March 28, 2017 | Liz Austin

Why community engagement is an even more crucial consideration than revenue growth when it comes time to choose your new company’s home base.

When Frank Sinatra crooned, “if you can make it there, you’ll make it anywhere,” he solidified New York’s reputation as the place to make anyone’s dreams a reality. Yet that age-old adage doesn’t quite hold as true anymore, now that New York (along with San Francisco / Silicon Valley) has become prohibitively expensive and thus no longer the most hospitable environment in which to plant the seeds for a new business. And so increasingly, startups are looking towards cities in the United States that aren’t New York or the San Francisco Bay Area to set down their roots.

Yet with so many up-and-coming urban centers making a splash, how can you pick the best headquarters for your new company? 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 towards 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.

St. Louis has also recently played host to a burgeoning startup scene — and for good reason. As FiveThirtyEight reports, the revival began with a group of investors and young entrepreneurs determined to foster a spirit of innovation in the Arch City, by “launch[ing] a fund to invest in local ventures, creat[ing] entrepreneurship clubs at local universities, and convert[ing] part of a massive downtown office building into an unlikely startup hub.” This web of support for young businesses is a crucial aspect to any startup city’s success.

Given the importance of participating in a network of small businesses, something to consider when selecting a metro area in which to establish your company’s presence is not necessarily economic growth, but whether that city fosters a high level of community engagement and offers easy access to crucial resources.

A Community-Oriented City

When compiling a list of the most hospitable cities in the United States to start a small business, the 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 field.

Radius generated the following criteria to determine just how hospitable to startup growth a city really is. These factors are helpful to consider when determining which city you should choose:

  1. Small businesses as a percentage of total businesses
  2. Percentage of small businesses that accept credit cards
  3. Percentage of small businesses in high growth industries
  4. Percentage of small businesses with a Facebook presence and website
  5. Percentage of businesses with online reviews

If any number of these factors coalesce, the result is a thriving startup culture — a web of small businesses that consumers and other businesses can interact with and learn from. This engagement is crucial for startups; though cities like Detroit and Omaha have many small businesses, they aren’t technologically savvy, and thus won’t have as many relevant resources and lessons to share. In short, there’s just not as rich of a pre-existing infrastructure in place for growth, inspiration, and financial support.

House Hunters

Now, down to the specifics. Following the above criteria, Radius listed the best cities for founding a startup as follows:

  1. San Diego, CA
  2. Denver, CO
  3. Austin, TX
  4. Seattle, WA
  5. Portland, OR
  6. San Francisco, CA
  7. Dallas, TX
  8. Boston, MA
  9. New York, NY
  10. Chicago, IL
  11. Las Vegas, NV
  12. 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 companies 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.

Companies should be open-minded in their approach to finding a home for their startup, taking metrics from the cost of living and rent to the number of other small business in their vertical into consideration. What’s certain is that there are clusters all over the U.S. that provide fertile soil for a startup to grow — so choose wisely!

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