Austin's No. 1

Austin outranks Silicon Valley as America's No. 1 city for startups

Austin outranks Silicon Valley as America's No. 1 city for startups

Austin aerial skyline with bridges and Lady Bird Lake
Austin appears at No. 1 among the country’s 20 best cities for startups. Ryan Conine/Getty Images

Sometimes, Austin folks feel like they're living in the shadow of America's major metro areas. But a new ranking of the best U.S. cities for startups flips the script by putting all of the nation's largest cities in our shadow.

In the ranking, produced by commercial real estate platform CommercialCafé, Austin appears at No. 1 among the country’s 20 best cities for startups and entrepreneurs, ahead of key markets like Washington, D.C. (No. 2); Seattle (No. 3); Denver (No. 4); and San Francisco (No. 5). The Capital City is first in startup density and non-employer growth, third in tech job market expansion, and fourth in millennial population growth, according to the report. 

CommercialCafé’s analysis looked at the 50 most populous cities in the U.S. For each city, CommercialCafé examined these data points: growth rate for solo businesses, startup survival rate, startup density, startup growth rate, success of Kickstarter fundraising campaigns, education levels, growth in tech employment, wage growth, rent-to-income ratio, coworking costs, and presence of millennials.

"[T]he Austin startup community had one of its best years in 2018," CommercialCafé declares. "According to PWC research, over $1.3 billion was invested, a local record in the two decades since the dot-com boom. The increased diversity of the local tech scene — which now includes e-commerce platforms, legal tech firms, tech-enabled services, health tech companies, food tech companies, and more — is slated to keep Austin in the lead of fertile startup cities for quite a while."

Among the factors in Austin's favor were its tech employment growth (37 percent), millennials' share of the population (31 percent), success of Kickstarter fundraising campaigns (26 percent), low rent-to-income ratio (19 percent), startup density (17.9 percent), and growth of solo businesses (3.9 percent).

One element of economic development in the Capital City comes from Innovate Austin, an initiative from the Austin Chamber of Commerce which focuses on drawing innovation- and technology-based businesses to the region and maintaining them. According to the initiative, 6,500 high-tech businesses, and 90 incubators, accelerators, and maker and coworking spaces call Austin home. In 2018, venture capital deals made in the city totaled 124. 

In addition to fostering an attractive environment for startups, the City of Austin is working to ensure that economic development also addresses local community concerns. In August 2018, the city council adopted new guiding principles for economic development. Some requirements include having a "living wage" for Austin-based employees of companies that receive incentives from the city and helping remove barriers to employment faced by some individuals.

“The policy update allows for a range of economic development tools that can address community needs and service gaps," said Rebecca Giello, interim director for the city’s Economic Development Department, in a release. "It allows the department to be more responsive to market realities and creates an agile framework for future programs to respond to Austinites’ expectations of economic development investments.”

Elsewhere in Texas, Fort Worth edges out Dallas, ranking second in Texas and 12th nationally. Dallas follows as third statewide and 15th nationally, and Arlington, which ranks fourth in-state and 19th nationally, is the only other Texas city noted in the report.