Three in four entrepreneurs (76%) grew their business revenue over the past year, and 72% are considering a strategic transaction in 2025 (M&A, IPO, private sale, etc.)
Entrepreneurs overwhelmingly (82%) predict a stronger US economy in 2025, and nearly three-fourths (72%) are considering a strategic transaction (IPO, M&A, private sale, etc.) within the next 18 months, reflecting growing optimism and a strong dealmaking pipeline, according to new research from Ernst & Young LLP (EY US).
The EY Entrepreneur Ecosystem Barometer, which surveyed 500 entrepreneurs with $1 million or more in annual revenue, demonstrates market confidence, with 76% of entrepreneurs saying they grew their business revenue over the past year. This is especially true for female entrepreneurs, with 35% reporting business growth of 20% or more.
“Despite weathering a high-interest rate environment alongside geopolitical and economic uncertainty, these entrepreneurs are positioning themselves for further gains in 2025,” said Andrew Jordan, EY Americas Entrepreneur Of The Year™ Director and EY US Assurance Partner. “Entrepreneurs are the backbone of the US economy, and their optimism serves as a barometer for growth and innovation. By better understanding their outlook, we can gain valuable insights on what we may see in the economy in 2025.”
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When asked to describe their company’s level of AI implementation, 72% ranked themselves as “intermediate” (using AI systems and developing fluency) or “established” (implemented AI systems with teams fluent on their use). Very few (less than 6%) said their company is not currently exploring the use of AI in any substantial way. Productivity is the main driver of this trend, with 61% of entrepreneurs saying they want AI technology to enhance their businesses’ overall efficiency and competitiveness.
Many entrepreneurs are planning to invest heavily in both talent and AI to capitalize on market opportunities. When asked to rank their investment priorities for next year, 73% of respondents placed talent initiatives (including identification, recruitment, re-skilling and training programs for existing employees) in their top three. Sixty percent of respondents included technology, such as AI and machine learning, in their top three priorities.
Strategic dealmaking on the rise
Strengthening optimism around the economy may be driving entrepreneurs to pursue deals to accelerate their growth. While 72% of all respondents note they are considering a strategic transaction such as an IPO, M&A or a private sale within the next 18 months, this jumps up to 91% for entrepreneurs with $5 million or more in revenue.
Also, the study found entrepreneurial dealmaking is already happening. Of those considering a deal, 39% reported that they are already actively planning for a strategic transaction, including 51% of female entrepreneurs and 55% of entrepreneurs with $5 million or more in revenues.
Overall, entrepreneurs are considering a variety of strategic transactions, with M&A as the leading target (75%) followed by a private sale (58%) and an IPO (39%).
More broadly, optimism is building for 2025 and beyond. IPO proceeds over the first three quarters of 2024 outpaced 2023 full-year levels, and deal volume more than doubled 2023 levels, according to the EY Q3 US IPO Trends report. A healthy public market is likely to have a cascading effect on the broader appetite for strategic transactions.
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Entrepreneurs plan to fundraise in 2025
After years of a constrained fundraising environment, entrepreneurs find themselves in need of capital. In fact, 91% are planning to fundraise, with 30% planning to raise over $10 million to fuel business growth over the next 18 to 24 months. Entrepreneurs plan to fundraise from a variety of sources, including self-funding (53%), loans from financial institutions (45%), private equity (44%), venture capital (37%) and more.
When it comes to VC investment, AI enthusiasm has created a tale of two markets with disproportionately high funding over the past few years. Of the 54,000 VC-backed companies in the US startup ecosystem, just over half have raised money since 2022, according to the EY Q3 US VC report.
“Nearly half of today’s VC-backed companies haven’t fundraised in the past two years and are likely nearing the end of their runway, needing capital soon,” Jordan said. “As interest rates stabilize and IPO and capital market activity strengthens, we expect to see more fundraising opportunities for entrepreneurs in the coming year.”
Entrepreneurs are showing up with intention
Entrepreneurs are focused on productivity while prioritizing their own wellbeing. The majority (55%) are in the office four days a week or more, yet less than 15% work over 50 hours a week, demonstrating an intentional balance between business priorities and quality of life. At the same time, 69% of entrepreneurs report getting seven or more hours of sleep each night.
“Taken together, these responses show that entrepreneurs are intentional about integrating their work and their lives,” according to Jordan. “They are no longer defined by relentless focus on their jobs at the expense of their health and personal lives. Entrepreneurs purposely manage — and in many cases, integrate — their work and wellbeing practices so they can show up with high energy and strategic focus.”