In order to discover the best untapped cities for startups, Fundera gathered data on 50 mid-sized cities with a population under 500,000 residents. Fundera measured each city’s access to a talented labor pool, average labor cost, office space cost, average cost of living, and proximity to a larger startup ecosystem. Their findings indicate that cities with high potential for startup success exist across the country.

Photo taken by Suzanne Tucker

Startup culture is centered in a few regions in the United States. The Silicon Valley Bay Area accounts for 45% of total venture capital investment in the U.S. When you add in other startup hubs, such as New York, Boston, and Seattle, it covers nearly three-quarters of the country’s venture capital investment. Many experts have called out so-called “second tier” startup cities, such as Portland and Austin, but even those regions are now becoming costly and saturated for would-be entrepreneurs.

Here are some of the key takeaways:

  • The top three cities—Madison, Plano, and St. Paul—earned high points for a combination of access to a well-educated local labor pool and a relatively modest cost of doing business.
  • A city with excellent feeder universities was likely to have a well-educated population and thus rank highly. Durham, St. Paul, and Madison all boast great nearby universities and an above-average concentration of residents with bachelor’s degrees.
  • A city with low office space rental rates was also more likely to rank highly, though some cities like Plano with higher rates still ranked well due to steady or slow annual growth in the cost of office space.
  • Several cities that are close to startup hubs, like Oakland with its proximity to San Francisco, didn’t make the top 11 because these are already too expensive.
  • Smaller cities in California—including Bakersfield and Chula Vista—were weighed down by a lower percentage of educated workers, and thus ranked toward the bottom.

Read on to see the complete ranking of the best untapped cities for startups. This information is useful for prospective and current founders, investors, and startups that are considering multiple locations.

About Fundera:
Fundera exists to help business owners make smarter financial decisions. They do this by helping small businesses confidently shop, compare, and understand the financial solutions they need to succeed.