Gen Z Founders Now Outnumber Baby Boomers

For the first time on record, Gen Z founders have overtaken Baby Boomers in starting new American businesses. Gen Z accounted for 9% of new businesses launched in 2025, compared with just 5% for Baby Boomers, according to Gusto's New Business Formation Report, the payroll company's sixth annual study of entrepreneurship, built on a survey of 1,051 founders who launched companies in 2025. It is also a reminder that the American dream of ownership is quietly being rewritten by the youngest adults in the workforce.

The crossover marks a turning point for who builds the American economy. The survey paints a portrait of a generation that is younger, more diverse and more AI-native than any before it — and the data suggests Gen Z founders got there by embracing artificial intelligence from day one.

AI is doing the heavy lifting for Gen Z founders

Artificial intelligence has become a foundational tool for new business creation: 60% of 2025 founders used AI to help launch their businesses, up from about a fifth in 2023, while AI adoption in day-to-day operations doubled across every major sector, rising from 21% to 44%, according to the report.

Gen Z entrepreneurs are leading that charge. 71% of Gen Z founders used AI to launch their business, compared with just over two-fifths of Baby Boomers — and younger founders were five times more likely to say they likely would not have started their business without AI, as reported by Business Journal Daily. AI-using businesses were also twice as likely to receive venture capital or angel funding, at 18% versus under one in ten for businesses that skipped AI. Gusto senior economist Nich Tremper credited the technology with "removing those barriers" — capital, expertise and time — that once kept aspiring entrepreneurs on the sidelines, calling it a structural shift in who gets to join the small business economy.

Gen Z founders are the most diverse generation of entrepreneurs yet

More than a third of new founders — 37% — are first- or second-generation immigrants, including 12% who are first-generation and 24% who are second-generation, according to the report. 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.

The pattern extends across demographics. AAPI women started a narrow majority of new AAPI-owned businesses in 2025, while 47% of new Gen Z-owned businesses were launched by women — up from 38% in 2024. That gain matters because the rise of Gen Z founders is disproportionately a story of young women: Baby Boomer women's share of new business ownership fell sharply over the same period. Capital access remains uneven, though. Nearly half of AAPI Gen Z entrepreneurs — 46% — received venture capital or angel funding, six times the rate of White Gen Z founders, a reminder that the playing field is not level yet.

What Gen Z founders still need to watch

The reasons people start companies are shifting, too. In 2025, 51% of new founders cited financial stability and building a future asset as a key driver — up sharply from 42% in 2024 — while "be my own boss" slipped to slightly under half, down from 48%, as reported by Metro Atlanta CEO. The generational split is telling: Gen Z founders are notably motivated by community impact (40%) and seizing a business opportunity (32%), while Baby Boomers lean on autonomy (52%) and income growth (about a fifth).

Financing is where the dream meets reality. Some 78% of new business owners needed startup financing, and personal savings and assets remained the most common source, used by 58% of entrepreneurs. The external funding mix is changing fast: the share of new businesses receiving venture capital or angel funding grew from 8% in 2023 to 13% in 2025, while reliance on family-and-friends loans fell from 15% to under a tenth. The playbook the numbers suggest: validate the idea cheaply, keep costs low with AI tools, and treat personal savings as the real first investor. The takeaway for anyone weighing a launch: AI has lowered the cost of getting started, but the bank account still matters — a dynamic explored in Gen Z's growing reliance on AI money advice, with more coverage on our business desk.

A note of caution from the data itself: the survey captures founders who got far enough to launch, not the many who explored an idea and stopped — a survivorship caveat worth keeping in mind before reading the boom as a guarantee. For readers weighing a first business, the numbers point to a concrete starting kit: an AI tool for drafting plans and pricing, a savings buffer before quitting anything, and a community to sell to first.

One more finding challenges the doom narrative around AI. New businesses that use AI in operations are more likely to plan headcount growth in 2026 (49%) than those that do not (41%), and hiring plans overall hit a three-year high, with close to half of new businesses planning to add employees. The message is clear: the businesses being built today are hiring, not shrinking — and for the first time, the youngest generation of entrepreneurs is building more of them than the oldest.