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10 Top States for Entrepreneurship and Innovation

Recently I told you about the 10 worst states for new business in America. Now here's where entrepreneurship is thriving.

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Recently, I told you about the 10 worst states in America for new businesses--at least, according to the U.S. Chamber of Commerce. Today, it's time for the best of the bunch.

First, the background. In its Enterprising States report, the Chamber took "an in-depth look at the priorities, policies and programs of the 50 states that are vital for job growth and economic prosperity," including "entrepreneurship and innovation."

While states like Arkansas, Maine, and West Virginia didn't fare very well according to that report, other states shone in a more positive light. Some of them might surprise you.

10. Florida

What brought the Sunshine State into the top 10? In a phrase, "business creation."

Florida ranked first overall among the states in "business birthrate," and third in the increase in self-employed workers.

You might be excused for asking whether that's always a great statistic, especially since people often start their own businesses in response to not being able to find a job elsewhere. And the state wasn't a leader for high-tech industries.

Instead, the Chamber reported, Florida's "fastest-growing self-employed occupations since 2002 include personal financial advisers (59,000 new jobs), managers (40,000), property managers (39,000), and securities and financial services salespeople (38,000)."

9. Georgia

The Chamber isn't alone in ranking Georgia pretty high on its list of entrepreneurial states. The National Venture Capital Association called Atlanta the No. 12 American city for tech start-ups last year.

Georgia's high rank was driven by its concentration of high-tech establishments, "with particularly high employment concentrations in computer facilities management," and software, according to the Chamber.

The report also cited the efforts of a state program called Entrepreneur-Friendly Communities that tries to teach communities to create an entrepreneurial environment.

8. Arizona

"Go west," young men (and women). Arizona had a "solid all-around performance," according to the report, and ranked "at least 15th in five of the six entrepreneurship and innovation metrics."

Top 5 in business creation rate, the state has a number of interesting government-funded projects. These include the yearly Arizona Innovation Challenge, which awards $3 million to its winners, an Angel Investment Program offering tax credits to investors in Arizona small businesses, and a Fast Grant Program helping companies with promising technologies.

7. Washington

With more than 57,000 Microsoft employees alone, it's probably not surprising to learn that Washington's STEM workforce was a big factor in placing it high on the list.

"The state is already home to the 3rd-highest concentration of STEM workers and is adding STEM workers at the 4th-fastest rate in the nation," according to the report.

The Chamber also cited Impact Washington, a nonprofit that supports manufacturing and also consults with very small businesses, and state financial support for manufacturers.

6. Texas

Its fifth-in-the-nation STEM job growth pushed Texas near the top of the list, along with being ranked No. 2 in growth of the number of self-employed workers. Since 2009, Texas has created 34,000 STEM jobs, "many of them in computer and IT-related occupations," according to the report.

The state has more than 2.2 million small businesses--meaning Texas has more small businesses than 13 other states have people.

More than 390,000 are direct employers, the report said, "and they account for over 45 percent of private sector jobs in the state. Small firms make up more than 98 percent of the state's employers."

5. Massachusetts

Massachusetts is a middling performer when it comes to many of the Chamber's criteria, but its status as a center for STEM jobs--combined with research and development at colleges like Harvard University, Massachusetts Institute of Technology, and other institutions--were enough to bring it into the top five.

Among the non-academic efforts that the study cited was a 2012 law that creates a matching grant fund to "invest in two or three technology areas that hold high potential to create a competitive global advantage."

4. Utah

Did you know that Utah adds STEM jobs at the 3rd-fastest rate in the country, and that it's No. 7 in high tech business concentration?

"The state scores well in business creation. It ranks 3rd in business birthrate and 7th in growth of self-employed workers," the Chamber said.

The report also cited a state program through Weber State University that "offers technology and business skills training to residents and to start-up businesses in the community," and another mentorship and education program for companies considering moving to Ogden, Utah.

3. Virginia

It might not be surprising that Virginia is near the top of this list, especially given the growth of the defense and broader government sectors over the last several years.

Virginia may just be "the best state in the nation for STEM jobs," according to the report, ranking No. 1 in STEM job concentration, and No. 2 in STEM job growth.

Virginia also has "the highest share of business establishments in high-tech industries," the Chamber said.

2. Colorado

It's not just beautiful scenery and fresh mountain air. Colorado ranked in the top 20 in every metric that the Chamber used to rank the states, which led to its No. 2 ranking for entrepreneurship and innovation.

Colorado clocked second place in the concentration of high-tech businesses, along with 4th place in business birthrate, and 5th place in STEM job concentration, with lots of new jobs in software development, engineering services, and physical and life sciences research.

1. Maryland

Maryland topped the list on the basis of three things: its No. 1 overall ranking for "academic R&D intensity," combined with its huge share of STEM jobs and high-tech businesses (enough to rank No. 2 and 3 in the country respectively).

"Recognizing the value of connecting tech start-ups with experienced entrepreneurs, Maryland launched the Maryland Entrepreneurs Resource List," the Chamber report said. "By connecting nascent firms with people who have been through the process, the list offers a chance to increase the survival rate of promising start-ups, ultimately creating jobs and increasing economic activity."

Interestingly, Maryland was middle-of-the-pack in two of the six categories: business birthrate and growth in self-employed workers. Maybe that demonstrates one of the truths of entrepreneurship: Just because you start a business doesn't necessarily mean you're an entrepreneur.

IMAGE: Bernard Gagnon/Wikimedia
Last updated: May 15, 2013

BILL MURPHY JR. is a journalist, ghostwriter, and entrepreneur. He is the author of Breakthrough Entrepreneurship (with Jon Burgstone) and is a former reporter for The Washington Post.
@BillMurphyJr




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