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Austin Ranks First in Startups Says Foundation

AUSTIN, TX—The five metros with the highest startup activity in the 2016 index were Austin, Miami, Los Angeles, San Francisco and Las Vegas, with Austin having 600 new entrepreneurs for every 100,000 adults.

By Lisa Brown | lisabrown | | Updated on August 31, 2016
Startups Austin was ranked number one of metro areas experiencing an increase in startup activity.
AUSTIN, TX—A majority of US states and metro areas are experiencing higher rates of new business creation, following the national trend, according to the 2016 Kauffman index of startup activity state and metro trends data released by the Ewing Marion Kauffman Foundation . Including Austin, ranked number one, 23 out of the largest 40 metro areas experienced an increase in startup activity. “These reports are critical to solving the puzzle of why entrepreneurship thrives in some places and not in others,” said Victor Hwang , vice president of entrepreneurship at the Kauffman Foundation . “Policymakers, practitioners and entrepreneur support organizations can use the findings as tools to take the pulse of their local ecosystems to strengthen startup activity.” The five metros with the highest startup activity in the 2016 index were Austin, Miami, Los Angeles, San Francisco and Las Vegas. The rate of new entrepreneurs varied widely across metros. Austin ranked number one in this category, with 600 new entrepreneurs for every 100,000 adults. “The startup numbers for states and metro areas dovetail with the national startup activity index report, which showed entrepreneurship recovering from the Great Recession slump,” said Arnobio Morelix , a senior research analyst and program officer at the Ewing Marion Kauffman Foundation. “While there is considerable variation from one locale to the next, the aggregate data bodes well for business startup activity around the country.” The Kauffman index of startup activity relies on three indicators to look at new business creation: the rate of new entrepreneurs in a location, calculated as the percentage of adults becoming entrepreneurs in a given month; the opportunity share of new entrepreneurs, calculated as the percentage of new entrepreneurs driven primarily by opportunity versus necessity; and startup density, the number of new employer businesses normalized by population. More specifically, the startup density is the ratio of the number of new employer businesses divided by the total population of existing employer businesses. Morelix tells GlobeSt.com: “Austin is improving over time, with 80% of entrepreneurs having started a business due to opportunity rather than necessity. Out of 1,000 businesses, 105 are startups there. Vibrant communities have density, fluidity, connectivity and diversity, whereby fluidity refers to how easy resources (ideas/intellectual capital, people and property) flow in an area.” National startup activity rose in the 2016 index, continuing an upward trend started in 2015. After falling with the Great Recession and reaching its lowest point in the past two decades just two years ago, startup activity rebounded in 2016 to its fifth-highest level ever. “With the Kauffman index of startup activity, the Kauffman Foundation provides the essential data and research that allow us to keep that pulse and leverage the insights we learn from the data to create a better future for our communities,” wrote Colorado governor John Hickenlooper in the report’s foreword. “All entrepreneurship is local. And the policymakers, entrepreneurship supporters and communities that overlook this reality do so at their own peril.”  

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