneurs who started a new business received a private capital investment, the highest rate of any group of new business owners, and up from just 4% in 2022.

But there’s still much more work that needs to be done to support Black or African American entrepreneurs. Our data suggests investors are less likely to write large checks to Black or African American entrepreneurs than to white entrepreneurs. In 2023, 31% of Black or African American entrepreneurs started their business with more than $10,000, compared to 35% of white entrepreneurs.

There’s a similar disparity in access to loans. Black or African American entrepreneurs are half as likely (4%) to use private business loans to start their companies compared to white entrepreneurs (8%). 

What Kind of Funding Did You Access to Start Your Business?




Source
AllMenWomenWhiteBlack/African AmericanHispanicAAPI

Private Business Loan

8%

8%

8%

8%

 4% 

11%

6%

Personal savings

53%

54%

55%

54%

55%

54%

56%

Government Stimulus/Unemployment Insurance


0.5%


0.1%


0.9%


0.6%


2%


0.1%


0.7%

Loans from family/friends

7%

6%

9% 

9%

13%

2%

6%

SBA backed loan

3%

2%

3%

3%

6%

1%

2%

Private capital investment

6%

 9% 

 3% 

5%

 12% 

 3% 

7%

No funds were needed

34%

 39% 

 30% 

35%

 31% 

31%

32%

How Much in Start-Up Funds Did You Use to Start Your Business?





AllMenWomenWhiteBlack/African AmericanHispanicAAPI

$1-$1000


31%

27%

35%

32%

 29% 

34%

32%

$1,001-$5,000


23%

20%

24%

22%

15%

24%

27%

$5,001-$10,000


13%

14%

11%

11%

25%

12%

9%

Greater than $10.000


34%

 39% 

 30% 

35%

 31% 

31%

32%

New Businesses Are Using Generative AI for Marketing

New business owners are taking advantage of advances in AI to make their firms more efficient, with at least 22% of new firms using generative AI tools in their operations. 

Marketing is by far the most popular use case: 76% of the new businesses using generative AI are applying those tools to marketing tasks such as content creation and market research. That trend could impact the number and types of jobs available to marketing professionals in the future.

A smaller but significant percentage (41%) of new firms are using generative AI for sales (e.g., crafting communications with leads) or customer service work (26%). 

Does Your Firm Use Generative AI Tools? 





Yes, I am intentionally integrating tools that use Generative AI into my firm’s operationsMaybe my employees may use AI in the course of business products that we have purchased, but I am not intentionally incorporating these tools into my firm’s operationsNo, I am intentionally not using GenAI tools in my firm’s operations
All
22%16%46%
Professional Services
 32% 18%38%
Personal Services
27%19%34%
Community Services
13%12%58% 
Goods-Producing/Logistics
7%24%56%

* Note: Totals may not sum to 100% as some participants responded “unsure”.

What Are Those Who Answered ‘Yes’ Doing with Generative AI Tools?





% Integrating AI in this way:
Marketing (content creation, market research)76%
Sales (crafting communications with leads)41%
Customer service (such as integrating AI into your firm’s chat tool or using AI to craft responses to customer emails)26%
Legal operations (legal research, contract review)17% 
Human resources (such as creating job postings)12%
Accounting and Finance (invoicing, bookkeeping)11%
Security and fraud detection (identifying bots, incident response)5%
Other23%

Investors Are Flocking to AI 

The rise of generative artificial intelligence is one of the most important technological developments in recent history, and entrepreneurs who embrace it are attracting the most interest from investors.

In 2023, 19% of new businesses developing AI technologies or using AI in their operations received a private capital investment, compared to just 4% of firms that aren’t making or using AI. AI-focused companies also started with considerably more funding: Nearly half of new businesses focused on AI (48%) began with more than $10,000 in startup funds, compared to 29% of other firms.

How Much Did Your Business Use in Start-Up Funds?






AI-Focused


Others
$1-$1,00013%19%
$1,001-$5,00014%25%
$5,000-$10,00011%9%
 Greater than $10,000  48% 29%

When we look at the founders of AI-focused firms who identify as female, AAPI, Latinx and/or Hispanic, and African American and/or Black, there are similar rates of participation in the AI ecosystem, but differences in access to funding these new firms received. In 2023, 11% of women, AAPI, Latinx and/or Hispanic, and African American and/or Black entrepreneurs are developing new AI technologies or putting AI tools into their product, just under the 15% rate of other owners.

Not all entrepreneurs are benefiting from the AI funding boom equally. 16% of new AI-focused businesses led by women, AAPI, Latinx and/or Hispanic, and African American and/or Black entrepreneurs received a private capital investment, compared to 23% of men, white, and other entrepreneurs with new AI-focused businesses. They also received less funding: 56% of founders of AI-focused firms with founders who identified as women, AAPI, Latinx and/or Hispanic, and African American and/or Black started their business with more than $5,000 in funds, compared to two-thirds (66%) of all founders of AI-focused firms.

Amid the still-high cost of living, more entrepreneurs are keeping their existing jobs when they start a new business. The rate of new business owners working full-time or part-time for another employer while starting their company rose from 27% in 2022 to 44% in 2023. 

Side hustles are most common among the youngest group of entrepreneurs, with 49% of workers between the ages of 25 and 34 starting their business as a side gig. 

More Than a Third of New Businesses Are Side Hustles








2023



2022
Was working full-time while starting this company25%15%
Was working part-time while starting this company19%12%
No56%73%

Younger Workers Are the Most Likely to Start Their Business as a Side Gig 






Age Group



Was working full-time
or part-time while
starting this company




Still working for that
company
25-3449%51%
35-4442%49%
45-5443%46%
55 or older38%61%

If You’re Tired of the Office, Join a Start-Up 

While large companies have increasingly pushed their employees to return to the office, startups continue to embrace remote work. More than a third (35%) of new businesses hired fully remote employees in 2023, up from 22% in 2022. Meanwhile, fewer new businesses are forcing new hires to work on-site full-time. In 2023, 43% of new companies hired employees for fully in-person roles, down from 51% in 2022. 

More Than a Third of New Businesses Hire Fully Remote Workers





All


Personal Services 


Professional Services 


Community Services 


Goods-Producing
All in-person43%77%19%55%52%
All remote35%14%61%14%30%
Hybrid22%9%19%31%18%

Remote Hiring Has More Than Doubled Since 2021

This chart shows the growth in remote hiring since 2021. Remote hiring as more than doubled since 2021.

Technology Opens the Doors to a Diverse Set of New Business Owners

In 2023, 40% of entrepreneurs were either immigrants or children of immigrants, in line with data released by the Small Business Administration in 2022. 

Furthermore, 19% of new business owners reported some form of disability. While technological changes, such as the rise of remote work tools, have allowed disabled Americans to join the labor force at record rates since the pandemic, these same advances are enabling them to start new businesses as well. 

Entrepreneurs with a disability were the largest group of new business owners examined who indicated that, among the reasons they started a new business in 2023, technology advances lowered the barriers to starting this business – 12% among owners with a disability, twice as high as the rate of entrepreneurs with no disability who chose that reason (6%).









Flexibility



Wanted or needed to supplement household income 




Wanted financial stability/build asset 





Lost job/partner lost job





Seized business opportunity
Technology advances lowered the barriers to starting this business
All66%16%37%7%37%7%
Fully or Partially Disabled
71%

18%

 45% 

6%

38%

 12% 
Immigrant or Child of an immigrant

68%


17%


34%


7%


33%


8%
Non-Immigrant nor Child of Immigrant

65%


16%


38%


7%


39%


7%

Conclusion

After years of declining US business dynamism, the pandemic turned that trend on its head, and the rising tide of entrepreneurship shows no signs of reversing. These new businesses are powering the economy, which means that how the economy looks tomorrow will depend on how we support these entrepreneurs today. 

Methodology

These findings are based on a survey of 1,345 new business owners using Gusto’s platform. The businesses were identified as having joined Gusto as a new business in 2023, and respondents were solicited across individuals with the title “Owner” or “Founder” listed in Respondents confirmed at the beginning of the survey that their businesses were created in 2023. Responses were asked to complete the survey via email from January 29 – March 4, 2024. Reported responses were weighted to match the industry distribution across the universe of businesses created in 2023 based on the Census Bureau’s Business Formation Statistics.

Liz Wilke is a Principal Economist at Gusto, researching the state of work and business in the modern economy. She is a veteran of both the technology and government sectors, where she directed research programs and public spending that supports dynamic, resilient companies and workers across the globe. Liz currently lives in Washington, D.C.
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