Best U.S. startup cities

Alexander Fishkov

Alexander Fishkov, Ph.D. student Computer Science

What is a startup?

A startup (or start-up) is a company or a project in its early stages with certain definitive features. It is risky and ambitious: The entrepreneur seeks to deliver a large impact, changing the way things are usually done in a field. Another defining aspect is that startups seek rapid growth but often fail. Since funds are generally required even for the initial development of a business, seeking venture capital is an essential part of the startup world. Thus, pitching ideas to angel investors and venture capitalists is an important part of success. Venture capitalists come at a later stage and provide more substantial amounts of money. This can, for instance, allow a company to hire more staff, speed production of a product or enter new markets quickly.

Business growth

In the above graph, we present quarterly data on newly registered businesses in the U.S. The data is provided by the Bureau of Labor Statistics (BLS). In the third quarter of 2018, nearly 251,000 new companies opened in the country. The number of new businesses has grown by nearly 25 percent since 2010. The trend is one of overall growth, with occasional dips around 2012-2013 and 2016. Although not all of the newly created companies are startups, this can be used as an indicator of a good climate for starting one.

Geography of startups

 

Where should you create your new startup? Which state and city provide the best opportunity? Researchers from Rice University and later E.J. Egan looked into related data and developed a rating. They analyzed multiple key attributes of startup and venture capital environments in each city, including the amount of venture capital invested, the number of active VC-backed startups and the number of new deals. On the chart above cities are ranked using a combination of these features. San Francisco took first place in the rankings with more than $4.5 billion invested in startups. This is 1.5 times greater than the amount invested in New York, which took second place. Apart from California, with its “old” Silicon Valley centers like Palo Alto, the list also includes some newcomers. Boston, Cambridge, Seattle and Chicago all hold prominent positions on the list. These cities have large populations, strong economic activity and are home to some of the best universities in the country.

Startup activity in the U.S. shows some degree of concentration. In the year 2018, the total value of venture capital invested in startups was $28 billion. The top 50 cities from the above-mentioned ranking accounted for 77.2 percent of this amount. Additionally, 73.3 percent of the new deals and 64.3 percent of all startup companies were concentrated in these cities.
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About Alexander Fishkov

Alexander Fishkov

Alexander Fishkov, Ph.D. student Computer Science

Alexander is a Ph.D. student in Computer Science. He currently holds B.S. and M.S. degrees in Applied Math. He has experience working for industry major companies performing research in the fields of machine learning, data mining and natural language processing. In his free time, Alexander enjoys hiking, Nordic skiing and traveling.

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