Texas Tops Nation In Nurturing Startups, New Report Says
Texas is one of the top incubators for startups and its cities are a hotbed of entrepreneurs, according to a new report from the Kauffman Foundation.
Austin topped the list of U.S. metros with the most startup activity. After Austin, the top four metropolitan areas are Miami, Los Angeles, San Francisco and Las Vegas.
But Texas as a whole fared well, too, according to the report. It has the most startup activity among its peer group of large states, even when compared to Florida, New York and California. Houston, Dallas and San Antonio were among the top 13 metro areas. Dallas came in 12th place, behind Austin and Houston but ahead of San Antonio.
The Kauffman Index of Startup Activity is compiled by the Kauffman Foundation, a Kansas City-based think tank focused on education and entrepreneurship. The report weighs several factors, including: the percentage of adults becoming entrepreneurs in a given month, the percent of people driven to start a business based on opportunity rather than ntecessity; and the number of new businesses compared to more established ones.
"There's a certain natural affinity to Texas for business people because it's viewed as a pro-business, low-tax, low government interference for business," said Rob Adams, director of Texas Venture Labs at the University of Texas at Austin and a former software entrepreneur. "Then it becomes, 'If I'm going to Texas for my startup, where's the best place?'"
Adams said the report mirrors economic trends of people leaving the "Snow Belt" for the "Sun Belt." Entrepreneurs are also attracted to the high quality of life and low cost of living in Texas, he said.
Austin far exceeds other cities in its density of startups that are less than a year old. It also has a higher percentage of adults who start companies each month. Austin companies have a "dumbbell distribution" with numerous startups and a few big companies, like Dell, IBM and Apple, but little in-between, Adams said.
Dallas has strong startup activity, but it does not have as much density of startups as Austin or Houston, according to the report. It also has a lower rate of people starting companies.
The report is based on data from the 2015 calendar year.
Adams said the abundance of startup activity in Texas could benefit the state long-term, if some of them grow and thrive. Only about 10 to 20 percent of startups are in business three to five years after they're founded, he said. That means it takes a lot of early-stage startups for a home run.
Across the U.S., startup activity is bouncing back after a "recession hangover," said Arnobio Morelix, senior research analyst at Kauffman Foundation. More entrepreneurs are choosing to start a company because of market opportunity instead of unemployment. Startup activity has also increased because of a narrowing gender gap between female and male entrepreneurs and a growing number of entrepreneurs who are minorities.
The percentage of men starting businesses remained flat from 2014 to 2015, but the number of women entrepreneurs grew from 220 out of every 100,000 women to 260 out of 100,000 women. However, the gender gap remains significant: About 420 out of 100,000 men started a business last year.
The face of entrepreneurship is changing, too. About 40 percent of all entrepreneurs were from minority backgrounds in 2015 -- up from 23 percent in 1996, Morelix said. Entrepreneurship has grown especially among Latinos, he said.
Ed Note: This article was written by Melissa Repko and originally featured in the Dallas Morning News.