When Frank Sinatra crooned, “If I can make it there, I’ll make it anywhere,” he solidified New York’s reputation as the place that could make anyone’s dreams a reality.
Yet this age-old adage doesn’t quite hold true anymore. Today, New York (along with San Francisco and Silicon Valley) has become prohibitively expensive. Thus it’s no longer the most hospitable environment to plant seeds for a new business.
Therefore, increasingly, startups are looking for greener (and more affordable) pastures across the United States. Yet with so many up-and-coming urban centers making a splash, how can you pick the best headquarters for your startup?
To put it simply, different cities are better suited for different business needs. What’s for sure is that the United States, home to half of the world’s leading startup ecosystems, offers a plethora of options beyond NYC.
Small business clusters
On the whole, startups gravitate toward energetic urban centers, not suburban office parks. Moreover, the established presence of small businesses in a given area encourages other small businesses to follow suit, creating a positive feedback loop.
Currently, clusters of small businesses are forming in the shadow of larger businesses that support their growth in cities like Denver, Chicago, and Houston. It has become increasingly important to find startup cities that provide an accessible network of small businesses.
When selecting a metro area to establish your company’s presence, don’t focus on economic growth alone. Consider whether that city fosters a high level of community engagement and offers easy access to crucial resources.
Community-oriented startup cities
When compiling a list of the most hospitable cities in the United States to start a small business, Radius, a tech company ironically based in San Francisco, looked at a number of different factors.
What they found was telling. Small businesses grow most reliably in the presence of strong community engagement, not necessarily because of high employment rates and income levels. Essentially, if a startup is to be successful, it should align itself with other new businesses in their industry.
Radius created the following criteria to determine just how hospitable a city truly is to startup growth. These factors are helpful when determining which city you should choose.
Percentage of small businesses:
that accept credit cards;
are in high growth industries;
with a Facebook presence and website;
have online reviews;
and small businesses as a percentage of total businesses.
If any number of these factors coalesce, the result is a thriving startup culture (i.e. a web of small businesses that consumers and other businesses can interact with and learn from). This type of engagement is crucial for startups.
Even though cities like Detroit and Omaha have many small businesses, they aren’t technologically savvy. Thus they won’t have as many relevant resources and shared learning as a benefit. In short, there’s just not as rich of a pre-existing infrastructure in place for growth, inspiration, and financial support.
Planting startup roots
Now, down to the specifics. Following the above criteria, Radius listed the best cities for founding a startup as follows:
San Diego, CA
San Francisco, CA
New York, NY
Las Vegas, NV
San Jose, CA
That said, the options don’t stop at these 12 metro areas. Baltimore, for example, is an ideal location for companies in the education space. That’s because Johns Hopkins University has sponsored the relocation of a number of education-focused startups bringing technological innovation and entrepreneurship to classrooms across the city.
Similarly, Nashville is a booming arts city and could be a perfect home for startups oriented towards music and culture. Meanwhile, startups in the energy space might look towards Houston, where there’s already a strong small business culture growing alongside established energy giants.
Founders should be open-minded in their approach to finding a home for their startup. Take metrics, including cost of living and the number of other small business in a vertical, into consideration. What’s certain is that there are clusters across the U.S. that provide fertile soil for a startup to grow. Choose wisely!
This article has been edited.
Philip G. Hulse is the Managing Principal of Green Street St. Louis, a full-service development company with a focus on creating a sustainable, lasting impact with their real estate projects. For more than 30 years, Phil has been a leading visionary in building up St. Louis’ urban core, and paving the way for business activity and commerce in the area. As Managing Principal of Green Street and a member of the Counselors of Real Estate, Phil is committed to sustainable development, building strong businesses, and redeveloping underutilized property into thriving centers for business in St. Louis. Connect with @greenstreetstl on Twitter.