Prominent venture capital firm Andreessen Horowitz (a16z) says it is beginning to see signs that a new type of business is rising, one that heavily relies on technology.
In the firm’s It’s Time to Build report, a16z says the rise of AI-native small businesses may be unfolding now.
According to the venture capital firm, data shows that new small business applications are on the up and up, and tech spend is on the rise, while payroll spend is rapidly decreasing.
“New business applications are elevated, but ‘high propensity [to hire]’ business applications are in decline. At the same time, SMB payroll expenses are flat-to-down, while tech-service spending keeps trending up. So, the data shows lots of new business formation, but it’s of the ‘non-hiring’ type, and while small businesses aren’t adding much payroll, they are spending a lot more on tech.”
a16z notes that the data is not a definitive signal that AI-native solopreneuring is now at hand, but the possibility isn’t so far-fetched.
Looking closer at labor data, a16z finds that youth unemployment has been declining since 2023. According to the firm, college graduates and non-college graduates are being impacted by the trend.
“Employment rates for young workers, whether college-educated or not, have both been in roughly equal decline for the past two years.
When you look at it this way, young knowledge workers specifically don’t appear to be uniquely challenged. It’s just hard out for all young people. There just isn’t that much hiring going on.”
The firm highlights that AI cannot be blamed for the hiring slowdown, as it affects all young people, not just college graduates.
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