The Top 10 Cities for Starting a Business (and Why Silicon Valley Doesn’t Make the Cut)

New research suggests that the Midwest is a thriving startup ecosystem, as California grows increasingly cost-prohibitive for new companies.

If you’re looking to start a small business, there’s a case to be made for moving to Sioux Falls, South Dakota, instead of Silicon Valley or New York City.

That’s according to a new report from WalletHub, a personal finance website: “2016’s Best Large Cities to Start a Business.” WalletHub evaluated the 150 most populated cities in the U.S., drawing on data from the U.S. Census Bureau, the Bureau of Labor Statistics, and the National Venture Capital Association.

The study ranked urban centers–excluding the larger metro areas–using three factors: local business environment (length of the average workweek, revenue growth, industry variety), access to resources (financing and the amount of venture capital investment made per capita), and costs (office space affordability, labor costs, corporate taxes, and cost of living).

Surprisingly, California and New York didn’t fare particularly well for new businesses. In fact, the top city in California on the list is Los Angeles, which comes in at No. 48, while both Buffalo, New York, and Rochester, New York, rank well above New York City (at Nos. 31, 35, and 89, respectively).

Venture capital investment continues to pour into these states–California alone accounted for $78.4 billion of investment over the past three years, or 56 percent of all VC investment in the nation, according to the most recent Moneytree report. Analysts note that the cost of living there has skyrocketed, which is extremely prohibitive for new companies. San Francisco ties with New York City and Washington, D.C., for the most expensive office space in the nation, while San Jose, Irvine, and Fremont suffer from the highest labor costs, the report found.

“The business environment in both Silicon Valley and Silicon Beach is still flourishing,” said Jill Gonzalez, an analyst with WalletHub. “The low rankings come down largely to high startup costs.”

“Being in the right city can really matter,” said Luke Pittaway, the director of the Center for Entrepreneurship and a professor of management systems at Ohio University’s college of business. His advice to entrepreneurs: “Look for a vibrant startup scene where others are doing cool things–you can learn from them. Look for a city that is creative, energetic, and livable–the talent you will need to recruit wants to live in those types of places.”

Still, when deciding where to start up, it’s worth considering what industry you plan to operate in–and what resources you’ll need access to. Health care technology has surged of late in Nashville, for instance, where startups benefit by doing business with (or hiring talent from) established players such as the Hospital Corporation of America, Amsurg, and HealthStream.

Meanwhile, Holland, Michigan, has become something of a chemical manufacturing hub–thanks, in part, to the government-funded LG Chem facility–while the state at large boasts the most engineers per capita in the U.S.

Chicago, which has the second-highest number of startups on the 2015 Inc. 5000, is fast becoming a manufacturing hub, thanks to the advent of 3-D printing, as Inc. columnist Howard Tullman notes.

Here are the top 10 cities for launching a business in 2016, according to WalletHub:

1.     Sioux Falls, South Dakota

2.     Grand Rapids, Michigan

3.     Oklahoma City

4.     Lincoln, Nebraska

5.     St. Louis

6.     Salt Lake City

7.     Charlotte, North Carolina

8.     Springfield, Missouri

9.     Tulsa

10.  Amarillo, Texas

Read more here: 2016’s Best Large Cities to Start a Business | WalletHub®

Author: Zoë Henry, Reporter, Inc.Source: The Top 10 Cities for Starting a Business (and Why Silicon Valley Doesn’t Make the Cut) | Inc.com

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