America is in the midst of an unprecedented wave of new AI companies
Since the start of the pandemic, America has seen a flurry of new business activity, especially around AI
Startups have long captivated the American imagination. New data shows entrepreneurs are now turning their ideas into reality in record numbers. It also shows how AI is adding fuel to the current startup boom.
According to data from the Census Bureau, new business applications rose to 424,000 in May 2024, a 48% increase from five years ago. Business applications — formal requests for an employer identification number from the government — provide a rough barometer for the health of America’s startup ecosystem.
What’s driving the current surge in startups? Economists point to a confluence of forces that have been at work for several years: the spread of remote work, layoffs at big tech companies, and a tight labor market. Together these have set entrepreneurs free to explore new ideas and sent companies searching for tech solutions to cope with worker shortages.
But there’s another force at play: artificial intelligence. Despite big tech’s dominance of headlines and bylines, a burgeoning ecosystem of AI-first companies is taking root. According to the Center for Economic Studies (a research program affiliated with the Census Bureau), the number of business applications related to AI has skyrocketed in recent years. They nearly doubled between 2022 and 2023, reaching just under 6,000 applications last year.
If the current trends hold, 2024 will likely be another blockbuster year for AI startups. Optimists also hope that AI companies will have a knock—on effect on the tech industry as a whole — much like the internet had at the turn of the century.
It seems that America has rekindled some of its dynamism over the pandemic. Time will tell if it can turn its record-setting number of business applications into real-world productivity.