Written By Scott Burns, Excerpted from The Dallas News
Texas is one of the top incubators for startups and its cities are hotbeds of entrepreneurs, according to a new report from the Kauffman Foundation. Austin topped the list of U.S. metros with the most startup activity. After Austin, the top four metropolitan areas are Miami, Los Angeles, San Francisco and Las Vegas.
"There's a certain natural affinity to Texas for business people because it's viewed as a pro-business, low-tax, low government interference for business state," said Rob Adams, director of Texas Venture Labs at the University of Texas at Austin and a former software entrepreneur. "Then it becomes, 'If I'm going to Texas for my startup, where's the best place?' "
Adams said the report mirrors economic trends of people leaving the Snow Belt for the Sun Belt. Entrepreneurs are also attracted to the high quality of life and low cost of living in Texas, he said.
Austin far exceeds other cities in its density of startups that are less than a year old. It also has a higher percentage of adults who start companies each month. Austin companies have a "dumbbell distribution" with numerous startups and a few big companies, like Dell, IBM and Apple, but little in-between, Adams said.
Dallas has strong startup activity, but it does not have as much density of startups as Austin or Houston, according to the report. It also has a lower rate of people starting companies.
Adams said the abundance of startup activity in Texas could benefit the state long-term if some of those companies grow and thrive. Only about 10 to 20 percent of startups are in business three to five years after they're founded, he said. That means it takes a lot of early-stage startups for a home run.