New business apps hit 5.6M in 2025, up 24% since ChatGPT. AI lowers the minimum scale for startups; Medvi posted $401M sales with two people. The shift defers headcount, research shows.
Alpha Score of 40 reflects weak overall profile with weak momentum, poor value, moderate quality, weak sentiment.
New U.S. business applications reached 5.6 million in 2025, a 24% increase since the launch of ChatGPT, according to a July research note from Citadel Securities that cited Census Bureau data.
The median seed-stage startup now employs four people, down from five in the first quarter of 2023, Citadel found. That decline coincided with rising interest rates and softening hiring demand, factors the firm said may have contributed to the shift.
Citadel estimated the surge in new business formation offsets the lower headcount at individual startups. “Those gains may accrue most powerfully to the bedrock of the American economy: small businesses and entrepreneurs,” analyst Frank Flight wrote.
AI has lowered the minimum efficient scale of a business, the revenue threshold at which it becomes economical to hire specialists, the research note said. A founder who once needed separate employees for accounting, marketing, customer service and compliance can now use AI tools to cover those functions with a smaller team. That makes it viable to start companies that would not have justified the overhead before.
Matthew Gallagher launched Medvi, a GLP-1 telehealth startup, from his Los Angeles home in September 2024 with $20,000 and no employees. The company posted $401 million in sales in its first full year, served 250,000 customers and produced a 16.2% net profit margin, according to PYMNTS, citing The New York Times. Medvi is tracking toward $1.8 billion in revenue in 2026. For comparison, Hims & Hers (HIMS) reported $2.4 billion in revenue last year with 2,442 employees and a 5.5% net margin. Gallagher runs nearly three times that margin with just two people – himself and his brother Elliot.
The tools were not proprietary. ChatGPT and Claude wrote code and marketing copy. Midjourney produced ads. ElevenLabs handled voice-based customer communication. Custom AI agents connected his systems. Gallagher outsourced the regulated components – licensed physicians and prescription processing – to specialist partners CareValidate and OpenLoop Health while retaining ownership of the customer relationship. That structure let him concentrate on growth while partners absorbed the compliance burden that typically consumes early-stage telehealth capital, PYMNTS reported.
PYMNTS Intelligence’s May 2026 Small Business Week report found that SMBs generating more than $1 million in annual revenue grew 13.7% on average, while businesses earning less than $150,000 grew just 0.6%. The gap suggests digitally fluent businesses are pulling away from smaller peers.
Citadel’s analysis points to a structural shift not yet visible in aggregate employment data. In S&P 500 earnings calls, companies describing AI as a complement to hiring outnumber those describing it as a substitute across nearly every job function, the firm found in an April analysis of earnings-call language. A business that once needed five employees to justify its early overhead now needs four. That headcount is not eliminated, Citadel said; it is deferred until the company reaches a scale where human judgment becomes the binding constraint.
Drafted by a large language model from the source reporting linked above, then screened by automated publishing checks. It is not read by a journalist before publication. Some articles cite our Alpha Score. Verify prices and figures against the original source. Educational coverage, not personalized advice.