Start-up landscape has been improving in recent years and these are the easiest cities to start a business in America. According to Kauffman Foundation, which publishes annual reports about entrepreneurship in the US, start-up activity index, which measures new venture creation, has continued to increase in 2016 following a positive trend that started a year before.
Still, many startups do not survive first years on the market. There are different statistics about survival rates of new businesses among which some even claim that only one in ten of fresh companies make it to the fifth anniversary. On the other side, Bureau of Labor Statistics data show that approximately half of the startups survive four year period – among business launched in 2011, 79.4% lasted at least a year, 69.3% celebrated the second anniversary, 61.9% existed three years and 56.3% lived for at least four years. But surviving on the market and making money is not the same thing – among businesses that do not disappear, 40% is profitable, 30% break even while 30% lose money. Whether a start-up would be a success or a failure depends on different factors. According to CB Insights, which analyzed 101 businesses that faded away, leading cause of deaths among startups is the lack of market need for a product/service that they offer, followed by problems with funding and poor human resources capital. Surrounding also plays important role in startups development (in CB Insight’s analysis bad location was a reason for failure in 9% of cases). In this article about the easiest cities to start a business in America we tried to determine which cities provide a nurturing climate for startups. For those who are considering launching a business in Europe our previous list of Easiest Cities in Europe to Move to might be useful as it includes a few startup hot spots.
In order to create this list we used as a starting point WalletHub’s comprehensive ranking of Best large cities to start a business in 2017, which was based on analysis of 150 places across America. WalletHub used 18 different criteria in creating the list including the number of startups per capita, survival rates, human capital availability, labor costs, office space affordability…. We also relied on Kauffman’s list of metro areas that focused on the rate of new entrepreneurs, the number of those launching a business because they recognized a good opportunity and start-up density. Combining these two lists we created the average ranking for 40 large cities, and then assigned additional points to those that appeared on Forbes, CBS, and global Startup Genome rankings. In this way we covered different sources that rank cities’ startup friendliness considering a range of different factors. So, let’s see which are the easiest cities to start a business in America?
11. Miami, Florida
We start today’s list with Miami which has the highest startup activity among large cities in America, according to Kauffman’s report. Together with Los Angeles Miami has the greatest share of new entrepreneurs in the adult population and second highest number of startups per 1,000 firms. However, the majority of new businesses in Miami do not make significant progress. Kauffman index of growth, which measures the growth of employees and revenues, puts Miami at the second lowest place, showing that few startups become significant players on the market. At the same time, WalletHub ranks Miami as the 35th best city to launch a business. The city did not rank higher on WalletHub’s list mainly because of poor access to financial and human capital resources.
10. Los Angeles, California
There are between 3,700 and 4,600 start-ups in Los Angeles, according to Startup Genome report, which ranks the city as the ninth best place in the world for start-ups. The city also ranks better than previously mentioned Miami on WalletHub’s list where it occupies the 33rd place. It would rank much higher if WH did not take into account costs of business (labor force costs, office space costs, costs of living, corporate taxes) which are among the highest in America. Still it is worth noting that companies do not pay taxes during first two years of existence in LA. Finally, Kauffman places the City of Angeles on the third spot mainly because of a high rate of new entrepreneurs.
9. Boston, Michigan
According to Startup Genome report, Boston has fifth best startup ecosystem in the world. Tech start-ups account for the greatest share of new businesses opened in Boston. However, in the last few years young entrepreneurs have found favorable opportunities in other sectors as globally successful Trip Adviser and HubSpot have demonstrated. Startup scene in Boston relies on highly educated young people coming from Harvard and MIT. Moreover, there are dozens of organizations helping fresh entrepreneurs to realize their ideas. Boston also appears on Forbes list, while Kauffman and WalletHub assign it 27th and 21st spot respectively among best places for startups.
8. St. Louis, Missouri
The number of new businesses has been on the rise since 2009 in St Louis. Nine years ago the city was 11 percent below the national average in the number of new firms per 100,000 people, while now it has the fifth highest startup density (96.7) among largest cities in America. Moreover, the money invested in new businesses went from $66 million in 2013 to $176 million in 2015. The greatest number of startups have been launched in the IT and biotechnology sector. Low business costs coupled with good access to human and financial resources have placed St Louis at the seventh spot on the WalletHub’s list. On the other hand the city is positioned relatively low on Kauffman’s ranking but it is worth noting that it has made the greatest progress between 2016 and 2017, advancing from 36th to 26th place.
7. San Diego, California
Number 7 on our list of easiest cities to start a business in America, San Diego, was named the best city to launch a business by Forbes which took into account five criteria including the percentage of small startups in high growing industries, the percentage of businesses with a Facebook page, websites and online reviews… The city ranks as fourth on Kauffman’s list which is better for seven spots compared to the previous year. A high percentage of adults launching a business each month (0.49, or one out of 200) was the main reason behind the climb on Kauffman’s list. On the other side, WalleHhub placed San Diego somewhere in the middle of its ranking mainly because of the business costs which are among the highest in the US.
6. San Antonio, Texas
San Antonio is another place our list of the easiest cities to start a business in America that made a noticeable improvement in Kaufmann’s report, climbing from the 13th spot which occupied in 2016 to the 6th position in 2017 due to a higher rate of new entrepreneurs and greater startup density. The city also boasts the second best business environment, according to WalletHub while CBS puts it at the 10th spot among the best metro areas for new businesses praising its low costs of living, moderate taxes, diverse and highly educated population. As in many other places on this list IT attracts the greatest share of venture capital in San Antonio.
5. Dallas, Texas
Dallas appeared on Forbes’ and CBS’s rankings of the best places for fresh entrepreneurs, and it’s 5th on our list of easiest cities to start a business in America. Citing MoneyTree, CBS emphasizes that $104.1 million of venture money was invested in Dallas’ startups in the first quarter of 2016, which is four times higher compared to the last quarter of 2015. The city also made one place climb on Kauffman’s latest ranking, performing the best in the category of startup density. WalletHub places it on the 30th spot mainly because of relatively high business costs.
4. Houston, Texas
Another city in Texas, Houston is also on our list of easiest cities to start a business in America because it boasts favorable business environment but like almost all other places in Lone Star State, it has relatively high business costs, according to WalletHub. On the other side, Kauffman assigns it the ninth spot which is three positions fall compared to a year ago. The city has between 900 and 1,400 startups and it appears on Startup Genome global ranking which emphasizes Huston’s efforts to facilitate business openings through collaborative work of government, corporations, investors, academia and fresh entrepreneurs.
3. Charlotte, North Carolina
Charlotte found a place on this list of easiest cities to start a business in America mainly because of high position it occupies on WalletHub’s ranking. According to WalletHub, the most populous city in North Carolina has third best startup climate. At the same time, CBS puts Charlotte among the best places to start a business, praising its affordability, low unemployment, highly developed financial, healthcare and retailing sectors. The city occupies 17th position in Kauffman’s ranking which is three spots higher than the last year. The advancement is due to a slightly higher percentage of fresh entrepreneurs starting businesses because they saw a good market opportunity, and due to the increased startup density (87.5 startups per 1,000 firms).
2. Denver, Colorado
Denver is one of the rare places on this list that has recorded fall in Kauffman’s rankings. In 2015, the city occupied 5th place, a year later it slipped to 8th position while in 2017 it has 10th highest startup index activity. The main reason behind the fall is a drop in the number of entrepreneurs who start businesses because of favorable market opportunities and not because of necessity, such as unemployment. Still, Denver is also one of few places that both Forbes and CBS included among greatest startup hotbeds in America. WalletHub’s analysis shows that Denver has moderately high business costs but good access to financial and human resources.
1. Austin, Texas
Austin ranks as first on our list of the easiest cities to start a business in America. Texas’ capital occupies second place on Kauffman’s ranking, eight on Wallethub’s list, and it tops Forbes and CBS lists, appearing as well on Startup Genome global ranking. Austin is one of the fastest growing cities in America. It boasts highly educated labor force and is one of the most successful places in attracting and retaining talented professionals. Last year $600 million venture capital flooded into 75 startups while in the last six years startup community received $700 million on average each year. Austin has fourth highest start-up density (104.5 per 1,000 firms) and even more importantly it has the second highest index of growth entrepreneurship in the USA, meaning that fresh businesses in Austin are very good at making money and creating new jobs.