You're thinking of starting a company. Where should it be located? There are a lot of lists out there of best cities for entrepreneurs--notably including Inc.'s own "surge cities," where factors like population growth, rates of entrepreneurship, and business investment combined to create what seems to us highly favorable environments for startup companies.

But the commercial real estate site CommercialCafé has taken a more direct approach, ranking cities not by whether they create good environments for startup businesses, but how well startups actually are surviving there. They looked at the nation's 50 most populous cities and ranked them on factors that reflect actual entrepreneurship. These included growth of tech companies with no employees (likely to be startups); percentage of new firms with no more than four employees that have survived their first year; percentage of businesses with up to four employees that are less than a year old (i.e., new startups); growth in number of startups and Kickstarter projects that met their funding goals.

They also looked at more traditional factors, such as affordability (housing as a percentage of income and co-working costs); percentage of people with STEM degrees, technology job growth; and percentage of Millennials. Combining all these factors, they came up with their own list of the 20 best cities for entrepreneurs. You can find all 20 here. These are the top 10, which is mostly, but not entirely, different from Inc.'s list. (It's worth noting that CommercialCafé​ considered cities only, while Inc. looked at metro areas.)

1. Austin

Both Inc. and CommercialCafé ranked the Texas capital as the best city for entrepreneurs, and in both cases startup density was a big factor. So was the level of investment--according to PwC, there was more than $1.8 billion in VC investment last year, the most in decades. And the city is still relatively affordable although that may change. Austin's had the fastest-growing population in the country for eight years in a row.

2. Washington, D.C.

D.C. grabbed second place because of its high population of residents with tech education--12 percent of Washingtonians between the ages of 25 and 39 have a bachelor or graduate degree in a STEM discipline. It also has a high startup survival rate with 60 percent of startups surviving for more than a year. And though tech wages aren't exactly low, they're rising more slowly than in most other cities.

3. Seattle

Seattle has seen the quickest increase in Millennial population of all the cities CommercialCafé considered. It also ranked second in tech education with 11.5 percent of 25-to-39-year-olds holding STEM degrees. On the other hand, new startup creation lags that of other cities for a simple reason: There aren't as many venture capital firms here as in some other places. And although funding increased in 2018, more than half came from outside the area.

4. Denver

Denver has a good percentage of residents with a STEM degree, and a growing Millennial population as well. Both tech jobs and startups saw a lot of growth in 2018 as well. And the city is known for its collaborative and friendly atmosphere.

5. San Francisco

San Francisco is the only top-ten city besides Austin that Inc. and CommercialCafé agree on--they both rank it fifth for starting a business. In CommercialCafé's ranking, San Francisco came in first in percentage of Millennial population, and third in percentage of people with STEM degrees. It also ranked third in startup growth, with an estimated 4 percent increase in new startups in 2018 compared to 2017. 

On the other hand, San Francisco startups have to contend with astronomical rents and a challenging hiring environment for tech talent, most of which the city's tech giants are gobbling up. That may be why it only ranked 18th for startup survival rate.

6. Charlotte, N.C.

Charlotte has seen an influx of residents with tech degrees and a healthy increase in non-employer startup companies as well. But what really sets Charlotte apart from the others is its affordability--rent and co-working costs combined make up only 20 percent of the local median income for a high-tech employee here.

7. Portland, Oregon 

Portland ranked third in startup growth among the cities CommercialCafé examined, and it also has a healthy population of residents with STEM degrees. On the other hand, it ranked low in Millennial population growth and was in 18th place for tech employment growth. 

8. Atlanta

Atlanta has the best startup survival rate of any city in CommercialCafé's ranking. That may be partly due to its affordability--it was among the 10 most affordable cities in the ranking. But it's actually seen a small decrease in the number of locals with STEM degrees, which is surprising, considering the presence of Emory and Georgia Tech. And though startups are surviving well, the startup growth rate in the city has slowed.

9. Kansas City, Missouri

Though it doesn't immediately come to mind as a startup hub, Kansas City got the top ranking for startup growth and second place in startup density. It also ranked third for affordability, which may be why new startups are locating there. But funding for early stage startups is scarce here, according to a local analysis. That could explain why the city only ranked 13th in startup survival rate.

10. Boston

Boston is second only to Atlanta for its startup survival rate, even though it only ranked 20th in rent affordability. And while startups there stand a great chance of survival, the startup scene isn't growing as fast as it might. The city ranked 19th in both startup growth and startup density.

Published on: Jun 30, 2019
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