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America’s Most Innovative Tech Hubs

SIlicon Valley

America’s Most Innovative Tech Hubs

For an aspiring entrepreneur, the Bay Area could be described as the “promised land.” Between tech-savvy partners, shrewd angel investors, blossoming incubators, and business-friendly educational institutions, you have it all – talent, experience, funding, and infrastructure. Entrepreneurship is truly embedded in the region’s DNA.

That’s why it’s not surprising that San Jose and San Francisco rank number one and number three in NerdWallet’s ranking of the top tech hubs in the United States. NerdWallet, a financial education website that covers the education, investing, banking, and small business beats, recently constructed a model for identifying where startups and tech funding had the biggest impact.

Here’s how it worked. NerdWallet gave a 33.33 percent weight to three areas:

  • Number of Utility Patents: According to NerdWallet, this included “a primary classification in classes of technology as defined by the U.S. Patent Classification System, granted in the metro area from 2009 to 2013 from the U.S. Patent and Trademark Office.”
  • Venture Capital Funding Per Capita: This was derived from 2014 numbers from the National Venture Capital Association.
  • Tech Startup Density: Using data from the Kauffman Foundation, NerdWallet defines this density as the ratio of “new companies in a region to the number of new companies in the U.S. controlling for population. For example, if an area’s density is over one, then the area has higher than average number of new tech companies.”

As you’d expect, San Jose – seat of Silicon Valley – benefits from the established tech firms like Cisco, eBay, and Adobe (not counting startups seemingly popping up every day). According to Forbes, the median household income there is nearly $100,000.The area ranks among the top 20 in job growth – and #7 in education, thanks to area institutions like Stanford, Santa Clara University, and San Jose State. In fact, nearly 50% of the populace in San Jose holds a bachelors degree or higher. However, this is undercut by its high cost of living (48.2% above the national average). The area was also awash in $3,585.68 per capita in venture funding, nearly twenty times higher than New York City.

The big surprise comes in at number two, with Boulder, Colorado edging out San Francisco. While Frisco has nearly four times the venture capital funding per capita, they are have a far smaller tech startup density, likely owing to Boulder’s moderate size (roughly 300,000 people). In fact, NerdWallet maintains that Boulder’s startup density is six times higher than the national average. Like San Jose, Boulder carries a high cost of living, but also the highest percentage of citizens with a college degree (57.9%). On the surface, the University of Colorado is a major economic boon for Boulder’s startup scene. However, Boulder also hosts TechStars, a startup incubator that rivals California’s Y Combinator.

Corvallis, Oregon, home of Oregon State University, ranked number four in NerdWallet’s list of tech hubs. It finished second in the number of patents per 1000 residents (though half of what the San Jose area produces). Rounding out the top five was the Seattle area. Best known for Amazon and Microsoft,  Seattle is among the top cities for tech startup density despite its massive size (nearly three million people).

So what are some takeaways from NerdWallet’s rankings? For starters, head west if you’re looking to start a company. Among the top ten cities, only Burlington, Vermont and Boston, Massachusetts were east of the Mississippi river. When you expand out to the top 25, only nine cities fit that criterion. California and Colorado headed the list with four cities each in the top 25 (Washington, Oregon and Utah each had two – and Minnesota would’ve had two as well if Minneapolis hadn’t finish 26th).

Not surprisingly, college towns fared well. Aside from Boulder and Corvalis, you’ll find strong performance from Fort Collins, Colorado (Colorado State University), Provo, Utah (Brigham Young University), Austin, Texas (University of Texas), Burlington, Vermont (University of Vermont), and Ann Arbor, Michigan (University of Michigan). Raleigh, North Carolina can draw students from Duke University, North Carolina State University, and the University of North Carolina. And don’t forget the Boston metro (Harvard, MIT, Boston University, Bentley, Northeastern, Tufts, Wellesley, Brandeis).

In addition, the south could use some help. If you exclude Texas, only Raleigh, North Carolina and Huntsville, Alabama made the top 25. Beyond that, only Atlanta and two Louisiana cities (Baton Rouge and Lafayette) ranked in the top 50. In other words, Tennessee, Mississippi, Florida, South Carolina, Kentucky, and Arkansas are completely shut out. The same applies to rust belt stalwarts like Ohio and Indiana.

Many large cities are also struggling to build a startup culture. Chicago, New York City and Philadelphia rank at number 41, 48, and 49 respectively (and, despite the Texas-sized hoopla, Houston doesn’t even crack the top 50…nor does Los Angeles for that matter).

Some surprises? Boise City, Idaho produces more patents per 1,000 residents than Austin or Raleigh. New Haven, Connecticut ($368.81), Santa Barbara, California ($309.92), and Santa Rosa, California ($248.92) have higher per capita in venture funding that better known startup magnets like Corvallis and Denver. Despite being miniscule in tech startup density and per capita venture capital funding, Rochester, Minnesota (home of the Mayo Clinic) generates the third most patents per 1000 residents.

Here is the data on the top 20 metros:

 

Rank Metro Area Patents Per 1,000 Residents (2009-2013) 2014 Venture Capital Funding Per Capita Tech Startup Density Overall Score
 1  San Jose,  CA  27.39  $3,585.68  2.60  80.11
 2  Boulder,  CA  10.20  $963.75  6.30  54.60
 3  San  Francisco,  CA  7.44  $3,485.31  2.40  53.70
 4  Corvallis,  OR  12.28  $131.08  2.00  26.28
 5  Seattle,  WA  5.40  $333.74  2.40  21.91
 6  Fort  Collins, CO  491  $42.03  3.00  21.83
 7  Provo, UT  2.89  $833.52  1.90  20.80
 8  Austin, TX  6.58  $329.56  1.70  19.55
 9  Burlington,  VT  10.23  $65.74  1.30  19.41
 10  Boston,  MA  4.83  $948.58  1.00  19.40
 11  Bremerton,  WA  12.12  $118.13  0.70  18.98
 12  Ann Arbor,  MI  8.31 $189.79  1.40  18.76
 13  Raleigh,  NC  5.10  $231.19  1.90  17.90
 14  Santa Cruz,  CA  9.95  $10.02  0.90  16.40
 15  Denver,  CO  1.48  $178.04  2.40  15.67
 16  Salt Lake  City, UT  2.11  $291.34  2.00  15.35
 17  Rochester,  MN  10.98  $5.19  0.40  14.92
 18  Washington,  D.C.  1.50  $144.06  2.30  14.85
 19  San Diego,  CA  5.31  $250.71  1.20  14.58
 20  Manchester,  NH  3.99  $186.71  1.60  14.52

Source: NerdWallet

For an infographic of the top tech hubs, go to the next page.