By Stephen Moyers
Location matters when founding a startup. The location an entrepreneur chooses can create meaningful business partnerships with local government, investors, and accelerators.
In the past, startups flocked to Silicon Valley, New York City, Boston, or Seattle. These cities shared 76% of venture capital money among them in 2017. Today, however, the startup landscape is changing. Entrepreneurs still rely on these heavy hitters, but they are also choosing relative outliers for their business homes. If you’re starting a business, it may be time to pack up and move to one of these six startup-friendly cities.
The year 2019 is statistically a great year for entrepreneurs. If this is your year to thrive, consider taking your brand to Columbus. The capital of Ohio can be an intriguing place to start a business, thanks to its demographic of college students, low cost of living, inexpensive costs of operating a business, high number of funds, and increase in venture capital deals.
Columbus, Ohio, topped the 2018 list of best cities for startups, according to Forbes and Revolution. The Ohio State University’s Center for Entrepreneurship has promoted innovation and business startups since 2001. One entrepreneur, Tony Franco of SafeChain Financial, managed to raise $3 million in venture capital for his business plan, without any meaningful revenue. He did this while based in Columbus.
Investors repeatedly asked Franco about his plans to move to the coast, but he said he’s staying put. Franco says the benefits Columbus offers go “beyond the marketing hype many cities claim when they say they are startup friendly.” Franco believes the seeds the Center for Entrepreneurship planted 18 years ago are paying off now in the city. Franco’s business won the Rise of the Rest seed fund competition in Columbus in 2017, earning a $100,000 investment.
Investor Steve Case (co-founder of AOL and Revolution) launched Rise of the Rest in 2014 to help fund startups in underserved cities. In the first nine months of 2018, Columbus’ venture capital deals amounted to $250 million. This is more than three times the value for all 12 months of 2017. The uptick in the capital is playing a large role in the city’s suddenly robust startup culture.
Austin, Texas, is an up-and-coming metropolis whose eclectic reputation is helping it rise to the top in the startup world. Austin came in first on Inc.’s List of Surge Cities. This list took into account rate of entrepreneurship, population growth, business investment, and other data points to rank the top 50 cities for startups. Many successful companies have relocated to Austin in the past few years, including Outdoor Voices, a New York clothing startup. Apple is also in talks to expand to Austin. Some of the perks include:
- No personal income tax
- Affordable real estate
- More available land to build
Sources were naming Austin a top place for startups back in 2016, calling it a start-up mecca for its thriving culture, supportive buyers, and enormous arts and music scene. Major corporations such as Amazon, Google, Facebook, and Whole Foods have helped put Austin on the map in terms of business culture. Now, smaller startups are taking advantage of the spotlight.
St. Louis, Missouri
The cost of doing business in St. Louis, Missouri, is 8% lower than the national average and 57% lower than in San Francisco. This, among other perks, makes it an excellent choice for startups. St. Louis came in at number two on Forbes’ list. Its three-year venture capital deal count is at 146, with major deals with Benson Hill Biosystems, Essence Group Holdings, Varsity Tutors, and Jane.ai.
Venture capital investment value in the city has risen by a whopping 90% over the past three years. Essence Group Holdings, a cloud-based software company founded in St. Louis, has had three raises since 2011, giving the company a combined $241 million. Startups in the city of St. Louis raised the most money of every city in the country in 2018–more than $200 million by the third quarter. Deal counts and total money invested were both higher than in 2017.
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Atlanta came in at number three on the Forbes list and number 18 on the Inc. list for best cities for startups. Major corporations such as Coca-Cola have put Atlanta on the map in the business sphere, but its low costs are now attracting smaller startups as well. Startup costs in Atlanta are 54% lower than in San Francisco, and 7% lower than the national average. In 2017, Atlanta broke a record for its total venture capital, coming in at $1.2 billion.
A few of the recent major venture capital deals have gone to AirWatch, Kabbage, and Rubicon Global. There have been 413 deals total over the past three years. Atlanta’s rate of entrepreneurship is among the highest in the United States. Georgia’s business-friendly tax credits, diverse culture, and pool of technology talent make it a gold mine for tech startups and other companies.
Eccentric residents, great diversity, an affluent urban center, and a productive metro area mark Colorado as a strong choice for entrepreneurs. In 2015, Boulder topped the list as the number-one place to start a business as a female entrepreneur, as well as a top-ranked city for all new business owners. Back in 2010, Boulder boasted six times more tech startups per capita than the national average. Successful high-profile companies such as TechStars, Ball Aerospace, and Celestial Seasoning all call Boulder home.
A number of local venture capital firms help put Boulder on the map for entrepreneurs. Foundry Group, for example, has helped fund a mix of startups across numerous industries. Foundry Group says it gives to entrepreneurs without having expectations of what to get back—at least in the short-term. Foundry is in it for the long haul, creating powerful long-term partnerships with its recipients. Boulder is especially popular among the millennial crowd.
If you have Colorado in mind, also consider Denver. Denver made number four on Forbes’ list of the top 10 cities for startups in 2018. Its three-year venture capital deal rate is 492, with major deals including Accera, Welltok, and Reven Pharmaceuticals. Like Boulder, Denver offers a diverse economy that helps burgeoning startups thrive. Denver’s 150,000 college students add to this economy and strengthen the available workforce. The cost of doing business in Denver, however, is 4% above the national average.
Charlotte, North Carolina
If your goal is ultra-low costs of doing business, Charlotte might be the ideal location for your startup. In 2018, Charlotte’s cost of doing business was 12% lower than the national average. Charlotte came in tenth on Forbes’ list because of its exceptionally low business costs in terms of labor, taxes, energy, and rent. The business costs rank among the lowest of all U.S. cities. The three-year venture capital deal count was 89, with major names including Passport AvidXchange, and Edison Nation.
From 2015 to 2017, the total venture capital investment in Charlotte amounted to $881 million—an impressive 590% jump from the previous three years. This massive increase stemmed in part from two raises for AvidXchange, a payment processing platform that made number one on the list of the 47 most powerful startups in the city in 2017. The company recently finished building its new headquarters at the Music Factory. Charlotte could be the place your startup finds its legs as well.
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