It’s not exactly news that the San Francisco Bay Area is a hot spot for tech startups, but let’s say you’re ambitious, talented and armed with a great idea but you don’t want to move there. What other places should you consider?
Or let’s say you’re ambitious, talented and looking to land a job at a tech startup. Where, outside San Francisco and Silicon Valley, are prospective tech employers?
To answer these questions, we looked at five data points:
1. Local innovation, as measured by utility patent growth from 2011 to 2013 and utility patents per 1,000 people. (Utility patents also are referred to as “patents for inventions,” as opposed to design or other patents, and constitute about 90 percent of patents issued by the U.S. Patent and Trademark Office.)
2. Access to capital, as measured by venture capital deals per 1,000 people and the average value of deals made in 2014.
3. Access to educated workers, as measured by the share of the local population with a bachelor’s degree in the engineering, business or the so-called hard sciences. (We excluded social sciences and gave more weight to science and engineering degrees than to business degrees.)
4. Strength of the local tech startup scene, as measured by new jobs per 1,000 people at young local companies in the science and technology sector and the information sector.
5. Local wage premium, as measured by how much more (or less) local startup workers earn compared with workers at all science and technology companies around the country. The lower the number, the better it is for employers.
The first four factors counted for a location and the last factor counted against it, because it indicates a potentially tight labor market for qualified workers, high salary costs for employers and likely a high cost of living. We looked at this data for the 50 biggest U.S. metropolitan areas and came up with the Top 12 Hot Spots for Tech Startups and Workers (outside San Francisco and Silicon Valley).
1. Raleigh, NC
Raleigh is home to software maker Red Hat as well as an IBM campus. That undoubtedly contributes to its high local share of engineers and scientists. At 8 percent, that share is the highest among our Top 12 metros. Local startups are hiring at a faster clip than elsewhere in the Top 12, utility patents per 1,000 people are fairly high, and venture capital is proving accessible.
Metro population: 1,162,689
Utility patent growth: 16 percent
Utility patents per 1,000 people (2013): 1.19
Venture capital deals per 1,000 people (2014): 0.04
Average value of venture capital deals: $6,685,238
Share of local population with bachelor’s degree in hard sciences or engineering: 8 percent
Share of local population with bachelor’s degree in business: 6 percent
New jobs at local tech startups per 1,000 people: 0.74
Local wage premium: -16 percent (remember, lower numbers are better)
2. Austin, TX
Texas’ capital led the Top 12 in terms of venture capital deals per 1,000 people. It also had the second-highest number of utility patents issued per 1,000 people. In addition, it’s got plenty of local science and engineering talent. Patent growth is lower, and the wage premium is higher (less negative) than in Raleigh.
Metro population: 1,782,032
Utility patent growth: 9 percent
Utility patents per 1,000 people (2013): 1.51
Venture capital deals per 1,000 people (2014): 0.06
Average value of venture capital deals: $5,443,684
Share of local population with bachelor’s degree in hard sciences or engineering: 7 percent
Share of local population with bachelor’s degree in business: 5 percent
New jobs at local tech startups per 1,000 people: 0.2
Local wage premium: -8 percent
3. Denver, CO
The Mile High City saw strong growth in utility patents and tech-startup jobs. It also has a decent pool of local scientists, engineers and businesspeople. Keeping it out of the Top 2 were its numbers for utility patents and venture capital deals.
Metro population: 2,601,465
Utility patent growth: 43 percent
Utility patents per 1,000 people (2013): 0.41
Venture capital deals per 1,000 people (2014): 0.02
Average value of venture capital deals: $11,169,070
Share of local population with bachelor’s degree in hard sciences or engineering: 6 percent
Share of local population with bachelor’s degree in business: 6 percent
New jobs at local tech startups per 1,000 people: 0.54
Local wage premium: -9 percent
4. Salt Lake City, UT
Salt Lake City posted good numbers in terms of the number venture capital deals the average value per deal. Also in its favor were the new-job numbers and the low wage premium. More impressive patent numbers would have moved it higher.
Metro population: 1,107,434
Utility patent growth: 18 percent
Utility patents per 1,000 people (2013): 0.53
Venture capital deals per 1,000 people (2014): 0.03
Average value of venture capital deals: $11,866,786
Share of local population with bachelor’s degree in hard sciences or engineering: 4 percent
Share of local population with bachelor’s degree in business: 4 percent
New jobs at local tech startups per 1,000 people: 0.45
Local wage premium: -28 percent
5. San Diego, CA
San Diego may be known for its beaches and military presence, but it had the highest number of utility patents issued per 1,000 people among the Top 12 and had the second-highest patent growth. It had the highest wage premium in the Top 12, though, meaning tech startups here are paying employees more than the typical science or tech company in the U.S. would pay.
Metro population: 3,138,265
Utility patent growth: 46 percent
Utility patents per 1,000 people (2013): 1.53
Venture capital deals per 1,000 people (2014): 0.03
Average value of venture capital deals: $8,132,121
Share of local population with bachelor’s degree in hard sciences or engineering: 6 percent
Share of local population with bachelor’s degree in business: 4 percent
New jobs at local tech startups per 1,000 people: 0.48
Local wage premium: 17 percent
6. New Orleans, LA
In most categories, New Orleans is little below average for the Top 12, but tech startups enjoy the second-lowest wage premium. Even though the number of venture capital deals was extremely low, the average value of those deals was the second highest in the Top 12.
Metro population: 1,209,239
Utility patent growth: 35 percent
Utility patents per 1,000 people (2013): 0.11
Venture capital deals per 1,000 people (2014): 0.002
Average value of venture capital deals: $21,145,000
Share of local population with bachelor’s degree in hard sciences or engineering: 4 percent
Share of local population with bachelor’s degree in business: 4 percent
New jobs at local tech startups per 1,000 people: 0.24
Local wage premium: -38 percent
7. Los Angeles, CA
In the Top 12, L.A. was second only to Raleigh in new jobs at tech startups per 1,000 people. Startups here enjoy a relatively low wage premium. Holding it back was its low number of venture capital deals per 1,000 people.
Metro population: 12,945,252
Utility patent growth: 22 percent
Utility patents per 1,000 people (2013): 0.48
Venture capital deals per 1,000 people (2014): 0.01
Average value of venture capital deals: $12,011,111
Share of local population with bachelor’s degree in hard sciences or engineering: 5 percent
Share of local population with bachelor’s degree in business: 4 percent
New jobs at local tech startups per 1,000 people: 0.6
Local wage premium: -22 percent
8. Las Vegas, NV
Las Vegas had the highest growth in utility patents of any of the 50 metros in our analysis. It’s also got the third-lowest wage premium. However, it had a very low number of venture capital deals. It also has the smallest population of hard-sciences and engineering majors in the Top 12.
Metro population: 1,976,925
Utility patent growth: 80 percent
Utility patents per 1,000 people (2013): 0.21
Venture capital deals per 1,000 people (2014): 0.003
Average value of venture capital deals: $7,544,000
Share of local population with bachelor’s degree in hard sciences or engineering: 3 percent
Share of local population with bachelor’s degree in business: 4 percent
New jobs at local tech startups per 1,000 people: 0.39
Local wage premium: -37 percent
9. Seattle, WA
The Emerald City has its fair share of scientists and engineers. Among the Top 12, Seattle also has the third-highest number of patents per 1,000 people. However, local tech companies aren’t hiring as many people here, and they pay them more than in all but one other place in our Top 12, San Diego.
Metro population: 3,504,628
Utility patent growth: 21 percent
Utility patents per 1,000 people (2013): 1.25
Venture capital deals per 1,000 people (2014): 0.03
Average value of venture capital deals: $11,155,833
Share of local population with bachelor’s degree in hard sciences or engineering: 7 percent
Share of local population with bachelor’s degree in business: 4 percent
New jobs at local tech startups per 1,000 people: 0.16
Local wage premium: 2 percent
10. Kansas City, MO
Fast growth in patents along with the lowest wage premium of the Top 12 put Kansas City on our list. The metro’s patents-per-1,000 people score also aided its ranking.
Metro population: 2,025,297
Utility patent growth: 44 percent
Utility patents per 1,000 people (2013): 0.45
Venture capital deals per 1,000 people (2014): 0.01
Average value of venture capital deals: $7,033,846
Share of local population with bachelor’s degree in hard sciences or engineering: 4 percent
Share of local population with bachelor’s degree in business: 5 percent
New jobs at local tech startups per 1,000 people: 0.2
Local wage premium: -43 percent
11. Miami, FL
Miami has the highest average value of venture capital deals of anywhere in the 50 metro areas we analyzed. That was a major driver of it making the Top 12. Also helpful were the low wage premium and reasonable patent growth. It is, however, the only metro in the Top 12 where tech startups shed jobs.
Metro population: 5,673,185
Utility patent growth: 24 percent
Utility patents per 1,000 people (2013): 0.24
Venture capital deals per 1,000 people (2014): 0.004
Average value of venture capital deals: $31,921,818
Share of local population with bachelor’s degree in hard sciences or engineering: 4 percent
Share of local population with bachelor’s degree in business: 5 percent
New jobs at local tech startups per 1,000 people: -0.06
Local wage premium: -21 percent
12. Portland, OR
The Rose City’s patent numbers are respectable, as are its metrics for local scientists, engineers and businesspeople. What really helped Portland break into the Top 12 were its low wage premium (the fourth lowest) and the new jobs at local tech startups, which tied with Salt Lake City’s number.
Metro population: 2,260,591
Utility patent growth: 10 percent
Utility patents per 1,000 people (2013): 0.85
Venture capital deals per 1,000 people (2014): 0.012
Average value of venture capital deals: $6,257,407
Share of local population with bachelor’s degree in hard sciences or engineering: 5 percent
Share of local population with bachelor’s degree in business: 4 percent
New jobs at local tech startups per 1,000 people: 0.45
Local wage premium: -32 percent
Northern California
So, what if we hadn’t ignored the Bay Area? The San Jose metro area, which includes Cupertino, Mountain View and Palo Alto, would have been the big winner, partly because nearly one-fifth of the population holds a science, engineering or business degree. San Francisco, partly thanks to its sky-high wage premium of 151 percent, would have ranked second — after Raleigh but before Austin.
Data sources: U.S. Patent and Trademark Office, National Venture Capital Association, U.S. Census Bureau, U.S. Bureau of Economic Analysis
