The Texas Capital has topped a new list ranking the best U.S. cities for starting a new business, with Austin's favorable economic climate enticing new opportunities for entrepreneurship and growth.

The recognition comes in CommercialCafe's recent "Best Cities for Startups" report, published December 10. The study analyzed large U.S. cities across two population categories: cities with more than one million residents and cities with populations one million and 500,000 residents. The report analyzed relevant metrics such as office or coworking costs, Kickstarter funding success, startup density, and survival rates, among others.

The study found Austin has several major entrepreneurial advantages over all other U.S. cities with 500,000 to 1 million residents.

"Specifically, the Texas capital was the frontrunner for indicators that looked at the overall share of startups within the local economy, as well as growth rates in five years (2019 to 2023)," the report said. "On top of that, Austin also topped the rankings for its percentage of college-educated residents and its consulting firms, which provide vital support for burgeoning enterprises."

About 12 percent of all businesses in Austin are startups that have been active for less than a year, the report revealed. These new businesses have a survival rate of 67.5 percent, meaning that more than two-thirds of all startups in the city will still be running up to five years after they were first established.

CommercialCafe cites two examples of successful Austin startups: Home finance company Homeward, and Jasper AI, an artificial intelligence-powered marketing platform co-founded by Forbes 30 Under 30 Local Austin honoree Chris Hull.

Surprisingly, Austin has a 52.6 percent "success rate" for its Kickstarter campaigns, an online crowdfunding platform for creative projects. Over 6,000 Austin-based campaigns were created since the platform launched in April 2009, and 3,187 were successfully funded.

"In this case, the city’s high concentration of engineers, developers and tech entrepreneurs, along with its annual South by Southwest (SXSW) festival — which acts as a launchpad for various hardware, software and gaming projects — provides highly favorable conditions for Austin Kickstarter projects to succeed," the report said.

Freelancers are another vital resource for new businesses that may need "specialized services" for a fixed amount of time, and Austin's freelance workforce has grown 10.2 percent from 2019-2023. The report found there were 46,655 freelancers working in Austin in 2023, compared to 42,322 freelancers in 2019.

Fiverr's annual Freelance Economic Impact Report discovered Austin-based freelancers generated nearly $4 billion in 2023, proving just how beneficial the local independent workforce has been for Austin's booming tech scene and other markets.

The report notes that Austin startups may run into difficulties renting an office space in the city. As many Austinites already know, rent doesn't come cheap: the report found that the average asking price for a 1,000-square-foot workspace in the city (for five employees) added up to $45,456 annually. For startups that want greater flexibility for their workers, the annual cost for a coworking space for the same number of employees in Austin came out to $14,100.

Other Texas cities with attractive economic environments for startups
CommercialCafe also revealed that Texas as a whole is one of the strongest states for starting a new business. Several of Texas' major cities – San Antonio (No. 2), Dallas (No. 3), Fort Worth (No. 4), and Houston (No. 7) – were all recognized among the top 10 best places to start a business in the category of U.S. cities with more than a million residents.

The top 10 best cities in the smaller range to start a new business are:

• No. 1 –Austin, Texas
• No. 2 – Nashville, Tennessee
• No. 3 – Indianapolis, Indiana
• No. 4 – Tuscon, Arizona
• No. 5 – Mesa, Arizona
• No. 6 – Charlotte, North Carolina
• No. 7 –Fresno, California
• No. 8 – Albuquerque, New Mexico
• No. 9 – Las Vegas, Nevada
• No. 10 – Louisville, Kentucky