The Next Wave of Startups Has Arrived

The share of next-wave startups -- like those in the health, energy, education and smart cities -- in the overall startup ecosystem grew 35 percent from last year. Now, communities and companies face the challenge of nurturing and supporting these young businesses to move beyond development into becoming permanent contributors of city economies.

Boston Leads Due to Connectivity and Access to Talent

Boston tops the Innovation that Matters rankings for the second year in a row. The city has the most dense population of startups of the cities measured and ranks first in access to capital.

Boston’s growing access to talent is a boon for the city, and its steady pipeline of next-wave innovators contributes to its vibrant startup community. Investment by city and civic leaders, universities and other research institutions also contributed to its rise in this year’s connectivity ranking.

Connectivity is Essential to Startup Success

Increased connectivity led to many of the major changes in this year’s rankings, as municipal leaders are finding that fostering collaboration is achievable and effective. Cities that emphasize engagement between startups and members of the community – whether they be civic leaders, established businesses or other economic and support networks – experience quicker startup growth and longevity. New Orleans led the rankings in connectivity. Entrepreneurs raved about the city’s focus on committing to entrepreneurship as a priority to the region.

Bay Area, Philadelphia Round Out Startup Leaders

Close behind Boston, the San Francisco Bay Area and Philadelphia ranked highly overall. Philadelphia jumped five spots in this year’s ranking thanks to significant investments from civic leaders that led to jumps in culture. The Bay Area fell just behind Boston for a second-place ranking in capital and continued to enjoy unmatched access to talent and industry specialization.

Philadelphia’s rise puts ranking pressure on the Bay Area and other established start-up hubs. For the Bay Area to maintain its ranking status, it must look to build out the diversity of its startup culture.

Atlanta and Dallas Jump Prodigiously

Atlanta rose 15 spots in the Innovation that Matters 2017 ranking, putting the southern city within the top 10. Dallas joined Atlanta, rising 12 spots to frank No. 7. Both cities owe their rise to increases in connectivity between civic leaders and the startup community.

For its part, Dallas has focused on building connections between established businesses and the startup community. Atlanta has relied on local assets such as the city’s economic development agency, Invest Atlanta, to bridge the divide between startups and the community. Both efforts have positioned the cities as startup-magnets.

Disengagement is a Growing Risk

While connectivity leads as a differentiator between cities for startup innovation, Innovation That Matters 2017 found a growing sense of disengagement overall between startups and local institutions.

Boston and the Bay Area have been consistent leaders in the rankings with the self-perpetuating momentum of their startup communities. Emerging communities must double-down on building the support structures for these companies to create an environment that’s sustainable in the long-term.

Texas is Home to Two of the Top 10 Startup Cities

Austin and Dallas both rank in the top 10 in this year’s report. Overall, Texas hosts three cities in the top 25, as Austin (5), Dallas (7) and Houston (21) all improved in access to talent and density of startups compared to last year.

While local-level engagement is paramount, Texas’ business-friendly atmosphere has proven to be beneficial for increasingly-mobile entrepreneurs searching for a place to call home. Better regional and state-level partnerships between Texas’ innovation hubs could help make the state even more attractive to startups.

Safety in Numbers

For cities moving down in rank this year, the concentration of existing startups was commonly one of the biggest factors contributing to the drop. Cities are finding density difficult to achieve and even harder to maintain, as costs of living rise in certain areas and others lack a cohesive local identity.