These are the best US cities for startups

You’ve got your business idea, worked out where your startup funding’s coming from and how many employees you’re going to need, but now you’re wondering, what are the best cities to start a business? Read on to discover the cost of doing business in America’s most successful startup communities and the support that’s available to help you get up on your feet.

What cities have the most startups?

There is a good reason why some cities are home to a higher number of startups than others. Pulling from a multitude of data from the experts at the Startup Genome, the data analysts at Inc. provide a full breakdown of America’s best cities for startups and small businesses. 

This study ranked cities under a variety of categories, including early-stage funding deals, population growth, net business creation, rate of entrepreneurship, high-growth company density, job creation, and wage growth. For reference, 10 of America’s top 50 cities for starting a business in 2020 are as follows: 

  1. Austin
  2.  Salt Lake City
  3. Durham
  4. Denver
  5. Boise
  6. San Francisco
  7. Charleston
  8. San Diego
  9. Phoenix
  10. Miami

Some cities on this list might surprise you; with San Francisco famously known for its numerous tech startups, you may have expected them to top the rankings. However, aided by its exceptional early-stage funding deals and capacity to nourish startup growth in a vast number of sectors, Inc. named Austin, Texas, 2020’s stand out city for new business owners.

A few other major cities with higher than average population density also made the Top 50, including Dallas, Los Angeles, and Boston. However, it is important to note that many lesser-known places have become major startup hubs. With lower rent costs and an overall higher standard of living, startups are likely to attract early-career talent to places like Houston over the famously expensive San Francisco. 

Which state has the most startups?

States with an abundance of venture capitalists on hand to offer financial backing to new businesses often have a high startup density. America’s South Eastern and South Western coasts have quickly become known for their entrepreneurial spirit, hosting some of the world’s best-known technology companies. Inc. named three cities in South Carolina among six standouts excelling at net business creation, joining the ranks of Florida and California. All three states boast more startup companies than the national average. 

So startup rates are high, but what about business survival rates?

According to the US Small Business Administration Office of Advocacy, medium enterprises make up 44% of America’s economic activity, making it imperative for the government to support their operations. 

Georgia McIntyre offers some intimidatingly damning statistics in her article, “What percentage of small businesses fail?”. She reports 20% of small businesses failing in their first year, 30% failing in their second, 50% in their fifth, and 70% in their tenth year. This high risk of failure may deter professionals, making the need for government support of new startups ever more crucial.

McIntyre writes that 42% of startups fail due to lack of demand, 29% face money issues, and 23% fail due to problems with finding employees with the right skills to support and sustain their business. As we will see, however, two of these points can be easily remedied by city government intervention, helping provide capital and ensuring skilled workers are in plentiful supply.

How do these cities create a supportive startup culture?

New startups can only get so far with hard work and the skills and ideas needed to begin their business venture alone. The first few months and even years can be tough, with directors often earning little more than minimum wage. Still, it can be financially beneficial in the long run for cities and other investors to support such businesses from the outset. 

Venture capital is made readily available by city startup funds in several cities across America. For instance, funds in Philadelphia and Oregon are aiming to invest $100 million in 100 startups to create 10,000 jobs for residents. This initiative also places a significant emphasis on backing women and entrepreneurs from Black, Asian, and other ethnic minority groups. 

In some cases, venture capital funding is either unavailable from the city government itself, or individuals have been unsuccessful in securing financial support at all. Fortunately, there are a wide range of venture capital firms on hand across the United States that will gladly help startups hit the ground running and establish a solid foundation. Offering both financial expertise and business advice to startup companies, some of San Francisco’s best-known venture capitalist organizations include Accel Partners, Blumberg Capital, and Darling Ventures.

As well as providing financing opportunities, some city governments subsidize office and warehouse rental fees for companies just starting out. Denver has taken up such a scheme in the past and even hosts its own annual startup week, providing a platform for professionals to network, with a virtual event taking place in 2020 that is open to the public.

The Center for American Entrepreneurship also notes that city governments can help their startups by “amplifying” their stories in the digital space. A virtual shout out from a major political figure, such as a city mayor posting on social media, can help a new business appear more reputable to the public. Widespread visibility on Twitter, Facebook, or Instagram plays a vital part in educating marketing audiences on what skills and products the company has to offer, and is likely to increase brand awareness. 

Cities also help support startups by ensuring the availability of an adequate quantity of educational courses, creating a well-educated workforce that can only help bolster the financial gains of new businesses. Startups receiving assistance with securing top talent and hiring skilled employees can even benefit from initiatives such as Ada Developers Academy and Floodgate Academy. These programs aim to provide minority groups and genders with the relevant training to access high skilled engineering and technology roles.

What are some of the US’s most successful startups in recent years?

A significant number of America’s startups have grown exponentially over the years, and many have proven exceptionally successful in the last decade. With combined total funding of $94.3 billion, according to Disfold, thirty early growth companies have enjoyed great success that they would not have been able to achieve without the much-needed venture capital they were all fortunate enough to secure. The following are the Top Ten that made the list

  1. The We Company
  2. JUUL
  3. Airbnb
  4. Argo AI
  5. SpaceX
  6. Rivian
  7. Magic Leap
  8. SoFi
  9. Kabbage
  10. Faraday Future

Other modern startups that are taking the American market by storm include Doordash, Instacart, and Pinterest. Alongside this plethora of successful companies, America’s freelancing industry is also on the rise. Upwork reported that over 57 million Americans worked as freelancers in 2019, contributing to 35% of the nation’s workforce. So it's no surprise that freelancing platforms like Fiverr continue to grow in popularity. 

Additionally, many talented individuals work in a freelance capacity to supplement their income rather than establish a full-scale business. Without the added financial burden of supporting multiple office spaces or employing a large workforce, it is highly likely that such professionals will be even more successful than some of America's better-known startups.

Whether looking for the ideal city to establish your own startup company or work freelance, a little bit of research can go a long way in finding a location that offers the best programs to help you get on your feet.

Now that you've learned about the best US cities for startups, check out our guide to the benefits of virtual offices, and discover how one can help your business. 

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Your complete business toolkit

Rovva puts everything you need for your business in one place. From an accountancy helpline to a drop-in business lounge - we've got everything covered.