Small business growth is skyrocketing across America due to cultural and economic changes during COVID, but the startups are hiring fewer employees than they used to.
The Big Picture: There’s now a record number of entrepreneurs but fewer opportunities for people simply looking for full-time employment.
Between the Lines: WSJ calls the new breed of businesses “pint-sized startups.”
Census Bureau data found that startups had an average of 5.8 employees at the beginning of the century. Now they have 4.6, and it’s been trending sharply downward since COVID.
Part of the reason is that entrepreneurs are taking on more roles at their own companies to keep overhead as low as possible and be flexible in what feels like a constantly changing economy.
Additionally, founders are relying more on contractors (a mix of part-time and full-time; US-based and international), gig workers, and AI tools to scale up/down depending on demand and goals.
Closing Thoughts: Small businesses are the backbone of employment growth in America, accounting for 60% of jobs created between 1995 and 2023. But as startups shift to smaller headcounts, more people may be forced to consider starting their own business if they want to be employed — a riskier endeavor considering that most startups fail within their first year.
Go Deeper: Silicon Valley is obsessed with the idea of staying in “founder mode” — founders taking on larger roles at their companies instead of delegating to reports (in other words, needing fewer employees).
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