More people are starting businesses now than ever before — and the reason could be that the opportunity cost, or what they have to give up in exchange for entrepreneurship, is lower than ever.
Data that the U.S. Census Bureau released earlier this month shows that the total number of applications to start businesses hit a record 5.5 million last year.
That’s half a million more applications than what was filed in 2022.
Related: Here’s What Millions of Small Businesses Have in Common, According to a New Survey
Census Bureau data from the first four months of this year show that the startup boom is still going strong, too — from January through April, the number of new business applications totaled over 1.7 million.
Why are more people filing to start new businesses?
Columbia Business School professor Angela Lee told Entrepreneur that the reason could be the “unprecedented number of layoffs from big tech companies in the last several years, resulting in a large pool of talent freed up to pursue entrepreneurship.”
Columbia Business School professor Angela Lee (left) and Co-Founder of Plum Alley Investments Andrea Turner Moffitt (right). Photo by Monica Schipper/Getty Images)
Lee, the director of the Eugene Lang Entrepreneurship Center, also noted that “entrepreneurship has historically been counter-cyclical because the opportunity cost to start a company goes down during a recession.”
Related: Want to Start a Billion-Dollar Business? Look to These Two Industries, Which Have the Most Unicorn Growth
Big tech companies have been laying off employees in record numbers in recent years.
Tech layoffs last year affected 263,180 employees globally according to tracker Layoffs.fyi.
Amazon laid off the most people (27,410) last year, but Meta (21,000), Google (12,115) and Microsoft (11,158) also contributed to record numbers.
The unemployment rate has remained stable, in the 3.7% to 3.9% range in the U.S. over the past nine months, according to the latest U.S. Bureau of Labor Statistics jobs report.
Related: ‘The Employment Situation’ Report for April Shows Employers Are Taking Hiring Down a Notch, Employee Wage Growth Slowing