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Innovation That Matters 2016

We are at the dawn of an extraordinary technological revolution and it is transforming every part of the U.S. economy. Innovation That Matters examines and ranks 25 cities’ readiness to capitalize on the inevitable shift to a digital economy.

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Boston ranks #1 on preparedness for the digital economy

Across the country, startup growth starts with community building. A review of dozens of key indicators landed Boston the #1 city in the nation for fostering entrepreneurial growth and innovation. Although The Bay Area was the clear leader across most index categories, its poor performance in the ecosystem connectivity survey suggests that the competitive nature of the region may be reducing collaboration among startups, government, corporates and institutions, bumping it to the #2 spot. When thinking about building their own digital economies, city leaders need to start with the basics but prepare to move beyond them to remain competitive.

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The Bay Area still attracts the most startups -- but NYC, Boston, and LA are catching up

The Bay Area is still the clear leader of entrepreneurial activity, but New York, Boston, and Los Angeles report comparable startup to exit ratios. In terms of sheer quantity, San Francisco continues to reign supreme, but a weak score among some connectivity factors could help other cities take the lead. Certainly something to watch in coming years.

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Quality of life drives entrepreneurial activity

While all 25 cities are drivers of the digital economy, not all of them offer a high quality of life to its residents. Denver, Austin, and Raleigh-Durham rank towards the top for a number of innovation metrics, but perhaps most importantly, the fact that the general experience of living in the city is an asset for entrepreneurs. Surprisingly, the Bay Area drops to the bottom of this list, perhaps due to low affordability in the region.

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Successful exits correlate with number of startups and capital

Ultimately, regions with the most startup funding generally tend to score high in successful exits. While the Bay Area is a strong leader in both the sheer number of startups and the number of successful exits, New York, LA, and Boston, are once again close behind. Cities need successful exits to recycle money back into the system to fund the next generation of startups. Many cities are still in the early stages of this process.

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Educated millennials comprise more than 8% of DC’s total population

Smart millennials play a big role in establishing an environment of innovation. Washington, DC has the greatest number of educated young people, followed by the Bay Area. Miami and Phoenix round out the bottom of the list with just under 4% of the city population comprised of college-educated millennials.

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Seattle shows impressive startup activity in urban centers

While Seattle has been strong historically in the startup scene, Raleigh has demonstrated significant progress in the last two years. Note that while Seattle’s startup activity is concentrated primarily in the main part of the city, Raleigh’s capital is spread along the tech triangle

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Austin is the #1 city in the US for domestic population growth

Austin, TX is the clear leader when it comes to domestic population growth, thanks to a number of high-profile companies setting up offices in the region. In direct contrast to Austin’s influx of American workers, New York and Chicago lost the greatest number of locals to other cities nationwide. The Bay Area and Miami demonstrate the largest increase in international newcomers.

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Health is king

Of the various industries studied in the Index, Health is king for startups. While the Bay Area, Boston, LA, and New York demonstrate an even divide across industries, other cities are far less balanced. The booming digital health market shows that cities well-positioned to lead in this industry have the most economic upside.

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