The city of Austin, Texas, has been named the best U.S. city for startups, according to a new report from CommercialCafe. The findings from the “Best Cities for Startups” report, published on December 10, 2023, highlight Austin’s robust economic environment as a major draw for entrepreneurs seeking new opportunities.
The report evaluated large U.S. cities based on various metrics, including office costs, startup density, and survival rates. It categorized cities into two groups: those with populations exceeding one million and those with populations ranging from 500,000 to one million. Austin stood out particularly in the latter category, demonstrating significant advantages in several key indicators.
According to the report, Austin leads the way in the share of startups within its local economy, with approximately 12 percent of all businesses being startups that have been operational for less than one year. The city’s startups boast a survival rate of 67.5 percent, indicating that over two-thirds continue to thrive five years after their establishment.
The report emphasizes that Austin’s high percentage of college-educated residents and the presence of consulting firms contribute significantly to this entrepreneurial success. These firms provide essential resources and support for new businesses. Notable examples of successful startups emerging from Austin include Homeward, a home finance company, and Jasper AI, an artificial intelligence-powered marketing platform co-founded by Chris Hull, recognized on the Forbes 30 Under 30 list.
Austin’s success extends to crowdfunding as well. The city has achieved a remarkable 52.6 percent success rate for campaigns launched on Kickstarter, a platform for creative project funding. Since its inception in April 2009, over 6,000 campaigns from Austin have been created, with 3,187 successfully funded. The report attributes this success to the city’s concentration of engineers and tech entrepreneurs, as well as events like the annual South by Southwest (SXSW) festival, which serves as a launching pad for innovative projects.
The freelance workforce also plays a crucial role in supporting new businesses. Austin’s freelance community has expanded by 10.2 percent from 2019 to 2023, with 46,655 freelancers reported in 2023 compared to 42,322 in 2019. According to Fiverr’s annual Freelance Economic Impact Report, these freelancers generated nearly $4 billion in 2023, underscoring their significance to the local economy.
Despite its advantages, startups in Austin face challenges, particularly regarding office space costs. The report notes that the average asking price for a 1,000-square-foot workspace suitable for five employees is approximately $45,456 annually. For those seeking more flexible arrangements, the annual cost for coworking space for the same number of employees is around $14,100.
The report also highlights that Texas is one of the strongest states for new business development, with several cities making the top 10 list for startups. Alongside Austin, San Antonio, Dallas, Fort Worth, and Houston were also recognized among the best cities for startups in the category of large cities with over one million residents.
In the category of cities with populations between 500,000 and one million, the top 10 locations for starting a new business include:
1. Austin, Texas
2. Nashville, Tennessee
3. Indianapolis, Indiana
4. Tucson, Arizona
5. Mesa, Arizona
6. Charlotte, North Carolina
7. Fresno, California
8. Albuquerque, New Mexico
9. Las Vegas, Nevada
10. Louisville, Kentucky
The findings of the report paint a picture of Austin as a thriving hub for entrepreneurship, driven by a strong support network, a vibrant community of professionals, and an environment conducive to innovation and growth.
