Does location influence a startup’s success? If so, what are some of the top cities for entrepreneurs? To answer those questions, researchers analyzed data on small business funding and the local tax landscape in each U.S. state. Here are some of the key factors they considered:
- Venture Capital Funding: The availability and accessibility of venture capital vary widely from state to state. Understanding which cities are hotspots for this type of funding can be a game-changer for a new company.
- SBA 7(a) and 504 Loan Funding: These Small Business Administration loans are vital resources for startups. The ease of obtaining these loans can differ significantly depending on the state you’re in.
- State Income Tax Rate: This is a critical financial aspect for any business. Lower tax rates can mean more funds available for growth and operations.
- Corporate Income Tax Rate: Some states opt to tax businesses on gross receipts instead of net income, often at a lower rate. Tax experts often view this as a more substantial burden on businesses. However, for a new entrepreneur with minimal startup costs, this approach could be more advantageous.
Is it all about Texas?
In the race to attract entrepreneurs, Texas emerges as a clear winner. This may be surprising to some, but Texas has one of the most favorable environments for startups.
As the eighth largest economy in the world, Texas offers competitive business advantages that few other states can claim: a business-friendly climate with no corporate or personal income tax, easy access to global markets, a robust infrastructure, and a highly skilled and diverse workforce. What’s more, SBA 7(a) loan funding reached a total of $2.8 million in 2023.
With that in mind, here are the top cities for entrepreneurs:
- Austin easily ranks number one for both venture capital deals and small business financing. Big name companies like IBM, Apple, and Dell have a strong presence, but startups are driving momentum with an impressive 714 venture capital deals.
- With numerous venture capital firms and a robust startup ecosystem, Dallas ranks number two on the list. Home to several unicorn startups, each valued over $1 billion, including o9 Solutions, Ltk, ShiftKey, and Interos, Dallas is poised to make a significant impact on the global economy.
- Houston may not have the widespread reputation of Austin, but small businesses with less than 100 employees make up 97% of all businesses in the city. Plus, the city government has several programs to support small business growth, and committed $15 million to small business recovery during COVID-19.
- San Antonio is on the lower end of VC deals, but small business funding is high thanks to programs like Launch SA and the city’s Economic Development Incentive Fund (EDIF). The Alamo City also has impressive incentives and resources for small businesses, as well as a new cybersecurity accelerator.
The Lone Star state isn’t alone
If you think it’s all about Texas, it’s not. Rounding out the list of top cities for entrepreneurs are Seattle, Miami, Columbus, Orlando, and Cleveland, each offering unique opportunities for business growth.
These cities demonstrate that entrepreneurial success isn’t confined to one region or city. In fact, these diverse locations are quickly gaining recognition as thriving hubs where the spirit of entrepreneurship is flourishing and networking works. This variety ensures that no matter where you are, there’s a place for entrepreneurs.