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

Editor’s note: This report was updated on September 10, 2024 to correct a methodological error.

Key Findings

• Nearly Half of New Business Owners Are Women: 44% of the new business owners in our survey were women. 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 5% of new business owners in 2023, almost double the 3% rate seen before the pandemic. Hispanic entrepreneurs made up 12% of new owners, compared to 10% last year. 
• Investors Are Increasing Their Support for Black-Owned Businesses: 13% of Black or African American entrepreneurs who started a new business in 2023 received a private capital investment, up from 6% 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 82% 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 26% 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. Nearly a quarter of new businesses (24%) hired fully remote employees in 2023, on track with the 25% that did so 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 more than twice the overall rate of entrepreneurs (10% vs. 4%).

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 remain elevated from pre-pandemic levels, 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 (44%) were women. In 2019, women accounted for just 29% of new business owners. That share shot up to nearly half in 2020 and has stayed elevated 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 11% 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, 11% of men reported receiving a private capital investment, compared to 5% of women.

Women Are Starting Businesses at Record Rates

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

Entrepreneurs of color continue to be a massive driver of business creation. In 2023, 5% of entrepreneurs identified as Black or African American, a 40% increase from the levels recorded in 2019. Furthermore, 12% 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

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: 48% of Black or African American entrepreneurs and 56% of Hispanic or Latinx entrepreneurs started a business because they wanted financial stability or to build an asset, compared to 41% of all respondents. 

Non-White Entrepreneurs Are Much More Likely to Cite Financial Motivations as Driving Their Entrepreneurship

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, 13% 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 6% in 2022.

In 2023, 36% of Black or African American entrepreneurs started their business with more than $10,000, compared to 52% of white entrepreneurs.

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

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

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 21% of new firms using generative AI tools in their operations. 

Marketing is by far the most popular use case: 82% 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 (46%) of new firms are using generative AI for sales (e.g., crafting communications with leads) or customer service work (43%). 

Does Your Firm Use Generative AI Tools? 

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

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, 17% of new businesses developing AI technologies or using AI in their operations received a private capital investment, compared to just 6% 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.

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, 14% 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 above the 11% rate of other owners.

Not all entrepreneurs are benefiting from the AI funding boom equally. 12% 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 29% of white male entrepreneurs. They also used less funding: 49% 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 more than three-fourths (78%) of new AI-focused businesses owned by white men.

Sides Hustles Are Becoming More Popular

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 26% 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. 

Nearly Half of New Businesses Are Side Hustles

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

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. Nearly a quarter (24%) of new businesses hired fully remote employees in 2023, similar to the 25% that did so in 2022. 

More Than a Third of New Businesses Hire Hybrid or Fully Remote Workers

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

In 2023, 43% of entrepreneurs were either immigrants or children of immigrants, in line with data released by the Small Business Administration in 2022. 

Furthermore, 18% 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 - 10% among owners with a disability, more than twice as high as the rate of entrepreneurs with no disability who chose that reason (4%).

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.