Author: Ed Elson
Compiled by: DeepChain TechFlow
False startup boom: 5.8 million new companies are registered in the U.S. each year, 70% of which will never hire employees.
DeepOcean summary: Last year, the number of newly registered businesses in the U.S. reached an all-time high, but behind the data lies an awkward truth—70% of these new companies have no intention of hiring anyone; they are merely side hobbies dressed up as LLCs. As "founder" becomes the trendiest social label and starting a company costs less than going on a date, true entrepreneurship is being diluted into an Instagram persona.
The U.S. economy currently has little good news. Oil prices have surged, mortgage rates have risen, labor force participation has plummeted, and the cost-of-living crisis is worsening.
However, there is one bright spot that has energized many economists: American entrepreneurship is on the rise. Nearly 6 million new business applications were filed last year (a record high), and we are on track to break that record by 2026. Setting everything else aside, the U.S. may be more entrepreneurial than ever before.
That’s why I was shocked when my colleague Dan Chiolan shared the following data last week: of the 5.7 million new businesses established last year, only 30% are expected to create any jobs… ever.
Wait... what?
That's right, you read that correctly. According to the U.S. Census Bureau, about 70% of new businesses in the U.S. are classified as "possible non-employer firms," meaning they are not expected to create any jobs at all. How do we know? Through various factors, such as whether the business owner provided a date for their first payroll or indicated they are hiring. The data shows that the U.S. isn't creating more businesses—it's just filing more paperwork.
Is this just an isolated case? No. Over the past two decades, the share of new businesses unlikely to hire has doubled. Meanwhile, the share of “high-propensity” businesses—those likely to hire—has halved, and their actual numbers have stagnated, meaning that (true) American entrepreneurship has effectively stalled.
Chart: Trends in new business registration applications in the U.S. from 2006 to 2026, light pink for "likely employers," dark orange for "likely non-employers." Source: U.S. Census Bureau, Stripe.
How is this possible? Is it related to AI? Probably not, because this trend began before ChatGPT even existed. Look at the spike in 2020—it’s more likely tied to COVID, meaning people were stuck at home with nothing to do. Let me introduce my latest economic theory:
False startup boom
What we are witnessing is not the rise of entrepreneurship, but the rise of what I call fake businesses. What is a fake business? Literally that. It’s the “side hustle project” your high school friend started out of boredom during the pandemic lockdowns. It’s your distant cousin’s “lifestyle brand” that hasn’t sold a single product but already launched a Substack. It’s a “collective” whose mission isn’t to generate revenue but to accumulate Instagram followers. It’s the kind of business you can barely squeeze time for without quitting your job—because… it’s not a real business at all. It’s a hobby you happened to register.
How do people have time to turn their hobbies into companies? Because now, forming an LLC takes just about 15 minutes and costs around $130—about 30% less than the average date. In other words, the most accessible hobby in the U.S. isn’t pottery or pickleball… it’s entrepreneurship.
Can I prove my theory? No. But like gravity, I can’t think of any other theory that makes sense. The number of non-employer businesses is skyrocketing, while the revenue generated by these businesses is plummeting, indicating millions of new businesses with almost no sales. Given how many friends of mine have launched Instagram accounts disguised as “companies,” one can only examine the evidence and conclude: they are the source of the problem.
Chart: Number of non-employer businesses in the U.S. (left) versus average income (right), 1997–2023. Source: U.S. Census Bureau, Bureau of Labor Statistics, Bloomberg.
Entrepreneurship worship
So the question arises: why would someone start a fake business? Why not just pursue a hobby on the side? Why turn it into an LLC? The answer is as simple as every trend: because it’s popular right now.
The hottest career in the world today is "founder." From Jensen Huang to Musk, founders are the rock stars of our digital age. The data reflects this: about 70% of Gen Z say owning a business is "part of the American Dream" (significantly higher than other groups), and nearly half say they don’t want a typical 9-to-5 job at all.
However, more important than being a founder is being able to call yourself one. The term “founder” evokes independence, fearlessness, and bravery—qualities people love to showcase on dating apps or social media. As a result, the number of Americans who added “founder” to their LinkedIn profiles last year surged by 69%.
Chart: The number of U.S. LinkedIn users adding the title "Founder" to their profiles increased by 69% last year. Source: LinkedIn.
I suspect most of these new "founders" are running fake businesses. Honestly, I get it. Unlike starting a real business (which requires major sacrifices), a fake business lets you keep your real job while still being a "business owner." It’s all the delightful flavors of being a founder, with none of the calories. Does your business actually do anything or make money? Of course not! What matters is simply that you have a business.
Founder worship...
Why has this happened? Over the past two decades, our society has been psychologically conditioned into a state of founder worship. Founders are no longer just businessmen—they are trendsetters, celebrities, cowboys, and taste-makers. They grace magazine covers and billboards. They host podcasts, write manifestos, and dominate our algorithms. Founders represent a unique combination of wealth and relevance that many aspire to but few achieve.
Chart: Number of episodes featuring guests with titles including CEO, Founder, or Entrepreneur on the Joe Rogan Podcast from 2018 to 2025. Source: Spotify, Prof G Analysis.
Therefore, being a founder carries immense social capital. Starting a company today doesn’t just make you rich—it makes you interesting. For a generation that says its life lacks meaning, this is a powerful claim. In the past, people filled their inner voids with alcohol, affairs, and eventually yoga; today, they fill them with startups.
……going down the wrong path
An unhealthy obsession with founder identity can lead to dark places. I know countless examples of people who destroyed themselves in their deep desire to become Steve Jobs (Elizabeth Holmes, SBF, Charlie Jarvis, etc.). Yet what fascinates me most is the recent scandal involving Bill Gates’ daughter, Phoebe Gates.
The 23-year-old Stanford graduate is currently under investigation after her shopping startup, backed by Hailey Bieber and valued at $185 million, was exposed for falsifying sales data. This fraudulent practice, known as “cookie stuffing,” is common in the affiliate marketing industry—but it raises a deeper, more intriguing question: Why did the daughter of the world’s 19th richest person feel the need to fabricate her way into becoming a founder? We now have the answer: because it’s cool.
I should have known from the moment she publicly announced her Series A funding—it looked less like a fundraising event and more like the Coachella lineup. I should have known when she and her co-founder launched one of the most popular fake businesses of the moment: a podcast. Or when she achieved the holy grail of fake businesses: appearing on Call Her Daddy. In any case, the signs were there.
Harder than you think
You may have noticed that I dislike fake startup hype. Setting aside the falseness, I despise the lie it promotes—that starting a business is easy—which could mislead millions of people’s careers.
In short, it’s not that simple. One in five American businesses fail within their first year, and half disappear within five years. While the dream of securing venture capital is tempting, it’s just that—a dream for most: only 0.05% of startups have ever received venture funding, and of those that did, about three-quarters failed to return any money to their investors.
Chart: Failure rates of U.S. businesses by years in operation, with nearly 80% no longer existing after 20 years. Source: Bureau of Labor Statistics, Clarify Capital.
I’m not trying to discourage anyone from starting a business. Done right, it can be transformative. But we should also acknowledge the truth about being a founder: it’s extremely difficult, often unrewarding, requires immense personal sacrifice, and is unlikely to lead to a positive outcome. This isn’t an opinion—it’s a statistical fact.
Many people seem to believe they can avoid the downsides of entrepreneurship by starting fake businesses. “Do it on the side,” they think, “so you don’t have to commit fully.” What they don’t realize is that nothing meaningful is achieved in your spare time—and there’s a good reason for that: meaning doesn’t come from the outcome, but from the process. That’s why it’s called meaning. It’s proportional to how much you’re willing to sacrifice.
A better choice is to make a choice—either choose to start a business or choose not to, but don’t deceive yourself into thinking you can do both. This applies to every other area of life as well. From side hustles to “situationships,” young people have developed an allergy to making decisions. We can barely decide what to eat or what to watch, let alone what to do with our careers. This may stem from our addiction to algorithms—the more we outsource responsibility to our phones, the less we take ownership for ourselves. But for too many young people, the result is that we’re not living our lives; we’re letting life happen to us.
This state of uncertainty is one we have the power to reject. Whether or not you become a founder, profound meaning is within reach of anyone. It exists in your work and outside of it, in your current job and your next one. It’s right there, waiting for you to take it. All you have to do is choose.
See you next week.
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