After the record-breaking startup funding surge of 2021, the startup economy looks very different. Capital is harder to secure, founders are expected to show stronger fundamentals, and investors are concentrating their bets in AI, SaaS, fintech, and health tech.Â
As funding tightens, local conditions — costs, talent, density, and support networks — now matter more than ever.
To understand which U.S. cities offer the strongest footing for new businesses, Commercial Cafe evaluated two groups of markets: those above 1 million residents and those between 500,000 and 1 million, comparing factors such as startup density, survival rate, costs, freelance activity, education levels, office and coworking affordability, and crowdfunding traction.
Major Cities (1M+): Phoenix Surges, San Antonio Wins on Costs
Phoenix tops the large-city category with the strongest startup density and growth rate, along with one of the largest jumps in college-educated residents between 2019 and 2024. Its expanding talent base and fast-growing business scene helped it secure the highest overall score in its tier.
San Antonio follows, driven by the most attractive cost structure among major cities. Labor expenses are among the lowest — median earnings sit just under $43,000 — and both office and coworking rents rank near the bottom. Combined with strong price parity, the city supports long-term viability, reflected in its two-thirds startup survival rate at the five-year mark.
Dallas and Fort Worth land close together, reinforcing the strength of the broader metro area, especially in startup density, new-business growth, and freelance participation.
Jacksonville stands out for having the largest rise in college-educated residents and the highest share of freelancers in the large-city category, paired with some of the most affordable office and coworking rates.
Other notable performers include San Diego, which leads all large cities in the share of residents with bachelor’s degrees, and New York City, which — despite high operating costs — remains dominant in networking opportunities and Kickstarter success.
Mid-Size Cities (500K–1M): Austin Leads, Nashville Impresses
In the mid-size tier, Austin takes the top spot with an unmatched combination of high startup share, fast growth, and the largest proportion of college-educated residents. Its strong consulting base further boosts early-stage founders.
Nashville secures second place by excelling in multiple support metrics, including top-tier crowdfunding success, strong networking potential, and one of the best startup survival rates.
Indianapolis performs well thanks to one of the highest survival rates and some of the most affordable coworking and office rents in the category.
Tucson offers one of the most favorable cost environments overall — with the lowest labor costs, low office rents, and strong price parity — placing it fourth.
Close by, Mesa ranks fifth as its highly educated population grows rapidly and new-business formation expands at one of the fastest rates in the country.
Other standout metrics include Louisville’s leadership in office and coworking affordability, Albuquerque’s first-place ranking in price parity, and Nashville’s strong networking and crowdfunding outcomes.
As capital becomes more selective, cities that combine affordability, talent, and community capacity will continue to gain ground — reshaping where the next generation of U.S. startups take root.
