Phoenix ranks as the 7th-best startup city in America

Above: Phoenix is the fifth-largest city in the nation and one of the fastest-warming, by one group’s assessment. Now, the city is working to address the consequences of human-caused climate change, such as poor air quality, drought and extreme heat. Business News | 9 Feb |

When starting a business, choosing the right location is everything. And according to new data, Phoenix ranks as the 7th-best startup city in America.

Approximately 20% of new businesses fail in the first 12 months, and 45% won’t survive the first five years. Launching a startup is even more risky during the pandemic, which has caused more than one-third of small businesses to close since 2020.

But the best cities can help startups survive. To be successful, entrepreneurs need to build their businesses in areas with favorable tax laws, access to funding, and a local talent pool of educated workers.


READ ALSO25 tech startups to watch in Metro Phoenix


To determine the best cities for starting a business, we analyzed publicly available data from the U.S. Census Bureau, Bureau of Economic Analysis, Bureau of Labor Statistics, UpCounsel, Google Trends, U.S. Patent Office, and the American Legislative Exchange Council Center for State Fiscal Reform.

Our weighted rankings evaluated various criteria, including:

• 3x: Business applications per 100,000 people in the last five years

• 3x: Employment growth in the last 12 months

• 2x: Average annual income

• 2x: LLC filing fees

• 2x: Incorporation filing fees

• 2x: Corporate tax rate

• 2x: Chief executives per 1,000 people

• 1x: Google Trends data

• 1x: Patents filed per 1,000 people in the last five years

Read on to learn if your city tops the lists — or fails to launch.

STARTUP CITY STATISTICS

Las Vegas is the best city to launch a startup, with the lowest corporate tax rate (0.65%) and highest employment growth rate in the last 12 months (8.5%) of all 50 cities studied.

Over the last five years, business applications per 100,000 residents are about 27% higher than the national average in our top 15 cities, with Miami boasting the fastest-growing startup scene (14,058 business applications per 100,000 residents).

The top 15 cities feature lower average LLC filing fees ($115 versus $154), corporation filing fees ($83 versus $135), and marginal corporate tax rates (5.10% versus 7.05%) than the average city in our study.

Entrepreneurs should flock to Florida. With no state income tax and one of the lowest corporate tax rates in America, the Sunshine State has four cities in the top 10.

In our top 15 cities, CEOs account for 1.79 out of every 1,000 people — that’s 26% higher than the average city in our study. Nashville, Tennessee, is the best place to network with founders — 4.14 out of every 1,000 people there have the job title “CEO.”

Entrepreneurs in Memphis, Tennessee, are most likely to search for the best startup cities: They have the highest rates of Google searches for the terms “starting a business” and “business plan.”

Not surprisingly, the most innovative city is the capital of Silicon Valley. San Jose, California, residents filed for a whopping 32.56 patents per 1,000 residents in the last five years of available Patent Office data — nearly 12x the studied city average.

The 10 worst places to start a business are centered in the North and Northeast.

Hartford, Connecticut, is the worst city to launch a startup, with incorporation fees costing $455, compared to the national average of $135. Boston, Chicago, Pittsburgh, and Buffalo, New York, round out the bottom five.

The 50 Best Startup Cities, Ranked

 

The 15 Best Startup Cities

For decades, Silicon Valley has been the top destination for startups. But as cities across the U.S. develop their research institutions and business infrastructure, entrepreneurs have found success outside the Valley.

Our top 15 metros climbed the rankings because they have:

A thriving business climate: Business applications in our top 15 cities averaged 7,503 per 100,000 residents over the last five years. That’s 27% higher than the average metro area (5,931). There are also more opportunities for young entrepreneurs to network and grow with startup founders. CEOs in our top 15 cities account for 1.79 out of every 1,000 residents — 26% more than the national average (1.42).

Employment growth: In our top 15 cities, employment growth over the last 12 months (5.2%) was nearly 1.5x higher than the metro average (3.9%).

Low taxes and fees: Not only do our top cities have lower filing fees — $83 for corporations and $115 for LLCs on average — they also have an average corporate tax rate of 5.10%. That’s 28% less than the studied city average (7.05%).

1. Las Vegas, Nevada

🏆 A MAGNET FOR JOB SEEKERS

Sin City ranks No. 1 for employment growth over the last 12 months at 8.5%. That’s more than double the studied city average of 3.9%.

Las Vegas is known as the ultimate adult playground, but behind the casinos and neon lights of the Strip, Sin City is also cultivating a reputation as a great place to work. The growing startup scene boasts coworking spaces, venture capital firms, and industry publications that will make entrepreneurs feel like they’ve hit the jackpot.

Although Las Vegas might seem expensive on vacation, it can be affordable for business owners. Not only does Las Vegas have the lowest corporate tax rate (0.65%) and the ninth-lowest incorporation fee ($75) among all cities studied, Nevada also does not levy a personal income tax.

Vegas also has the fifth-most affordable employees, who earn an average annual income of $51,244, about 19% lower than the national average.

2. Salt Lake City, Utah

🥈 STRONG CEO CULTURE

With 4.1 CEOs per 1,000 residents, Salt Lake City has nearly 3x the national average (1.42).

Salt Lake City has quietly attracted entrepreneurs and startups for years. Over the last five years, Salt Lake City residents have filed 8,198 business applications per 100,000 residents — the fourth most on our list.

Besides the area’s natural beauty and outdoor attractions, the main draw is the city’s affordability. It costs only $72 to incorporate or start an LLC, which is more than 50% cheaper than the average cost across all cities studied.

The workforce in Salt Lake City is highly educated, with more than half of residents 25 years and older holding a bachelor’s degree or higher. Salt Lake City is home to the state’s flagship institution, the University of Utah. Plus, Brigham Young University — located about an hour south — has produced 300 businesses and raised $6.25 billion in venture capital funding, making it one of the best universities for startup founders.

3. Orlando, Florida

💵 CITY OF SAVINGS

Orlando has the second-most affordable employees, who earn an average annual salary of $48,233 — about 25% less than the studied city average ($63,363).

Walt Disney built his empire on a mouse, and in the shadow of Cinderella’s castle, the next generation of entrepreneurs can make their dreams come true in Orlando.

The city has made great strides in transforming its image from primarily a vacation destination into a tech hub where businesses can form, grow, or relocate. With 9,265 business applications per 100,000 residents over the last five years — 56% more than the studied city average — Orlando ranks third on our list of fastest-growing startup scenes.

The Orlando metro area also has the second-highest employment growth rate (7%) behind Las Vegas.

4. Miami, Florida

👏 A BOOMING BUSINESS CLIMATE

With 14,058 business applications per 100,000 residents in the last five years, Miami has 2.5x the number of applications as the average city on our list (5,931).

When a venture capitalist suggested making Miami the next Silicon Valley, Miami Mayor Francis Suarez tweeted back, “How can I help?” Since unintentionally launching the campaign to foster innovation in Miami, Google search inquiries for “business plan” in Miami have soared to the No. 6 spot on our list.

The city also ranks No. 7 among all cities studied for interest in the search term “venture capital,” and a slew of investors have moved to South Florida for its low tax rates. Shortly after Suarez’s tweet, SoftBank Group Corp. announced a $100 million funding initiative for Miami-based companies or those planning to relocate to Magic City.

Miami’s tech boom is also good news for Latin American startups. The city has a host of bilingual employees — about 75% of the population speaks a language other than English — and it’s in the same (or almost the same) time zone as most Latin American countries, making it easier to do business internationally.

5. Atlanta, Georgia

💻 SEARCHING FOR BUSINESS

Entrepreneurs in Atlanta are fourth-most likely to search for the terms “starting a business” and “business plan” on Google.

Atlanta has emerged as one of the fastest-growing tech hubs in the United States. The city became a breeding ground for startups through the Venture Atlanta conference, which connects companies to capital throughout the Southeast every year, followed by the opening of the Atlanta Tech Village. The coworking space renewed Atlanta’s entrepreneurial fervor, and today, the city ranks No. 2 for business applications filed over the last five years (10,853 per 100,000 residents).

Atlanta possesses a large pool of entrepreneurial talent from local universities Emory, Georgia State, and Georgia Tech — home to the Advanced Technology Development Center. Since 1980, the business incubator has launched more than 190 startups, of which 90% are successful after five years.

The city is also the site of several historically Black colleges such as Morehouse and Spelman College, whose students reinvest in the community after graduation. Georgia’s capital has been named one of the best cities for Black entrepreneurs, with a high percentage of Black-owned businesses (30%).

6. Tampa Bay, Florida

✅ CHECKING ALL THE BOXES

For entrepreneurs looking to start a business, Tampa Bay has it all: employment growth (5.6%), affordable employees ($52,291), and flourishing businesses (7,695 business applications per 100,000 residents).

Our No. 6 city attracts more than tourists. The Tampa Bay area is a rapidly growing startup hub that’s been named one the best emerging tech cities and one of the best places to work in tech.

Per-capita business applications (7,695) have exceeded the national average (5,931) by approximately 30% over the last five years, catching the eye of entrepreneurs and high-profile investors such as Microsoft founder Bill Gates and Tampa Bay Lightning owner Jeff Vinik.

Vinik launched innovation hub Embarc Collective, one of many accelerator programs the city has to offer. City leadership has prioritized developing a diverse and inclusive business community and offers programming to support that goal. The Tampa Chamber of Commerce spearheads the Minority Business Accelerator specifically designed to help Black- and Hispanic-owned businesses grow by identifying and overcoming barriers.

7. Phoenix, Arizona

🚀 READY FOR LIFTOFF

In Phoenix, employment grew at a rate of 5.6% over the last 12 months. That’s tied for the fifth-highest rate on our list.

Not much can grow in the desert, but Phoenix is fertile ground for startups. Once seen as an area with limited investment dollars, the metro secured more than $1.2 billion in venture capital funding from 2015 to 2020.

Labor costs can be a major expense for growing businesses, but Phoenix has some of the most affordable employees, whose annual salary ($51,851) is 18% less than the studied city average ($63,363). Such low operation costs allow funding to last longer, giving businesses more time to get off the ground.

The local community supports small businesses through the Arizona Founders Fund, and there are more than 40 coworking spaces and accelerators to help founders expand their networks.

8. Jacksonville, Florida

🤑 MAGIC 8 BALL

Our eighth-best city for startups also ranks No. 8 for most business applications per capita (7,695) and lowest corporate tax rate (4.46%).

The last — but by no means least — Florida city in our top 15, Jacksonville is an ideal place to start a business. Inexpensive business costs and a low corporate tax rate (4.46%) attract entrepreneurs who want to pocket more profit and reinvest in future growth opportunities.

Early-stage companies, in particular, will find plenty of support through PS27 Ventures, which provides educational resources and access to investors to help businesses grow sustainably. The local foundation also hosts annual forums to aid and connect Black founders and female entrepreneurs.

Not only is Jacksonville a great place to build a business, it’s also a great place to live. The city is an ocean-lover’s dream with three main beaches featuring white sand and clear water. It also boasts museums, local shopping centers, and a large urban park system that will help hungry entrepreneurs find work-life balance.

9. Denver, Colorado

💰 BUSINESS ON A BUDGET

Denver has the lowest incorporation filing fee among all cities studied. It costs only $50, which is $85 cheaper than the national average ($135).

Under the guidance of Gov. Jared Polis, the co-founder of seed accelerator Techstars, Colorado is quickly becoming recognized as one of the best states to do business. The startup scene is flying high particularly in Denver, where business applications per capita (8,029) have exceeded the national average (5,931) by 35% over the past five years.

The flourishing business scene has resulted in job growth, which increased at a rate 33% faster than the national average in the last 12 months. With business opportunities and proximity to the Rocky Mountains, the Mile High City consistently attracts college graduates from around the country and is considered one of the most educated cities in the U.S.

10. Kansas City, Missouri

🌻 SILICON PRAIRIE

This Midwestern city is the cheapest place to file for an LLC — costing only $50, compared to the $154 average across all cities studied.

Kansas City has more to brag about than barbecue. The metro area straddling the Missouri-Kansas state line is becoming one of the best startup destinations because of its low costs to do business. Its prices are hard to beat: a $50 LLC filing fee and $58 incorporation filing fee are $104 and $77 cheaper than the national average, respectively.

Venture capitalists are taking note of this up-and-comer and invested $1.09 billion in 2021. Business owners will find support from homegrown investors such as the Kauffman Foundation. The Kansas City-based nonprofit provides capital to entrepreneurs, especially women, people of color, and founders who invest in underserved communities.

11. Raleigh, North Carolina

✍️ BUSINESS-FRIENDLY TAX RATES

North Carolina’s capital city has the second-lowest corporate tax rate at 2.5% — nearly 3x lower than the studied city average (7.05%).

Raleigh is an important spoke in the educational hub known as the Research Triangle: comprising North Carolina State, North Carolina, and Duke universities. All three schools have prominent entrepreneurship programs that encourage students to innovate. The metro is one of the most inventive on our list, ranking No. 7 for most patents filed (4.96) per 1,000 residents in the last five years.

The students who graduate from these universities are positioned for success with business-friendly tax rates and a pipeline of specialized workers. As young entrepreneurs look toward the future, interest in the Google search term “starting a business” has grown to No. 5 on our list.

12. Oklahoma City, Oklahoma

💥 BANG FOR YOUR BUCK

This small-market locale is one of the cheapest places to launch a startup, ranking No. 2 for lowest incorporation fees ($52) and No. 8 for most affordable employees ($52,688 per year).

Oklahomans have embraced the entrepreneurial spirit ever since settlers urbanized unoccupied prairie during the Land Run of 1889. Since then, this cowboy capital has grown into one of the coolest (and cheapest) places to live and do business, with a lively industrial-chic entertainment district and an outdoor adventure park that’s home to the U.S. Olympic and Paralympic Training Site for rowing and kayaking.

The mix of amenities and affordability attracts entrepreneurs, and Oklahoma City ranks No. 7 for interest in the Google search term “starting a business.” To foster the fledgling entrepreneurial ecosystem, the NBA’s Oklahoma City Thunder established Thunder Launchpad, a 12-week accelerator program to help founders scale their business with free workspaces and a mentorship network.

Entrepreneurs also have access to homegrown investors such as i2e, which has pumped more than $77 billion into Oklahoma businesses in all phases.

13. San Jose, California

💡BRIGHT IDEAS

San Jose residents filed for a whopping 32.56 patents per 1,000 residents in the last five years of available Patent Office data — nearly 12x the national average.

Nicknamed the capital of Silicon Valley, San Jose has been a top destination for tech startups since the founding of Intel and HP — long before Steve Jobs developed Apple in his garage. The city is located a mere 20 miles from Stanford University, whose highly educated students are famous for founding billion-dollar businesses such as Google, Nike, DoorDash, and Instagram. The school’s curriculum offers several hands-on launchpads that have spawned hundreds of businesses and helped students develop networking and fundraising skills.

The Valley’s tech boom made billionaires, creating a hotbed for wealthy investors and venture capitalist firms. About 20% of all venture capital funding in the U.S. is concentrated in the area, prompting San Jose residents to search for “venture capital” on Google more than any other metro area on our list.

In addition to funding opportunities, entrepreneurs flock to the Valley for the benefit of networking with specialized workers and proven CEOs. The metro has two CEOs per 1,000 residents, about 40% more than the national average.

14. Los Angeles, California

✨ A BUSINESS HEAVEN ON EARTH

Employment growth (5.8%) in the City of Angels over the last 12 months is nearly 50% higher than the studied city average (3.9%). That’s the fourth-highest rate on our list.

Los Angeles is a city of creatives, making it the perfect place for startup founders to thrive. Many programs, such as the Disney Accelerator, exist to support companies in the entertainment industry, but all kinds of businesses can succeed. Social media startups Snapchat, Tinder, and Whisper all established their footing in the City of Angels.

Entrepreneurs will find more affordable living conditions in Los Angeles, which is about 18% cheaper than rival San Jose. It’s also relatively cheap to start a business. Filing for an LLC costs just $75, compared to the national average of $154.

L.A. also has a high concentration of science and engineering graduates from nearby universities. The University of Southern California, the University of California at Los Angeles, and the California Institute of Technology are regularly ranked in the top 50 universities nationwide. Programs such as the Price Center for Entrepreneurship and Innovation at UCLA provide valuable training for startup founders before they graduate.

15. Nashville, Tennessee

🤝 WHO YOU KNOW

With 4.14 CEOs per 1,000 residents, Nashville is the best place to network with startup founders.

Music City is finding its voice in the business world. Nashville is still the top destination for burgeoning country artists, but the city is attracting creatives of another sort — health care entrepreneurs. Nashville is home to nearly 4,000 health care companies that garnered $940 million in venture capital from 2005 to 2015, 60% of total investment dollars in the city at that time.

The metro’s high number of health care companies creates the perfect environment for competition and innovation, especially among students. Vanderbilt University is ranked No. 13 for best medical school research, while Meharry Medical College is the country’s largest historically Black college, dedicated to treating underserved communities through research-based patient care.

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