June 13, 2017

These 5 southern U.S. cities have the most startup activity

The latest Kauffman Index of Startup Activity shows that business creation may be back to pre-recession levels

Miami tops a recent list for new startup activity in the U.S. Photo by Gaetano Cessati via Unsplash

In 2013, the level of business development in the United States was the lowest it had been in 20 years. However, after three years of continuous growth, business creation may be back to the same level as before the Great Recession, according to the most recent Kauffman Index of Startup Activity. The report, supported by the Kauffman Foundation, measures new business creation and the people behind them across the 40 largest cities and metropolitan areas in the United States.

The broad trend at the national level shows a rise in startup activity, and this is reflected on a city-wide basis: 29 of the 40 cities represented in the Kauffman report saw an increase in startup activity in 2016.

The report measures “startup activity” across three sets of criteria. The first, “rate of new entrepreneurs,” measured the number of adults becoming entrepreneurs each month. The second, “opportunity share of new entrepreneurs,” split new entrepreneurs into two categories: unemployed adults starting businesses out of necessity, and those starting them because of “market opportunities.” The latter group, according to the report, is more likely to develop a stable long-term business. Finally, the report measured “startup density,” or the number of new businesses with at least one employee.

The report highlights a few surprising geographic trends. The cities with the most total startup activity are largely in the southern and western parts of the United States; the rate of new entrepreneurs was also high in southern cities like Los Angeles, Austin, Miami, and San Diego.

Meanwhile, cities in the northeast performed best in terms of “opportunity share of new entrepreneurs,” which can serve as “an early indicator of potential,” according to the report.

However, while some of these general trends are encouraging, they belie a series of disappointing micro-trends. “[In Miami] the gap between startups and growth is the most pronounced in the country,” Arnobio Morelix, one of the authors of the Kauffman report, told the Miami Herald. “Not a lot of those companies are reaching high levels of growth by employees or revenue.”

Moreover, between 2006 and 2014, the rate at which new businesses were started went down 20 percent across the forty metropolitan areas measured by the report.

Here are some of the findings from the latest report:

Cities, including metro areas, with the highest startup activity:

      1. Miami
      2. Austin
      3. Los Angeles
      4. San Diego
      5. Las Vegas

Cities with the lowest startup activity:

      1. Pittsburgh
      2. Milwaukee
      3. Indianapolis
      4. Minneapolis
      5. Philadelphia

The cities with the most growth:

      1. St. Louis (from 36th to 26th)
      2. Cleveland (from 37th to 28th)
      3. San Antonio (from 14th to 6th)
      4. San Diego (from 11th to 4th)
      5. Cincinnati (from 25th to 18th)

The cities with the largest decline:

      1. Nashville (from 16th to 29th)
      2. Baltimore (from 22nd to 35th)
      3. Columbus (from 13th to 23rd)
      4. San Francisco (from 4th to 14th)
      5. San Jose (from 9th to 16th)

    Mikhail Klimentov

    Mikhail Klimentov is a contributor to The Renewal Project.