Article by Ben Johnson via Fundera Ledger
Bill Gates, Mark Zuckerberg, Steve Jobs. What do these three entrepreneurs have in common? They all started their business before the age of 25! There’s never been a better time to be a young entrepreneur in America. Universities teach classes on entrepreneurship, incubators have popped up in cities across the country, and being a business owner is seen as a well-respected career choice.
While Austin, Denver, New York, Seattle, and Silicon Valley are often seen as the epicenters of high-tech entrepreneurship—there are young men and women starting business in communities in many other metro areas across the country. For these young entrepreneurs, choosing where to start a business can be as much an important decision as what type of business to start.
A business’s location impacts operating costs, access to talent, and overall success. And most importantly, location shapes an entrepreneur’s decision of whether to start up in the first place!
Where Should You Start Your Startup?
Young entrepreneurs are living off ramen noodles and working into the night while they get their ideas off the ground—so choosing an affordable location is one of their most important choices. We decided to take a look at the data to see if we could pinpoint communities that young entrepreneurs should consider when starting up.
We used data from the US Census Bureau, Bureau of Labor Statistics, and Zillow to create a composite score for metropolitan areas across the United States. Here’s what the numbers had to say.
Trends You’ll See in the Best Cities for Young Entrepreneurs
High correlation with college towns
Iowa State Cyclones, Colorado Buffaloes, Michigan Wolverines—seeing a trend? Almost all of the metro areas on our list are home to large universities. This isn’t a coincidence—college towns are notoriously well-educated and constantly churning out new entrepreneurs.
Don’t forget about Middle America
While the West Coast and East Coast are often seen as the traditional innovation hubs of the country—there’s a lot going on in middle America. On our list, 6 of the top 8 towns are inland.
Small business is still king
Even if technology entrepreneurs get the majority of press coverage, small business is still king. Entrepreneurs going into agriculture, hospitality, retail, transportation, and other industries thrive all across the country!
The Top 3 Best Cities for Young Entrepreneurs
1. Ames, Iowa
Fundera score: 70.88
Median household income: $50,438
Average rent for single family home: $1,204
Percentage of residents 20 to 34: 35.4%
Percentage with bachelor’s or higher: 48.29%
Unemployment rate: 2.1%
Ames is home to Iowa State University, the nation’s first land-grant university. It’s a college town with a total population of 58,965—and 36,660 of those residents are students! The city performed well due to its high population of young people (35.4% of the city is 20 to 34 years old) and its well-educated residents (48.29% of its the city has at least a bachelor’s degree). Entrepreneurs in the town should consider looking at the Pappajohn Center for Entrepreneurship to build their network.
2. Boulder, Colorado
Fundera score: 70.85
Median household income: $70,961
Average rent for single family home: $2,206
Percentage of residents 20 to 34: 24%
Percentage with bachelor’s or higher: 58.9%
Unemployment rate: 2.2%
Take a 25-mile ride from Denver to come upon the outdoorsy town of Boulder. It’s a bit of an anomaly—with athletes, hippies, entrepreneurs, and students all living next to each other. But the unique makeup has created one of the most vibrant entrepreneurial scenes in the country. Boulder leads our study in terms of educational attainment with nearly 60% of the city having a bachelor’s degree or higher. Young entrepreneurs here will find a Techstars accelerator, a center for innovation and entrepreneurship at CU Boulder, and several VC funds in the town.
3. Ann Arbor, Michigan
Fundera score: 69.31
Median household income: $61,003
Average rent for single family home: $1,678
Percentage of residents 20 to 34: 26.8%
Percentage with bachelor’s or higher: 52.64%
Unemployment rate: 2.6%
While Ann Arbor is the 6th largest town in Michigan, it ranked 1st amongst Michigan cities in our study. The metro area excelled in our study in part because the large student body at the University of Michigan (44,718) helped bring up the educational attainment among residents and lowered the unemployment rate. The university has an active innovation center and has awarded more than $350,000 in seed funding to student ventures.
The Rest of the Best
4. Lawrence, Kansas
Fundera score: 68.93
Median household income: $50,939
Average rent for single family home: $1,294
Percentage of residents 20 to 34: 33.7%
Percentage with bachelor’s or higher: 49.15%
Unemployment rate: 3.2%
5. Columbia, Missouri
Fundera score: 68.88
Median household income: $49,899
Average rent for single family home: $1,124
Percentage of residents 20 to 34: 31.1%
Percentage with bachelor’s or higher: 47.34%
Unemployment rate: 2.7%
6. Iowa City, Iowa
Fundera score: 68.26
Median household income: $55,842
Average rent for single family home: $1,421
Percentage of residents 20 to 34: 30.1%
Percentage with bachelor’s or higher: 46.6%
Unemployment rate: 2.4%
7. Ithaca, New York
Fundera score: 67.20
Median household income: $52,624
Average rent for single family home: $1,571
Percentage of residents 20 to 34: 30.1%
Percentage with bachelor’s or higher: 50.83%
Unemployment rate: 3.4%
8. Corvallis, Oregon
Fundera score: 66.79
Median household income: $49,802
Average rent for single family home: $1,687
Percentage of residents 20 to 34: 29.1%
Percentage with bachelor’s or higher: 52.79%
Unemployment rate: 3.2%
Fundera’s study looked at three resources in-depth: The US Census American Community Survey, the BLS Local Area Unemployment Report, and the Zillow Rent Index Summary. And we started out with 382 metropolitan statistical areas, as delineated by the US Office and Management and Budget. Out of those, 46 metropolitan areas lacked information for one or more of our metrics, so they were excluded from the results.
Our study ranked metropolitan areas by creating a composite score of the following metrics.
Household income—20% of score
We assumed that higher household income would represent a healthier business climate in a metro area. More income leads to more disposable income that can be spent at businesses within a community.
Percentage of young people—20% of score
Because our study focuses on young entrepreneurs, we needed a metric to measure their prevalence in the community. A higher percentage of young people, age 20 to 34, increased a city’s overall score. We also considered the positive network effect of having more young people in the community.
Education level—10% of score
We included educational attainment to characterize the labor pool within a metro area. Entrepreneurs starting businesses rely on their employees—and this metric shows the demographics of city’s workers.
Unemployment rate—25% of score
We viewed unemployment as an unfavorable metric for a city. It’s used in our study as a gauge of each city’s economic health.
Average rent—25% of score
Average household rent is included as a measure of cost of living. Communities with high rents can be great breeding grounds for entrepreneurs, but the high rent can also make starting a business a more expensive and higher risk endeavor.