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Which U.S. cities are the most, least startup-friendly?

Posted by Carol Mahamedi

December 3, 2021    |     3-minute read (459 words)

Deciding where to set up your business can affect its growth and long-term success, but which factors should you weigh in? Online lending platform LendingTree has broken down the data on key metrics, such as local unemployment levels, average educational attainment and the local tax rate, to identify three U.S. cities with the most-favorable conditions for startups, as well as three with the least-favorable conditions.

Top 3 cities to launch a startup

  1. Raleigh: According to LendingTree, Raleigh, North Carolina, is the No. 1 American city for startups, owing to its well-educated labor pool, low corporate tax rate and ample supply of reasonably priced housing. More than 50% of the city is 24 years old to 55 years old, representing favorable ages to join a startup.

  2. Austin: As the fastest growing metro area in the country, Austin, Texas’ home prices are increasing quickly. Nevertheless, residents reportedly spend an average of only 21% of their monthly salary on housing costs, which is significantly less than most other cities. Roughly 80% of small businesses that launch in Texas are still in business a year later. This can be attributed at least in part to the fact that Texas has no personal income tax and to the state’s low corporate tax rate.

  3. Boulder: With a disproportionately high number of tech firms and patent applications filed over the last 20 years, Boulder, Colorado, has earned a great reputation for startups. It is also considered one of the country’s healthiest cities and is home to the flagship University of Colorado, both of which attract strong talent and foster a thriving startup ecosystem.
Which cities should startups steer clear of?

  1. Bakersfield: This California city has high housing costs, a high unemployment rate, a tough tax landscape and a relatively low proportion of working-age adults that have at least a bachelor’s degree. Bakersfield’s high cost of living coupled with high taxes prompt many local businesses to seek outside funding, curtailing the number of businesses that successfully launch there.

  2. Toledo: This Ohio city is challenging to launch a startup in due to its low proportion of residents who are in their prime working age, from 24 to 55 years old, as well as its low rate of residents who have received at least some higher education. The city also has relatively few self-employed residents.

  3. Honolulu: Among U.S. cities, Honolulu was especially hurt by the COVID-19 pandemic, with its local economy heavily dependent on hospitality and tourism. In fact, a QuickBooks report found that Honolulu was the pandemic’s fourth most-impacted city. Meanwhile, Hawaii is also the only state that is yet to completely recover from the revenue dip of the past year, making it an even tougher place to launch a business.

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