San Francisco and San Jose, California, are not only home to Big Tech's all-stars, they're also the top two spots where minority entrepreneurs are thriving.

Over 42 percent of all minority-owned companies in these cities make at least $500,000 in annual revenue and more than half have been in business for six years or more, according to a new report released Tuesday by LendingTree, an online loan marketplace based in Charlotte, North Carolina. The study uses Census data to gauge how minority business owners with employees fare in the 50 largest metro areas in the U.S. It measures performance based on metrics including a company's longevity and revenue, and whether a city's minority population is proportionally represented in business ownership demographics, dubbed the "parity index."

"We did not try to say this is the best place for minorities to have or start businesses," says Kali McFadden, lead research analyst at LendingTree. "We looked at where minority businesses are doing better--it's a more forensic attitude."

Perhaps unsurprisingly, minority entrepreneurs have higher success rates in coastal cities like Seattle, Washington, D.C., and Portland, Oregon, than in the Midwest, according to the data. Kansas City, Missouri, and St. Louis received the lowest scores overall, settling at No. 49 and No. 50, respectively. Remarkably though, Cincinnati snatched No. 10, as the only heartland city to break into the top tier. (It also landed at No. 42 in Inc.'s Surge Cities index).

The case of St. Louis is interesting, too. Even though it has the second-highest parity rate at 71--that is, the number of minority business owners is more closely aligned to the makeup of its population--only 18 percent of minority-led companies there reach or surpass the $500,000 revenue mark. That's nearly three times lower than the highest score on that metric in the survey, which is 49.7 percent in Memphis, Tennessee. 

What's causing the gulf between parity and revenue in these locales? McFadden isn't sure. A number of factors determine a company's success, including education and access to capital. Socioeconomic reasons can also cause businesses to sputter. For instance, if your customer base can't afford to pay for your services, that's going to erode your ability to scale. 

Here are the 10 U.S. cities where minority entrepreneurs flourish:

Published on: Jan 9, 2019