Last year, startup activity increased in 32 of the 50 U.S. states and 18 of the top 40 cities, according to the recently released 2015 Kauffman Index Startup Activity report. The Index published by the Kauffman Foundation tracks startup activity be analyzing trends in the U.S.’s states and top metropolitan areas based on the rate of new entrepreneurs, “opportunity share” as defined by Kauffman and startup density.
“There’s been an explosion of entrepreneurship programs and events across the country in recent years, and while we don’t fully understand their impact, last year’s rebound in new business creation is a good sign,” said Dane Stangler, vice president of Research and Policy at the Kauffman Foundation. “State and local leaders need to understand how many startups they have in their regions and who’s starting them so they can make decisions on how to build on what they currently have.”
In both the 2014 & 2015 index, the following metropolitan areas maintained their rankings in the top 10: Austin, Texas; Miami, Fla.; San Jose, Calif.; Los Angeles; Denver; San Francisco; New York; Houston; San Diego; and San Antonio, Texas.
To identify startups driven by market opportunity, the Kauffman Index defines and measures “opportunity share” as the percentage of new entrepreneurs not coming out of unemployment. Unsurprisingly, San Jose in the heart of Silicon Valley ranked highest in the top 10 with an opportunity share of 91.2 percent, while Nashville ranked lowest with 60 percent.
The rate of new entrepreneurs also held weight in identifying the top 10. This rate varied widely ranging from 0.55 percent to 0.13 percent. The top three metros in this category were Austin topping the list with 0.55 percent, Miami in second with 0.52 percent and San Jose with 0.41 percent.
By tracking new businesses rather than entrepreneurs, researchers can measure startup density – a key indicator of a successful entrepreneurial community. Amongst the top 40 metro areas, Miami tops the list with 247.6 startups per 100,000 people as Cincinnati leans toward the lower end with just 93.9.
At the state level Montana, Wyoming, North Dakota, Colorado and Vermont were the top five, while overall the western and southern states showed the highest startup activity, according to the 2015 Index.
See all the state rankings, click here.
“Historically, the Plains and Rocky Mountain regions have not been thought of as hotbeds of entrepreneurial activity,” said Arnobio Morelix, research analyst at the Kauffman Foundation, and one of the studies’ authors. “But entrepreneurship is closely associated with economic growth, so it should not be surprising that some of the states seeing increased levels of startup activity have experienced high rates of real GDP expansion in recent years.”
Alabama ranked the lowest in opportunity share with the index indicating that almost three out of every ten new startups were associated with entrepreneurs who were unemployed. Idaho ranked the highest with approximately one in ten.
