Why Are These Cities Attracting the Most Startups?

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Being able to start a successful business is central to the American dream. Many Americans have come from poverty and with some hard work, good ideas, and sound management became successful business leaders.

Over the last few decades, a new culture of tech startups has emerged, several of which have grown into multi-billion dollar corporations. Many new entrepreneurs are trying to make the next Facebook or Uber. As of last year, the number of tech-based startups had grown by 47%.

Growth in the number of tech startups specifically is due in large part to the advent of widely-available high-speed internet. The internet has also made it possible to start a new business from just about anywhere in the United States, but some places have have a much more active startup culture.

Click here to see why these cities are attracting the most startups.

Many Americans think of Silicon Valley, located within the San Jose-Sunnyvale-Santa Clara metro area, as the epicenter of entrepreneurial activity in the United States. But based on a recent report on startup activity in U.S. metro areas, the Valley does not even rank among the top 10 metro areas for startups — though several other California cities do.

24/7 Wall St. used data from 2018 edition of The Kauffman Index of Startup Activity to determine the metropolitan areas with the highest levels of entrepreneurial activity. This index considers the percentage of the population starting a business, the share of businesses that are considered startups, and the employment situation of people starting their own businesses.

While these factors are important, there are many other considerations that can be advantageous to those starting a new company. An area’s cost of living, share of well-educated residents, and access to investors and customers are all factors than could make or break a startup.

24/7 Wall St. reviewed the The Kauffman Foundation’s Index of Startup Activity, listing the five metropolitan areas with the highest levels of startup activity. The index has three components: the rate of new entrepreneurs, the opportunity share of new entrepreneurs, and startup density. The rate of new entrepreneurs measures the share of a population that became entrepreneurs in a given month. The opportunity share of new entrepreneurs tracks the percentage of new entrepreneurs who left a job to start their own business. Startup density is defined as the number of startups per 1,000 companies. A startup is defined as a company less than a year old with at least one employee besides the owner.