License or reprint this slide show
printer-friendly with images

Slide Show | January 2013

10 Great Cities for Starting a Business

If you're hoping to start your own business, finding the right place to set up shop is a critical first step. To give budding entrepreneurs a jump on the competition, we scoured the country for ten startup-friendly cities.

First, we looked for metropolitan areas with high concentrations of small businesses. Then we scanned for places with low living costs, specifically for self-employed people, as measured by the Council for Community and Economic Research. Some pricier areas still made the cut because they offer advantages, such as large pools of highly skilled workers, that might outweigh the expense.

Next we screened for an educated workforce to ensure you'll have plenty of promising job applicants when you're ready to hire. Finally, we looked for areas that tend to receive a lot of start-up investment dollars and offer low business costs.

Take a look at our list of ten of the best cities for entrepreneurs.


10 Great Cities for Starting a Business

Dallas

Metro area population: 6.5 million

Number of small businesses per 100,000 people: 2,015.1

Cost of living for self-employed: 0.6% below U.S. average

Percentage of labor force with bachelor's degrees: 27.9% (U.S. average: 22.9%)

Standout start-ups: biotech company Kewl Innovations (focused on diabetes treatment), gift card retailer CardLab, software company Newton Insight

Not everything's bigger in Texas. Take taxes. In the Kosmont-Rose Institute Cost of Doing Business Survey, both Dallas and neighboring Fort Worth ranked among the 20 least-expensive cities in the West in 2012, based on a basket of costs, including property taxes, sales tax, business license fees and utilities taxes. Dallas also has no personal income tax, occupation tax or wage tax.

It's no wonder 20 Fortune 500 companies, including AT&T and Southwest Airlines, choose Dallas for their stomping grounds (cowboy boots optional). But budding entrepreneurs need not feel dwarfed by these corporate behemoths. Nearly 80% of Dallas businesses officially weigh in as small (technically with fewer than 500 employees, but typically with 20 or fewer). And they employ nearly 40% of the area's workforce.

The smallest of small businesses — "microenterprises" with five or fewer employees — can get help from the Business Assistance Center program, which provides resources, workshops and one-on-one counseling to future CEOs. Start-up accelerator Tech Wildcatters offers its mentorship program and up to $25,000 in seed money to select companies. And the Dallas County Community College District provides a 30,000-square-foot business incubation center that can house up to 50 small-business owners, who share the costs.

Dallas

Kansas City

Metro area population: 2.0 million

Number of small businesses per 100,000 people: 2,296.4

Cost of living for self-employed: 0.6% below U.S. average

Percentage of labor force with bachelor's degrees: 30.5%

Standout start-ups: mobile apps Leap2 and EyeVerify, real estate software developer ShownHome

With its growing tech community, you might think this area more Oz than Kansas these days. In recent years, a colorful crowd of start-ups has been taking advantage of the region's lower costs and gathering in what's been aptly dubbed the "Silicon Prairie," which includes Omaha, Des Moines and Kansas City. Kansas City, however, offers an added technological draw that exists nowhere else: Google Fiber's ultra-high-speed network, first implemented in November 2012. (Another exclusive offering: unbeatable Kansas City-style barbecue.)

To harness this truly unique opportunity for innovation, Kansas City, Mo. — the city straddles the Missouri-Kansas border — has developed a strategic initiative called LaunchKC, which will roll out a number of developments in hopes of attracting and nurturing tech entrepreneurs. On its to-do list: reduce costs for starting new businesses, create a wireless district in the downtown area and establish a collaborative space for tech professionals.

For local resources that already exist, tap into the Kansas City Startup Village. The community of entrepreneurs has plugged into Google's superfast Internet speeds and invites others to join their shared offices and living spaces at little or no cost. Plus, a number of business incubators, including BetaBlox and Think Big Partners, offer mentorship programs, access to facilities and networking opportunities. Think Big also offers investment funds.

Kansas City

Atlanta

Metro area population: 5.4 million

Number of small businesses per 100,000 people: 2,275.3

Cost of living for self-employed: 1.7% below U.S. average

Percentage of labor force with bachelor's degrees: 31.6%

Standout start-ups: biotech company Cell Constructs, investing software company Lucena Research, app developer TripLingo

This Southern belle knows how to court the entrepreneurial spirit. Back in 1886, it was the birthplace of Coca-Cola, whose products have fueled many a creative mind ever since. And more than hometown loyalty has kept Coke’s headquarters in Atlanta, alongside the likes of AT&T, UPS and Delta. The city boasts the world's busiest airport, and execs enjoy a quality culture scene led by the High Museum of Art, fine dining options and an active nightlife.

Another entrepreneurial draw: Despite its big-city appeal, Atlanta offers small-city living costs. And according to consulting firm KPMG, business costs are 3.8% below the national average. Plus, the area's 57 colleges and universities provide a deep pool of young skilled workers.

Campuses also offer support and resources for local innovators. Georgia Tech's start-up accelerator, the Advanced Technology Department Center, has helped launch more than 130 tech companies since 1980 with its mentoring program, networking events and other services. Georgia State houses CollabTech, a business incubator with nearly 14,000 square feet of lab space and offices, access to equipment and technology, and an on-site facility manager.

Beyond school grounds, Hub Atlanta offers co-working spaces as well as a network to connect entrepreneurs and potential investors. And funds are flowing into Atlanta at a healthy rate. In the first nine months of 2012, the metro area raised more than $196 million in investment funds, according to the National Venture Capital Association.

Atlanta

Denver

Metro area population: 2.6 million

Number of small businesses per 100,000 people: 2,691.5

Cost of living for self-employed: 3.8% above U.S. average

Percentage of labor force with bachelor's degrees: 34.6%

Standout start-ups: foodie app Forkly, eco-friendly boutique retailer Beautifuli.com, mobile application builder AppIt Ventures

The mile-high city provides stable ground (and beautiful scenery) for aspiring impresarios with lofty business goals. After all, small businesses with fewer than 50 employees make up 95% of the area's economy. Despite a slightly higher than average cost of living, Denver scores favorably on the Kosmont-Rose Institute Cost of Doing Business Survey. And according to consulting firm KPMG, business costs are 1.6% below the national average across industries — and are particularly low, at 8% below average, for corporate services such as insurance.

Denver's economic development office encourages small-business growth with its JumpStart Biz Plan Awards. All applicants receive feedback and advice on how to plow ahead, and winners collect $50,000 cash, plus legal counsel and tax, accounting, marketing and social media services. Winners also get a one-year membership in tech start-up community Galvanize, as well as an office in its 30,000-square-foot workspace.

In addition to a highly educated workforce — one in three workers has a BA or higher — the Denver area also boasts a fair share of the nation's start-up investment dollars, having received more than $192 million in venture capital last year through the third quarter.

Denver

Seattle

Metro area population: 3.5 million

Number of small businesses per 100,000 people: 2,634.2

Cost of living for self-employed: 16.7% above U.S. average

Percentage of labor force with bachelor's degrees: 32.7%

Standout start-ups: mobile payments developer Cardfree, clean tech company TreeFree Biomass Solutions, biotech firm CisThera

A little fall of rain can hardly hurt true entrepreneurial drive — and that is something Seattle has by the bucketful. Venture capitalists recognize the area's potential and poured more than $623 million of funding into its start-ups through the third quarter of 2012. After all, the area is well-known for its innovative industry leaders such as Amazon and Microsoft, which in turn are creating opportunities for the next generation. Amazon Web Services (AWS) holds an annual contest looking for the world's best new computing, gaming and applications start-ups built on its platform. The grand-prize winner gets $50,000 in AWS credit, $50,000 cash, mentoring sessions and support services. And Microsoft's BizSpark promotes and connects software start-ups with investors, mentors and partners.

Besides adding to the highly educated local labor force, the University of Washington pumps $1 billion worth of research funding into the community, investing in promising researchers and projects. UW also offers select start-ups access to its New Ventures Facility, a business incubator with 23,000 square feet evenly divided into office and lab space. It currently houses 15 start-ups and will fit up to 25 once renovations are completed in 2014.

Off-campus, energy-efficiency-focused engineering firm McKinstry maintains a 24,000-square-foot innovation center offering development, demonstration and office space, as well as consulting and mentoring opportunities with the firm's experts in construction, energy and facility services. The tech start-up community can also tap into Seattle 2.0, the Web-based network now hosted by GeekWire.com, for online resources and live events.

Seattle

Indianapolis

Metro area population: 1.8 million

Number of small businesses per 100,000 people: 2,228.5

Cost of living for self-employed: 4.9% below U.S. average

Percentage of labor force with bachelor's degrees: 29.3%

Standout start-ups: consumer-review site Angie's List, biotech company NICO, video chat mobile app Kincast

Indianapolis offers a burgeoning start-up scene with an exceptionally low price tag. Its cost of living for the self-employed is the second-lowest of any city on this list. Average office rents in Indianapolis are the cheapest of our choice cities for starting a business, at $17.73 per square foot per year, well below the national average of $19.30.

Verge is Indy's go-to software start-up network, which connects more than 1,800 entrepreneurs, investors and developers. It hosts regular events at which hopeful company leaders take the stage to pitch their ideas to investors. IndyMade.com is another useful resource that's working to collect data on all Indianapolis-area start-up activity, including networking events, funding sources and a comprehensive map of emerging companies.

IndyMade identifies a baker's dozen of funding sources for start-ups in the area, including SproutBox, based in nearby Bloomington, and Halo Capital Group. Rather than simply writing a check in exchange for equity, SproutBox invests its own employees’ time and talents into start-ups, which it refers to as “sprouts.” Over a ten-month period, selected entrepreneurs receive between $200,000 and $250,000 worth of cash and services. Halo Capital is a more traditional angel investor.

Indianapolis

Orlando, Fla.

Metro area population: 2.2 million

Number of small businesses per 100,000 people: 2,408.7

Cost of living for self-employed: 1.8% below U.S. average

Percentage of labor force with bachelor's degrees: 24.6%

Standout start-ups: aircraft charter service GiveJet, doctor search engine MyDocHub, market research company Immersyve

Orlando may really be the place where all your dreams come true — and you don't even need a Disney-certified fairy godmother to make it happen. Beyond tourism, the area has grown into a high-tech hub and fosters innovation in a range of industries that have little to do with talking mice. The diverse economic progress even helped land Orlando on Kiplinger’s 2012 list of cities with surprising job growth.

The University of Central Florida's Business Incubation Program is currently helping more than 130 start-ups establish themselves in the fields of biotechnology, engineering, environmental services and more. The program maintains ten locations throughout the area, with a total of more than 141,000 square feet of office and lab space. It also provides mentoring services, marketing support and networking opportunities.

Another helpful local resource: the National Entrepreneur Center. It provides free business training, counseling and networking opportunities to local business owners. The center also offers a facility with office space and conference rooms at affordable rates.

Orlando, Fla.

Pittsburgh

Metro area population: 2.4 million

Number of small businesses per 100,000 people: 2,355.2

Cost of living for self-employed: 4.5% below U.S. average

Percentage of labor force with bachelor's degrees: 28.9%

Standout start-ups: health care software firm Almedtrac, energy storage developer Aquion Energy, logo designer 80|20 select

The city built on steel and coal might prove to be a diamond in the rough for entrepreneurs. Pittsburgh is looking to become the "new center of innovation in American energy" and putting up the cash to get there. On top of nearly $143 million the area raised in start-up capital during the first nine months of 2012, the area's research and development funding through Carnegie Mellon, the University of Pittsburgh and other institutions amounts to $3 billion annually.

State-sponsored economic development group Innovation Works provides funding, business guidance and other resources to promising projects. With the Allegheny Conference of Community Development, it formed the Energy Alliance of Greater Pittsburgh to connect local energy entrepreneurs, researchers and investors. It also created tech start-up accelerator AlphaLab, which runs a 20-week program twice a year that provides select companies with funding, office space, mentorships and other assistance to get up and running.

Other entrepreneurial resources in the area: Carnegie Mellon University is home to 118 research institutes and centers, which help launch 15 to 20 new start-ups a year, on average. Nonprofit Idea Foundry assists technology start-ups by providing business advice, investment capital and networking opportunities. The Pittsburgh Life Sciences Greenhouse focuses its entrepreneurial assistance on companies developing medical devices, therapeutics, biotech services and health information technology.

Pittsburgh

Nashville

Metro area population: 1.6 million

Number of small businesses per 100,000 people: 2,178.5

Cost of living for self-employed: 10.1% below U.S. average

Percentage of labor force with bachelor's degrees: 28.2%

Standout start-ups: short-term lender Contigo Financial, biotech company Superior O&P, health care data company Stratasan

You don't have to be a country crooner to succeed in Nashville. The nonprofit Entrepreneur Center helps start-ups in the health care, technology, social enterprise, and digital media and entertainment industries catch their big breaks in these parts, too. (Its tech sector propelled Nashville onto our list of 8 Cities with Surprising Job Growth.) The Center's incubators offer mentorships, networking assistance and other resources to help businesses launch within six months.

The biggest advantage to setting up shop in Nashville is its affordability. The Music City offers the lowest living costs of any city on this list, and its business costs were rock-bottom in the Kosmont-Rose Institute Cost of Doing Business Survey. In fact, according to KPMG, business costs are 4.3% below the national average across industries — and are markedly low for corporate services, at 13.2% below average.

And while you're saving on expenses, you can also collect some seed money. The area raised a respectable $72 million from venture capitalists through the third quarter of 2012. One accelerator firmly supporting Nashville is the Jumpstart Foundry. In addition to $15,000 in seed funding, it provides select companies with a 14-week mentorship program.

Nashville

San Francisco

Metro area population: 4.4 million

Number of small businesses per 100,000 people: 2,545.8

Cost of living for self-employed: 64.4% above U.S. average

Percentage of labor force with bachelor's degrees: 39.8%

Standout start-ups: car-sharing company Getaround, corporate payroll software company ZenPayroll, e-mail and messages organizer Minbox

No business-city list would be complete without San Francisco. The Startup Genome project, a research effort looking into what makes start-ups successful or not, named Silicon Valley and the Bay Area the hands-down winner for world's best entrepreneurial environment. Major start-up success stories, including Craigslist, Pandora and Twitter, were spun here and continue to beckon thousands who hope to find their own enterprising happy endings in the City by the Bay. Skilled workers are just as plentiful; the area boasts the highest percentage of college-educated workers on this list.

Hordes of investors are rushing to San Francisco, too. Through the first nine months of 2012, the city pulled in a whopping $4.4 billion in start-up funds — 21.9% of the entire country's venture capital investments and $1.2 billion more than the next most investor-enticing area in the country (nearby San Jose).

But exposure to all that capital will cost you. San Francisco is the priciest city on this list and has the fourth-highest cost of living in the country, behind Manhattan, Brooklyn and Honolulu. Of course, you can save on some costs by taking advantage of the dozens of business incubators and other co-working spaces. (Or you can wait for a vacancy in the "incubator house" on aptly named Billionaire's Row, where several entrepreneurs pay rent to live and work — like "The Real World," but with innovation.)

San Francisco

More from Kiplinger

SLIDE SHOW: 6 Rags-to-Riches Millionaires

SLIDE SHOW: 8 Low-Cost Franchises for Hard Times

QUIZ: Test Your Start-Up Know-How

SLIDE SHOW: 8 Cities with Surprising Job Growth

TOOL: Find the Best, Latest Mortgage Rates in These Cities

More from Kiplinger

This page printed from: http://www.kiplinger.com/slideshow/business/T006-S001-10-great-cities-for-starting-a-business/index.html

All contents © 2014 The Kiplinger Washington Editors