Solopreneurs Built on AI Are Reshaping U.S. Small Business Formation

Business applications with no early signs of hiring rose 26.8% in AI-exposed industries between the first quarter of 2024 and the first quarter of 2026, from roughly 222,000 to 281,000 per quarter, according to research by Liya Palagashvili, a labor economist and director of the Labor Policy Project at George Mason University's Mercatus Center. Over the same period, applications in those industries with stronger indications of becoming employer businesses fell 6.4%. In construction and wholesale trade, which Palagashvili used as a comparison group, non-employer-type applications declined 0.4%.

The figures describe an economy in which the smallest businesses can now generate millions in revenue without a single employee, and they land at the center of a debate over whether AI destroys jobs or redistributes them. Tech giants spend hundreds of billions of dollars to scale artificial intelligence. The smallest companies in the U.S. economy need only a few AI tools to run a cost-competitive business.

What does the data actually show?

Palagashvili found that new business formation is rising in direct correlation to applications unlikely to become employer firms. The Census-based measure identifies applications without indicators associated with near-term payroll or hiring plans.

"What AI is doing is giving those capabilities directly into the hands of the individual," Palagashvili said.

She cautioned that the findings are preliminary and descriptive. They do not establish that AI caused the increase, and the measure does not show whether those businesses ultimately remained one-person firms or never hired.

How much revenue can a zero-employee business reach?

Alex Willen expects his 12 e-commerce brands, all operated with no employees, to generate between $2.5 million and $3 million this year. Anthropic's Claude handles bookkeeping, customer service, advertising and inventory across his businesses. OpenAI image tools perform work that once went to photographers and designers.

Without AI, Willen said, "I'd probably need one other full-time person, plus I'd need to use contractors for photography, design, bookkeeping, and ad management."

A traditional product photography shoot could cost $2,000 to $5,000, he said, and a designer $300 to $1,000 for new listing images. When AI eliminates one of those expenses, "that money just goes into my pocket," Willen said.

AI has also opened revenue channels he would not have pursued. After acquiring Lone Trail, a hunting-gear brand selling binocular harnesses, packs and other outdoor accessories, Willen found its Shopify site accounted for roughly 1% of sales. Instead of shutting the channel down, he used ChatGPT and Claude to rebuild the site and AI to help run Meta advertising. In a recent 30-day period, Shopify accounted for roughly 30% of Lone Trail's revenue.

"That's going to end up being at least six figures of annual revenue that would not exist without AI," Willen said.

Kristin Ginn left Microsoft in March and started trnsfrmAItn, an AI-adoption consultancy. Seven months later, she has roughly $250,000 in business received or contracted through year-end, with no employees or regular contractors. She uses AI for proposals, pricing, strategy and other work, and is exploring an AI agent to perform part of a labor-intensive client process.

Stanford economist Erik Brynjolfsson put the shift in perspective: "The biggest misconception is that it's just about individual productivity; it's actually about leveraging AI to perform tasks that previously required a whole team."

Is the solopreneur pattern widespread?

A survey by accounting and invoicing software company FreshBooks found that 79 percent of solopreneurs had tried AI before hiring someone for a task they could not perform themselves. The figure was 86 percent when including microbusiness owners. AI allows them to "look much bigger than they are," FreshBooks CEO Shaheen Javadizadeh said.

Among existing small businesses, the data points the other way. Gusto, a payroll and HR software company serving small businesses, tracked businesses after they adopted AI and found their headcount was about 7% higher after a year than comparable businesses that knew about AI but had not adopted it. Among firms with fewer than 10 employees, AI adopters grew headcount about 10% more than comparable non-adopters.

Does less hiring mean more power for platforms?

Willen's model carries a structural tradeoff: operating with fewer people does not eliminate reliance on larger technology platforms. Roughly 80% of his revenue still comes through Amazon, and he uses Meta and Shopify to expand direct sales. Ginn has no staff, but LinkedIn has been one of the biggest drivers of customers to her consultancy.

Brynjolfsson said the proliferation of smaller producers can increase the value of the platforms that connect them with buyers.

"There's this long tail of products, but at the same time, big platforms like Amazon are more powerful than ever because they aggregate all of these and they bring them together," Brynjolfsson said.

The relationship is not simple labor savings flowing to Big Tech. Some of the money Willen saves becomes profit, and Ginn spends less than $60 a month on paid AI tools. Brynjolfsson said AI can make it economical for more small producers to exist, and as core business production becomes cheaper, small businesses place greater focus on customer acquisition and distribution.

What happens to midsize firms?

Brynjolfsson argues solopreneurs will thrive while AI simultaneously produces larger firms on average than exist today. In a September research report titled "AI's Use of Knowledge in Society," he and Zoë Hitzig, a researcher at the Anthropic Institute who studies the social and economic impacts of AI, argue that as AI codifies knowledge previously scattered among workers and enables more information to be aggregated and acted upon centrally, firms will grow larger on average, industry concentration will increase and local managerial autonomy will decline. The researchers say early evidence is largely consistent with those patterns.

Brynjolfsson predicts AI could contribute to a "hollowing out" of midsize firms — very small teams capable of doing more at one end and giant organizations exploiting AI and scale at the other.

"The fat in the middle — the layers of management focused on internal coordination — will likely be significantly reduced," he said.

Adam Branch has seen that shift from inside two technology companies. Before founding rhino.ai, an enterprise software company that uses AI to modernize legacy systems, Branch built Incentive Technology Group, a traditional technology services company that grew to roughly 500 employees. Under that model, winning more work meant hiring more people.

"With rhino.ai, we're building AI software to do more of the work those teams used to do," Branch said.

Rhino.ai has roughly 50 employees. Branch estimates comparable modernization work can now be performed with three to four times the productivity per employee. His team estimates labor represented roughly 85% of operating spending at ITG, with technology at about 5%. At rhino.ai, Branch puts labor at roughly 40%, while technology — cloud, software and AI models — represents about 25%.

How fast are AI-native startups growing?

AWS reports a similar loosening of the link between revenue and headcount. Its Engines of Growth research, an independent global study of 3,413 startup founders and senior leaders across 20 countries, found AI-native companies grew revenue an average 156% annually versus 65% for startups overall. More than half generated over $400,000 in revenue per employee. The study covered companies under five years old that use AI in its most advanced forms.

"Growth used to be tied directly to how many people you could hire," said Ruba Borno, vice president of AWS Specialists and Partners. "Now founders can scale with technology, not just headcount."

Brynjolfsson does not read the result as Big Tech winning at everyone else's expense. Entrepreneurs keep some productivity gains, consumers get more choice, and platforms profit from supplying the technology and connecting more producers with customers.

"The platforms and the people who are creating the tools are winning because they are able to sell them, the solopreneurs are winning because they are able to use them, and the consumers are winning because they are getting new products that they didn't get before," he said. "It's mostly a bigger pie, so it's a win-win-win — a triple win."

What AI changes, he said, is the shape of that pie.

"Whenever there's a technology change, a platform change, obviously it benefits the companies that are creating those platforms and technologies," Brynjolfsson said. "But it also benefits new entrants who can start fresh."