The 25 US cities that are best for launching and growing a business, where capital flows and talent abounds
- Before the pandemic, entrepreneurs were already leaving expensive cities like San Francisco and New York for cheaper ecosystems like those in Boise and Salt Lake City. But the coronavirus crisis added fuel to that trend.
- Business Insider determined the 25 best cities to start a business, using metrics like percent change in typical home value, venture capital deals, percent change in employment, and median household income.
- We found popular locations like San Francisco still made the list (it was ranked No. 2) along with surprising cities like Reno, Nevada, (No. 8) and Kalamazoo, Michigan (No. 20).
- Visit Business Insider's homepage for more stories.
Before the pandemic, entrepreneurs were already leaving expensive cities like San Francisco and New York for cheaper ecosystems like those in Boise and Salt Lake City. But the coronavirus crisis added fuel to that trend.
Nearly one-third of Americans were considering moving to a less densely populated area because of the coronavirus outbreak, according to a Harris Poll survey released on April 30.
Choosing a new location isn't easy, especially if you're aiming to find an entrepreneurial ecosystem that will support your business. Business Insider determined the 25 best cities to start a business, using metrics like percent change in typical home value, venture capital deals, percent change in employment, and median household income.
We found popular locations like San Francisco still made the ranks along with surprising cities like Reno, Nevada, and Kalamazoo, Michigan. Here's where the cities ranked and what they offer entrepreneurs who are considering a new headquarters.
25. Charlotte, North Carolina
Charlotte has a reputation for sprouting fintech startups given its strong banking industry — Bank of America is headquartered there and Wells Fargo has a strong presence. Additionally, local startups are netting more VC funding: So far this year, startups raised about $426 million compared to just $121.89 million last year
Meanwhile, housing prices are quickly rising. The median home value increased from $240,044 in March to $249,960 in August.
24. Napa, California
Nestled between San Francisco and Sacramento is Napa, a region known for its wine, riverfront promenade, and quaint shops. While the Glass Fire is disrupting life and business for many residents, the city has a strong reputation for supporting alcohol- and food-related businesses.
Additionally, the high median household income of $92,769 means locals have the means to patronize local businesses.
23. Indianapolis, Indiana
While Indianapolis startups don't net as much VC funding as other cities on this list, the capital has seen strong increases in employment. In July, 986,500 people were employed, a 15.4% increase from April.
Additionally, lower housing costs and the newly-built rapid-transit bus IndyGo Red Line makes Indianapolis attractive for anyone looking to escape traffic jams and rising rent prices.
22. Huntsville, Alabama
Huntsville boasts an interesting dichotomy of development that mixes independent small businesses with high-tech industries such as aerospace and biotech. For example, farmers' markets and the Lowe Mill arts facility help support local entrepreneurs while the 4,000-acre Cummings Research Park houses hundreds of tech companies. Additionally, the week-long Innovate Huntsville event is known for its pitch competitions and tech demonstrations.
Meanwhile, Alabama's A&M University and the University of Alabama in Huntsville provide a steady stream of talent for the area's entrepreneurs.
21. Lansing, Michigan
A mix of low housing costs, strong talent pipelines, and high employment make this city an ideal home for small business owners. Employment in Lansing skyrocketed this year, jumping 21.2% between April and July, as did the median home value, which increased 7% over the past year to $105,805.
Meanwhile, the city has several local colleges, including Michigan State University, which nurture budding talent for area businesses. Lansing's key industries are agriculture tech, food innovation, insurance services, insurance tech, life sciences, mobility, and autonomous tech.
20. Kalamazoo, Michigan
Come for the high employment rates and stay for the local craft beer. In July, locals held 157,400 jobs, a 24% increase from April. Home value in Kalamazoo was $184,138 at the end of August, indicating a small percent change from March to August, at 2.8%.
The city is home to the country's first sustainable craft brewing higher education programs, which were launched at Kalamazoo Valley Community College and Western Michigan University in 2015. It also boasts a whopping number of breweries, including Bell's and Final Gravity Brewing Company.
19. Ann Arbor, Michigan
Ann Arbor is best-known for housing the University of Michigan campus, which can be a draw for aspiring entrepreneurs. So far, alumni have founded 22 startups and claim 502 inventions, according to the University's website. Additionally, it nurtures promising young talent for local businesses.
Employment in the city is also on the rise, jumping 21.8% between April and July to 190,000 jobs.
18. Provo, Utah
For years, outside investors ignored Utah's burgeoning tech scene and forced local entrepreneurs to bootstrap. Now, investors are warming up to the area's founders: Business owners raised $218 million in venture capital so far this year.
There's a great deal of local support for founders, including the Braid Workshop, a consulting and network service designed for women entrepreneurs.
17. Santa Barbara, California
The University of California in Santa Barbara is a draw for aspiring entrepreneurs hoping to gain access to the school's many programs and facilities designed to boost innovation.
For example, the New Venture program encourages undergraduate and graduate students to launch companies while the California NanoSystems Institute's makerspace facility invites founders to build and test prototypes.
Those support systems help draw investor interest as well. Regional entrepreneurs netted about $511 million in venture capital so far this year.
16. Ogden, Utah
Ogden's reputation may be based on its ski resorts and other outdoor recreation, but it's also home to a vibrant downtown packed with restaurants and bars.
Meanwhile, housing costs are on the rise — the median home value of $348.946 already increased by 5% since March — and 324,000 people were employed in July. What's more, Weber State University supports a small business development center that provides consulting, classes, and resources for aspiring entrepreneurs.
15. Washington, DC
Since Amazon announced it would build its HQ2 in Crystal City, Virginia, the nation's capital has been abuzz with entrepreneurial activity. While some worry the tech behemoth will scoop up the city's top talent, others believe it will increase DC's profile as a tech hub.
Meanwhile, Virginia Tech is building a new $1 billion Innovation Campus just south of HQ2. The facility will include an incubator space for startups, ground-floor retail space, and graduate-level courses in quantum computing, cybersecurity, and artificial intelligence.
14. Salt Lake City, Utah
Local entrepreneurs and leaders reinvested a great deal to make Salt Lake City a bustling haven for entrepreneurs. In 2010, Omniture co-founder Josh James created the nonprofit Silicon Slopes, which promotes the interests of Utah's tech industry and hosts an annual tech conference.
The creation of the Lassonde Entrepreneur Institute at the University of Utah also helped to boost Salt Lake City. The 160,000-square-foot center can house 400 student entrepreneurs who develop new companies in the facility.
13. Boise City, Idaho
Idaho's capital city has long held a cool-factor among nature and music enthusiasts, but recently, it's become a draw for entrepreneurs as well. In 2014, local business leaders determined Boise needed better access to capital and a stronger talent pipeline if it was going to compete with cities like Austin and Portland.
Shortly after, Boise State University opened its Venture College, which hosts an on-campus incubator and teaches classes in entrepreneurship, to help students prepare for careers in startups. Coding schools and a developer's boot camp also opened. Meanwhile, community leaders cultivate relationships with investors to draw them into the city.
12. Manchester, New Hampshire
The riverside city of Manchester is just 50 miles north of Boston but doesn't get overshadowed by the Beantown. Manchester's residents have a high median household income of $83,626 and about 96,000 were employed in July, a 13.9% increase from April.
The proximity to local colleges makes Manchester an ideal hub for New England entrepreneurs looking to scoop up top talent — Saint Anselm, Southern New Hampshire University, and the University of New Hampshire at Manchester are all local.
11. Olympia, Washington
Washington's capital city is experiencing an increase in employment and housing costs this year. About 134,000 individuals were employed in July, a 7.4% jump from April's numbers, and the median house value of $385,743 is expected to rise 6.1% within the next year.
The entrepreneurial community is also welcoming of newcomers: OlyMEGA — which stands for Olympia makers, engineers, geeks, and artists — is a makerspace and networking group while Olympia Women's Networks focuses on provides female entrepreneurs with business referrals.
10. Bremerton, Washington
A short ferry ride from Seattle sits Bremerton, a city known for its harborside shops, restaurants, and cafe. But these idyllic views make it an expensive place to live: The median home value is $359,900 — a 11.7% increase from last year — and expected to rise 5.9% within the next year.
Locals who are considering starting a business can apply to the 6 Month Startup Kitsap, a program for aspirational founders that helps them decide whether they should give up their day jobs to chase their entrepreneurial dreams.
9. Austin, Texas
In recent years, prominent business leaders like Outdoor Voices founder Tyler Haney and investor Tim Ferriss have relocated to Austin from New York and Silicon Valley, respectively. Adding big-name residents only bolstered the city's reputation as a thriving entrepreneurial ecosystem.
Austin packs a lot of punch for business owners: Local founders raised nearly $1 billion in venture capital this year, after adjusting for population, and the city is home to unicorns such as jewelry brand Kendra Scott and energy employers marketplace RigUp.
While SXSW was canceled this year due to the coronavirus pandemic, it's been a huge draw for entrepreneurs, investors, and creatives in the past. The event is scheduled to be digital next year.
8. Reno, Nevada
Nicknamed the biggest little city in the world, Reno offers business owners more than just 24-hour casinos. Reno's entrepreneurial ecosystem has grown in recent years as founders seek affordable housing without losing their connections to the west coast startup market.
Additionally, Reno's employment levels jumped 25.7% to around 222,500 in July, the second-highest percent change in employment on our list. Tech behemoths such as Tesla, Microsoft, and casino gaming company IGT have also lured out-of-state talent to Reno, creating a strong network of professionals for local entrepreneurs.
7. Las Vegas, Nevada
Founders hoping to escape expensive housing costs in California are looking to Las Vegas as a cheaper haven. The median home value is $296,730 and is expected to rise 4.4%, according to Zillow. The lack of state and local income tax is an added sweetener.
Founders in the game design and hospitality get the added bonus of working near the casinos. But Vegas's startup ecosystem is more than just gambling. The state-run Battle Born Venture Program invests in local startups in the mining, aerospace, and water sectors.
What's more, women business owners earn nearly twice as much as their male peers, according to a study from small business financial marketplace Fundera.
6. Santa Cruz, California
The coastal city of Santa Cruz lures newcomers with its ocean views, but the city's interconnected businesses provide strong entrepreneurial opportunities. For instance, local farmers supply ingredients for the area's popular farm-to-table restaurants.
Entrepreneurs are also seeing increases in venture capital funding. So far, founders have raised $650 million this year compared to nearly $90 million last year.
5. Seattle, Washington
The city known for its coffee has a lot more to offer entrepreneurs than just caffeine. For starters, Amazon's sprawling headquarters is located in the city. Google, Facebook, and Apple are also building a greater presence in Seattle, which gives business owners the chance for collaborations, mentorship, or useful business connections.
Seattle's employment rose by 10.6% from April to around 2 million in July. The metro area also has a high median household income among our list of metro areas, at $94,027.
Seattle's downside, like many west coast hot spots, is its high housing costs. The median home value is $780,126 and rising, according to Zillow.
4. Boston, Massachusetts
The Boston area is home to more than 30 colleges and universities, including prestigious institutions — such as Harvard, MIT, and Babson College — that provide top talent for startups.
Just like its alumni, Boston also has a strong network of successful companies including restaurant point-of-sale platform Toast, wearable device Whoop, and marketing software platform HubSpot that make it a hub for aspiring founders.
While Massachusetts doesn't allow happy hours, enterprising entrepreneurs talk shop in one of the city's many accelerators and incubators. Accelerator MassChallenge has been running for 10 years and fueled the growth of 2,344 startups.
Boston had around $8 billion of capital invested in startups so far this year. The metro area also had the fifth-highest median household income among these metro areas, at $94,430.
3. Dover, Delaware
Dover-based businesses raised $407 million in venture capital so far this year, a huge increase from the $83 million they netted in 2019. That shows investors are getting serious about Dover's startups.
Meanwhile, the city has several incubators that can help local entrepreneurs start and scale businesses. Delaware State University's latest incubator is slated to go inside the new multi-use building called Division Street Offices and the school already has a commercial kitchen incubator on campus.
2. San Francisco, California
While many founders are opting to move or start their businesses in cheaper cities, the Bay Area is still a draw for entrepreneurs. Some want to be close to the action of Silicon Valley while others want to get a slice of the robust venture capital funding. So far, San Francisco-based businesses raised $22.5 billion, adjusted for population, in VC funding.
The metro area also had the second-highest median household income among these metro areas, at $114,696. But the city isn't accessible for everyone thanks to astronomical housing costs. The median home value is $1.4 million, according to Zillow. And who could forget the fact that some people were spending $2.25 an hour to work from a parking space last year.
1. San Jose, California
It may come as no surprise that the city closest to Silicon Valley is high on the list, but San Jose has more to offer entrepreneurs than just proximity to powerful companies.
San Jose is 20 miles away from Stanford University, which is ideal for founders looking to hire talented graduates. What's more, venture capital firms are investing in local startups: San Jose-based businesses raised $9 billion so far this year, the second-largest amount of capital invested after adjusting for population size.
The metro area also had the highest median household income on the last, at $130,865.
To get a sense of the best cities to start a business, we looked at four different metrics that focused on investments and overall economic health.
We only included metro areas that had values in all four of our metro areas and had at least some capital investments this year. Capital marketing company PitchBook also shared the large amount of venture capital invested in Silicon Valley, but since this place did not have values in any of the other metrics. So, we excluded it from our list. In the end, we looked at nearly 190 metro areas.
After compiling our data, we calculated a z-score for each metro on each of the four metrics so that we could compare the values on the same scale. We then summed each of the z-scores together to create an overall index where the larger values made the top of our list.
The following are the data sources and values we used in our analysis:
- Percent change in typical home value, March 2020 and August 2020: To get a sense of how well the housing market is recovering in a metro area, we took the percent change of home value from March to August using metro area data collected by Zillow.
- Venture capital deals, Q1 2020 and Q2 2020: PitchBook shared with us quarterly VC deals by metro area. To compare values across places with varying population sizes, we adjusted the total capital invested in the year so far by each metro area's population. We used population estimates from the Census Bureau's 2019 American Community Survey to do this.
- Percent change in employment, April 2020 and July 2020: To get a sense of how employment has bounced back so far since the low-point in April, we looked at the percent change in employment from April to July. It is important to note we used preliminary July estimates from the Bureau of Labor Statistics before the latest employment report was released in October.
- Median household income, 2019: To get a sense of how wealthy the local potential customer base is, we looked at the median household income from the Census Bureau's 2019 American Community Survey. Values are adjusted for 2019 inflation.
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