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Austin Edges Out San Francisco as Best Location for Startups

In a recent report by the The Kauffman Foundation, Austin was determined to have the most entrepreneurial activity in the country.

by Lilly Rockwell, Austin American-Statesman / August 29, 2016
Downtown Austin (Shutterstock)

(TNS) -- Austin has landed the No. 1 spot on yet another list.

For the second year in a row, Austin has the highest rate of startup activity of any metro area in the country. The Kauffman Index, which examines startup activity in 40 major metro areas, said Thursday that Austin was No. 1 after looking at metrics such as startup density, rate of new entrepreneurs, and whether start-up founders were starting businesses out of necessity or opportunity.

In particular, Austin ranked the highest of any metro area in the rate of new entrepreneurs. Each month the Austin metro area produced an average of 600 entrepreneurs for every 100,000 working adults.

Though Austin has landed at the top of plenty of lists over the years, this particular ranking thrilled the city’s civic leaders, who love an opportunity to one-up rivals for entrepreneurial talent, such as San Francisco and New York.

Michele Skelding, the senior vice president of global tech and innovation for the Austin Chamber of Commerce, said the Kauffman ranking is important because so much attention on start-ups, particularly when it comes to venture capital fundraising, is often focused on Silicon Valley.

“This report will hopefully shine a light on Austin,” Skelding said, calling it phenomenal “exposure.”

It’s true that Silicon Valley dominates when it comes to venture capital investments, with $21 billion flowing into San Francisco area companies in 2015, according to the National Venture Capital Association. Austin companies raised $740 million from venture firms in 2015.

Notably, Austin was the only Texas city in the Top 20 in the National Venture Capital Association report on the top 20 metro areas.

But the Kauffman report focused on more than venture capital dollars, looking at all types of new businesses, from restaurants to a retail store or a software start-up.

Austin Technology Council CEO Barbary Brunner said the Kauffman ranking was “not surprising.”

“There are a bunch of economic factors that make Texas a great place to start and do business,” Brunner said. She said Texas is favorable to businesses from a tax perspective and that Austin offers a good quality of life and comparatively lower cost of living.

Austin’s high level of startup activity is also a reflection of the overall health of Texas entrepreneurship.

Of the top 15 metro areas on the Kauffman Index, four were in Texas. Houston moved up one spot to No. 7; Dallas moved up three spots to No. 12; San Antonio was No. 13, a fall from last year’s rank of No. 7.

Brunner said Austin offers a considerable amount of support and infrastructure for start-ups.

She said: “We have a ton of co-working facilities that are available to people who want to find an office space to work out of. That makes it financially easier for people to start a company as well.”

©2016 Austin American-Statesman, Texas Distributed by Tribune Content Agency, LLC.