2023 National Peer Rankings: Major Metros
How do the top Midwest cities compare to peer metros nationally?
To view the full rankings, visit the city rankings page on Midwest Startups.
This year we took on the challenge of comparing the Midwest City Rankings with ten of the top peer metros nationally. For a long time, Chicago has clearly been the top tech ecosystem in the Midwest with Minneapolis a strong #2. These are large and dominant in many of the categories, which begs the question: how do they compare to the oft-hyped ecosystems we hear about in other parts of the country? Or for that matter, we know how an Indianapolis stacks up against a Columbus, but how would either fare against a Seattle or a Nashville? To understand these questions, and to build a ‘measuring stick’ for some of our largest cities, we selected 15 of the more prominent regional ecosystems (by either startup activity, population and/or being the largest ecosystem in their state) to compare against similarly-sized national cities.
While these new rankings include many cities outside of the Midwest region, it does not include all major cities, and in fact, omits the three largest startup metros in the United States (San Francisco, New York City, and Boston). We applaud and celebrate the magic happening in those cities; however, one goal of this year’s comparison is to benchmark against peer cities over time, and while we’re — as the economists say — cautiously optimistic about the future of Midwest marvels like Chicago and Minneapolis, comparing ourselves to these behemoths with over 50 years of startup development and robust venture ecosystems isn’t productive at this time. Rather, we look to the good work being done in the next generation of startup cities like Los Angeles, Austin, Miami, and Denver to draw a comparison and measure ways these cities and their Midwest counterparts are succeeding as well as falling short.
Chicago is #1 in the Midwest, #2 when compared to national peer markets
Year after year, Chicago (#2) has dominated in the Midwest ecosystem and, unsurprisingly, outpaced its Midwest companions again, but how does it stack up against other peer cities? The Windy City actually kept up with the largest metros we included in these rankings, coming in second only behind Los Angeles and outranking startup city darlings like Austin, Miami, Philly and Denver. While this news may be shocking to outsiders, Chicago ranks second highest among these peer cities in the number of VCs present in the metro as well as for the access to resources. LA is ranked number one in overall Startup Environment and Access to Resources; however, they sit at number 16 for overall Business Climate. LA outpaces Chicago and most other metros with their startup environment touting not only large numbers of startups and exits in their ecosystem, but a large number of big exits and funding rounds.
Los Angeles
This California-based metro comprises the largest startup scene outside of the three major players (SF/Silicon Valley, New York, and Boston) and LA’s ranking here reflects that. Number one overall, and topping the categories for Startup Environment and Access to Resources, LA also saw the most startups and startup exits in our data collection. Nonetheless, LA still has room for growth, ranking number 16 overall in business climate. Midwest cities like Indianapolis, Detroit, St. Louis and Chicago all performed higher in that category. Non-Midwest metros like Atlanta, Nashville, Austin and Miami outpaced Los Angeles in this category as well.
Austin
While Los Angeles takes the cake this year for the highest number of startups produced in the cities we’ve analyzed, Austin boasts the highest number of startups relative to their population. Austin is number three overall and leading the way with the greatest startup density at 76.0 compared to LA’s 28.9. Aside from being home to perfect breakfast tacos, Austin can also claim healthy scores in other categories: second in Startup Environment, eighth in Access to Resources and overall number three in this year’s rankings.
Miami
Leading the pack for business climate is Miami. While Miami ranks number four overall, they sit in the number one spot for business climate — especially with their tax climate. In future years, Chicago would benefit from continued improvement in its business climate rank and could look to Miami for a good example.
Top Midwest Cities vs. Larger Metros
Outside of Chicago and LA, there’s some tough competition in the top metros with Minneapolis (#9) and Indianapolis (#10) rounding out the top ten. There is some close competition for the top few spots and it’s likely that in the next few years, we will see a shakeup between the top metros.
Minneapolis vs. Denver
In what we’re dubbing the Battle of Lakes vs Mountains, Minneapolis shows its startup scene can (and does!) keep up with Denver. Coming in at number eight (Denver) and number nine (Minneapolis) in our rankings, both cities boast startup ecosystems to be proud of. Strong marks for Startup Environment and exceptional scores in the Access to Resources category make the Twin Cities metro a contender. For Denver, it’s much of the same. Both cities scored poorly in the Business Climate category, coming in at 27th (Denver) and 59th (Minneapolis) on the list due to factors like tax climate (Minnesota is almost at the bottom there). While Denver beats the Twin Cities in number of startups and startup density, Minnesota has some longer-term advantages with the university ecosystem and startup accelerators score, so expect this to be a continuous battle in the future.
Indianapolis vs. Nashville
Circle City and Music City don’t have much in common (aside from mediocre NFL teams in the same conference), but the two metros are side-by-side in our rankings, with Indianapolis coming in just slightly ahead to round out the top ten. Indiana has an incredible amount of government programs that are great incentives for startups and VCs alike including a strong angel tax credit, a long-running direct investment arm and a large state-backed fund-of-funds. Indianapolis boasts high marks for access to resources and business climate. Nashville also has a stellar business climate and a higher ranking for Startup Environment. The two cities find themselves with much ground to make up in one respective category each (for Indianapolis, it’s the Startup Environment category; for Nashville, Access to Resources). Given their proximity in the rankings, changes between now and next year for either metro in these categories could make a big difference.
St. Louis vs. Salt Lake City
In the battle of STL vs SLC, we found some really compelling insights for our number 17 (Saint Louis) and number 16 (Salt Lake City) metros on the list. Worth noting that unlike nearly every other metro of the 70+ cities covered in the rankings, Salt Lake City is completely absent from any government programs: angel tax credits, direct/indirect investment or any pro-startup use of SSBCI funds. Even so, SLC has a longer history of Big Outcomes (large fundraises and exits) for startups, including Qualtrics, Pluralsight and Domo. And even though it’s just a small factor in our rankings, SLC has the highest Internet Access score in this study.
St. Louis did slide two slots in the Midwest City Rankings this year, but St. Louis has way more Big Companies (number of Fortune 500 companies) than Salt Lake City. STL may see their fortunes change for the better in the near future, as the city has more accelerators and funding resources for early-stage startups (albeit fewer than neighboring states). And while the two cities have a similar number of startups overall, the density is much higher in Salt Lake City, and the number of startups is growing faster overall. Nonetheless, a major exit or two could push the Lou ahead in future years.
Methodology Recap: How the Rankings were Calculated
Relative vs. Absolute: Before we start to ask ourselves what makes one ecosystem better than another, or one ecosystem moves up or down in the rankings, it is important to understand what we are measuring. These rankings measure a core based statistical area’s (CBSA) relative rank as an ecosystem for a startup to launch, grow and scale. A city can still absolutely improve while its rank stays constant or falls.
Data: We divided it up into three categories with 25 underlying weighted variables that come from 16 different data sources, ranging from the US Census to the US News and World Report to individual state government websites. Since 2018 we have relied solely on PitchBook as our source of startup and investor data. We realize there will be some degree of error from any data source, and there can be healthy debate and judgment on how to weigh the importance of individual variables. Ultimately we aim to be as consistent and objective as possible and understand it will continue to improve every year.
Data and Calculations
Our 25 variables are pooled into 3 major categories (data cutoff date at 06/30/2023). Here is what goes into each one:
Startup Activity which includes subsections for Startups (number, density and momentum), Exits and Big Outcomes (43.5% Weight):
A measure of how active the tech community in the city is, and the size and quality of the network available to a new startup. Factors included are the number of startups present, the number of exits, the growth in startup formation and the scale of large outcomes (both large exits and large fundraises). Data comes directly from Pitchbook.
Access to Resources which include subsections for Talent, Sales & Innovation, Investor Presence, Accelerators/Incubators, and Government (39.0% Weight):
A measure of how supportive the city’s environment is, and the value-add it can provide to help a startup grow. It considers factors such as investor activity, accelerators, universities and government support. Data comes from several different sources: the US Census, US Patent & Trademark Office,Fortune.com, Pitchbook, US News & World Report, The Global Accelerator Network, US Small Business Administration and individual state websites.
Business Climate which include subsections for Business Costs, Demographics and Connectivity (17.5% Weight):
A measure of how conducive the city’s economic environment is to attract and scale a business. It includes demographic and economic factors such as the cost of living, labor costs, business tax friendliness, population and GDP per capita, as well as ‘connectivity’ indicators like the quality of internet access, airport and highway infrastructure. Data comes from several sources: the Bureau of Labor Statistics, the Bureau of Economic Analysis, the US Census, the Tax Foundation, the National Digital Inclusion Alliance and Google Flights.
A HUGE shoutout to Sam Cavender and Leandro I Bedolla who meticulously pulled all of the data through several months of tedious work and planning. Additionally, thank you to Katie Birge, Ruth Brungard and Abhinaya Konduru for help in visuals, publishing and distributing.
