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It looks like 2021 will have been a banner year for startups. Not only does the post-pandemic climate favor entrepreneurship, but startup funding is skyrocketing. In fact, some states are seeing fourfold increases in early seed funding of new companies compared to 2020. And these trends look to be continuing as we head into the fourth quarter. But not every state is enjoying such a situation as some are attracting new companies at a higher pace. For a number of reasons, these are emerging as the best states for startups in the years to come.

(Read what Bold Business predicted for business in the post-pandemic world in this story!)

Over the past few decades, many startups tended to migrate to a few select states. California has been a popular site for tech companies for many years, and New York also often has its fair share. The reason for this in part relates to access to startup funding in these areas. Tech startups had the best chance of securing funding if located near Silicon valley. Likewise, other companies explored major hubs where venture capitalists tended to live. But this is no longer the case, especially as costs of operation have increased. Today, the best states for startups are those that not only offer funding resources but many other amenities as well.

“The pace of activity across all facets of the U.S. [venture capital] ecosystem in 2021 has been astounding, with many annual records already shattered before the fourth quarter even started.” – John Gabbert, Founder and CEO of PitchBook

Florida as a Case Study 

Since mid-way through the pandemic, the state of Florida has seen tremendous growth. In 2021 to date, startup funding in Florida has exceeded $1.3 billion. By comparison, the total funding in 2020 as $277 million. Some of this growth had to do with less restrictive policies to individuals and businesses alike during COVID. But this is not what is continuing to sustain Florida’s growth potential. Instead, many cities in Florida are enjoying expansion because of investments made specifically in startup funding programs. These programs have originated from several sources, including municipalities, universities, and even local investors. This is why many consider Florida one of the best states for startups today.

 

Some pretty green water in the middle of a city
A key driver in determining fertile ground for startups? Access to startup funding, of course.

Miami and Tampa are among several cities in Florida seeing such a boom in company startups. Miami is now a hotspot for new tech companies as a result of some well-designed startup funding programs. This includes the University of Miami’s Launch Pad startup accelerator. It also includes a branch of 500 Startups in the area. Tampa is also becoming a hub for new companies attracting diversified sectors. This includes fintech, healthcare, and other areas of interest. Of course, it helps that Florida has the 4th largest economy and has no personal state income taxes. This combined with a favorable climate and low cost of living are other reasons it’s one of the best states for startups.

“I see a massive brain drain happening in California which is great news for the rest of us. Texas, Florida, and the mountain states will benefit now that Zoom has shown us what is possible using their technology.” – William Bowman, Professor of Entrepreneurship, Catholic University of America

Other States Seeing an Increase in Startups

While Florida’s growth in both startups and startup funding has been impressive, they are not alone. There are several other emerging states that are consider among the best states for startups today as well. The following a few of the ones that offer an appealing environment for a variety of new companies. From small to large, new companies in several industries would suggest these too are among the best states for startups.

  • Texas – With a state economy of $1.8 trillion, Texas has the second largest economy in the nation. In addition, it has a cost of doing business that is more than 11 percent below the national average. This, combined with the fact that it has no state or personal income taxes, makes it among the best states for startups. And it also offers a variety of resources for startup funding. Places like Austin are well known for supporting small business startups. Likewise, the Texas Enterprise Fund lends grant support for larger companies with greater capital and job creation.
  • North Dakota – Among the best states for startups, North Dakota has recently been recognized for its high-growth potential for small businesses. It too has extremely low state personal and corporate state taxes, less than 3 percent overall. Fargo is rapidly becoming one of the fastest growing tech hubs in “Silicon Prairie.” And the state has incubators and funding resources that include the Innovate ND Program. These features and a very low cost of living make it one of the best states for startups currently.
  • Utah – According to some reviews, Utah is believed to have the second highest growth potential for business of all states. One reason for this is that the state offers easy access to bank financing and startup funding. This naturally places it on the list of best states for startups. The Utah Microloan Fund provides qualified small businesses with up to $50,000 in grants. The state also has a healthy labor supply and a low cost of business. Salt Lake City and the surrounding regions have similarly attracted many tech firms, giving it the name Silicon Slopes.
  • North Carolina – Compared to the national average, North Carolina boasts business operation costs that are 10 percent lower. The state also has vast talent pool given the high number of universities and colleges in the area. Charlotte and Raleigh specifically are key hotspots for new companies. In fact, Charlotte has earned the name of the “startup capital of the South.” Several startup funding resources similarly exist in the state, particularly for companies in fintech or with university affiliations. Thus, North Carolina is also now considered among the best states for startups as well.

Core Attractions for Startups

By examining the best states for startups above, it is evident that all share common features. These states offer low costs of living and of business operations. Most also have little to no state taxes when it comes to corporate or personal taxes. Each also has significant growth potential. But most importantly, all have invested heavily in programs that support aggressive startup funding, acceleration, and incubation. This appears to be the magic recipe for states wanting to attract startups today.

 

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