Gusto’s Annual New Business Formation Report Finds 60% of Founders Used AI to Launch — Double the Rate from Three Years Ago — as a New Generation Rewrites the Rules of American Entrepreneurship

SAN FRANCISCO, May 14, 2026 /PRNewswire/ — Gusto, the leading partner for small businesses, today released its sixth annual New Business Formation Report, revealing a historic milestone in American entrepreneurship: for the first time ever, Gen Z has surpassed Baby Boomers in new business starts. Based on a survey of 1,051 founders who launched businesses in 2025, the report paints a portrait of an entrepreneurial generation that is younger, more diverse, and more AI-native than any cohort before it.

Gen Z accounted for 9% of new businesses started in 2025, compared to just 5% started by Baby Boomers — a generational crossing that marks a fundamental transformation in who is building the American economy.

“For years, the barriers to starting a business — capital, expertise, time — kept countless aspiring entrepreneurs on the sidelines. AI is removing those barriers. What we’re measuring in this report isn’t just a technology trend. It’s a structural shift in who gets to participate in the small business economy,” said Nich Tremper, Sr. Economist at Gusto.

AI at the Center of a New Era of Entrepreneurship

The 2026 report reveals that artificial intelligence has become a foundational tool for new business creation. 60% of 2025 founders used AI to help launch their businesses — up from just 21% in 2023 — and AI adoption in day-to-day operations has more than doubled across every major sector, rising from 21% to 44%.

Gen Z entrepreneurs are leading the AI charge: 71% of Gen Z founders used AI to launch their business, compared to 42% of Baby Boomers. Gen Z entrepreneurs were five times more likely than Baby Boomers to say they likely would not have started their business without AI.

The data also challenges the conventional wisdom that AI destroys jobs. New businesses that use AI in operations are more likely to plan for headcount growth in 2026 (49%) than those that do not (41%) — and hiring plans overall hit a three-year high, with 44% of new businesses planning to add employees in 2026. AI-using businesses are also twice as likely to receive venture capital or angel funding (18% vs. 9% for non-AI-using businesses).

The Face of Entrepreneurship Is Changing

The 2026 report reveals that American entrepreneurship is growing more diverse on every dimension:

• More than 1 in 3 new founders (37%) are first- or second-generation immigrants, including 12% who are first-generation and 24% who are second-generation.
• Women led 69% of new Black-owned businesses started in 2025 — the third consecutive year that Black women have outnumbered Black men in new business formation.
• AAPI women started 51% of new AAPI-owned businesses in 2025.
• Gen Z women made up 47% of Gen Z-owned businesses in 2025, up from 38% in 2024 — even as Baby Boomer women’s share fell sharply.
• Nearly half of AAPI Gen Z entrepreneurs (46%) received venture capital or angel funding — six times the rate of White Gen Z founders.

Why People Start Businesses Is Shifting

“Be my own boss” is fading as a primary motivation. In 2025, 51% of new founders cited financial stability and building a future asset as a key driver — up sharply from 42% in 2024. The desire for autonomy (“be my own boss”) was cited by 46%, down from 48%.

This shift signals a more economically purposeful class of entrepreneurs. Gen Z founders are notably motivated by community impact (40%) and seizing a business opportunity (32%), while Baby Boomers continue to lean on autonomy (52%) and income growth (21%).

Funding Pathways Are Evolving

78% of new business owners required some form of startup financing. Personal savings and assets remained the most common source, used by 58% of entrepreneurs. The landscape of external financing is shifting rapidly: the share of new businesses receiving venture capital or angel funding has grown from 8% in 2023 to 13% in 2025, while reliance on family and friends loans has fallen from 15% to 8%.

About the Report

The 2026 New Business Formation Report is Gusto’s sixth annual study on new business formation in the United States. The report is based on a survey of 1,051 founders who started their businesses in 2025, conducted by Gusto’s Insights Group, a team of in-house economists with data dating back to 2020. It offers a comprehensive look at who is starting businesses today, why they’re doing it, how AI is reshaping the path to entrepreneurship, and how new founders feel about the year ahead.

The full report and interactive data are available here.

About Gusto

Gusto is the leading partner for small businesses, helping them with a wide variety of critical tasks, including payroll, health benefits, tax credits, compliance, 401(k), HR, and much more. Gusto serves over 500,000 small businesses across the US and is on a multi-decade journey to grow the small business economy with technology and heart.

Media Contact

press@gusto.com

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SOURCE Gusto, Inc.