10 most entrepreneurial states









“If you think things can’t get worse it’s probably only because you lack sufficient imagination.”



Opening up a small business in a tough economy is a risky gamble. But these 10 states saw more startup activity than anywhere else nationwide, according to the Kauffman Index of Entrepreneurial Activity. Here’s why.


1 Arizona

2011 startup rate: 520 per 100,000 adults

Arizona is a sizzling spot for startups. People were more likely to launch businesses here than in any other state in the country last year.

Arizona has benefited from a steady stream of entrepreneurs migrating from less business-friendly states like California. The lure? Business and property taxes are low, as are workers’ compensation costs, according to the Arizona Commerce Authority.

What’s more, the labor pool is highly educated, as schools such as Arizona State University and the University of Arizona churn out a steady stream of science and technology grads. The state encourages firms to upgrade employees’ skills, giving grants to those that offer in-house job training.

That’s key, since tech firms dominate Arizona’s new business landscape. Software and semiconductor makers are big here, as are solar, clean-tech and renewable energy technology firms. More traditional fields like retail and tourism also are hot.


2 Texas

2011 startup rate: 440 per 100,000 adults

Texas doesn’t mess with entrepreneurs. It’s tax-friendly, with no personal or corporate income tax. Regulations don’t change frequently. Labor and housing costs are reasonable.

And the economy is relatively strong, attracting more than 1,400 people a day to move there. Cities such as Dallas and Austin boast some of the lowest home foreclosure rates in the country, according to the Texas Association of Business.

Startups abound in the vibrant health care industry, thanks to the state’s rapidly growing population. Texas boasts top medical schools, such as Texas A&M’s, one of the fastest-growing in the country. The Texas Bio Corridor, which stretches 275 miles along Interstate 35 from San Antonio to Dallas-Fort Worth, is home to a growing number of health care, biotech and medical device startups.

Elsewhere, professional and technical services such as consulting, accounting, engineering and construction contractors are booming.

Fledgling businesses have access to capital through a mix of public and private programs. For example, the state’s $250 million Enterprise Fund woos businesses being tempted to open in or move to another state. In return, firms must guarantee they’ll create a significant number of local jobs. Meanwhile, tech startups can get cash from an Emerging Tech Fund if they agree to partner with a university in the state for their R&D work.


3 California

2011 startup rate: 440 per 100,000 adults

You might think California’s lingering budget woes, high unemployment, burdensome taxes and regulations, and highly litigious culture would spook people thinking about launching a business here.

Whatever. The Golden State has a history of embracing entrepreneurs that shows no sign of letting up. Silicon Valley continues to be the launch pad for innovative web, biotech and geeky startups galore. Hollywood’s robust entertainment industry sparks many new film- and TV-related firms.

Necessity is another driving force: California has a large population of immigrants and long-term unemployed, and many are creating small businesses as a way to earn a living, said Loren Kaye, president of the California Foundation for Commerce and Education.

Indeed, many firms with low startup and overhead costs launch and grow successfully in California, said Kaye. And, he said, they typically aren’t walloped by high taxes and reams of regulation until they grow big.



4 Colorado

2011 startup rate: 420 per 100,000 adults

Colorado took a hard knock during the recession, and is still struggling with high unemployment of 7.9%, just shy of the 8.2% national average. But there’s a silver lining: The state’s job woes have ignited a surge in small businesses.

Many layoff victims who worked at top technology and aerospace employers there have decided to quit corporate America and start their own IT, manufacturing and home-based consulting services firms, said Tony Gagliardi, Colorado state director for the National Federation of Independent Business.

Business owners here are welcomed with state-funded training programs, a relatively low cost of living, and reasonable workers’ compensation rates. Denver in particular, which is just 45 minutes away from popular skiing and camping sites, has become a burgeoning hub for entrepreneurs, especially those who have migrated from nearby California and Utah.

Still, business owners should be aware of some drawbacks. The state’s personal property tax can become an impediment to growth. In Colorado, personal business property, such as a computer or furniture, is taxable for as long as a business owns it.



5 Alaska

2011 startup rate: 410 per 100,000 adults

Alaskans say it takes a go-getter to succeed in their state. Indeed, if you want to start a business here, you better be undeterred by extremes like frigid, dark winters and long, hectic summer days.

Shop owners typically stay open late during the May-through-September cruise ship season. After all, they need to squeeze every dime possible out of the tourist throngs that flock to popular ports like Juneau and Anchorage in summer. Many bed & breakfasts and arts and crafts boutiques also depend on a flurry of summer visitors.

Niche business like small boat builders and repair shops aren’t quite so seasonal, and tend to attract entrepreneurs. Food businesses are another good bet: Restaurants are very popular here.

Alaska may be one of the prettiest places to start a firm but it’s not cheap. Its distance from the continental U.S. means high labor, transportation, and shipping costs. On the other hand, big oil money helps fund government services, so business taxes are low and there’s no state income or sales tax.



6 Missouri

2011 startup rate: 400 per 100,000 adults

Move over Detroit. The big guns of manufacturing have turned sweet on Missouri — and GM, Ford and even Boeing are opening or expanding factories here. Smaller suppliers and job shops are following, in hopes of capitalizing on the boom, said Daniel Mehan, president of Missouri’s Chamber of Commerce.

Startups also are springing up in biotech, life sciences and more traditional areas like agribusiness and food processing.

Among the draws: low taxes, cheap electricity, and a push to make the state more business-friendly. Missouri’s franchise tax, which corporations pay in advance for doing business in the state, is also being phased out and workers’ compensation laws have been relaxed.

Start-up money remains hard to come by, though. One exception is Missouri’s five-year-old New Markets development program, which provides capital to entrepreneurs who start businesses and add jobs in low-income communities.



7 Navada

2011 startup rate: 390 per 100,000 adults

Watch out Silicon Valley: You have competition just next door.

The Nevada desert — Las Vegas in particular — is becoming a popular landing spot for tech firms large and small. Popular online shoe seller Zappos moved its headquarters and data center operator Switch Communications launched here.

Following in their footsteps are startups ranging from technology service providers to logistics companies that cater to retail, aerospace and defense companies.

Low taxes have helped make Nevada a haven for small businesses. The state has no business income, estate or franchise tax. Income taxes are low. Also, Nevada has more corporations — about 325,000 in a state with just 2.5 million people — than any other state except Delaware.

Need a business license? Nevada is streamlining its processes so would-be entrepreneurs will be able to get one in just a day, said Nevada’s Secretary of State Ross Miller. The state is also enticing business owners with plans to launch a new online portal this year where they can collaborate, hold board meetings and finalize contracts virtually.

There is one obstacle for businesses. Some entrepreneurs complain that they can’t find workers with the job skills they need, particularly in the fast-growing technology area.

“One of our bigger challenges is to develop a competitive workforce that meets the current needs of the market,” said Miller, who thinks schools need to upgrade their students’ tech skills. “There’s very little technology transfer taking place in Nevada.”


8 Vermont

2011 startup rate: 390 per 100,000 adults

The joke is that when people come to Vermont on vacation, they don’t want to leave. According to state legend, iconic IBM chief Tom Watson Jr. opened up a plant here because he loved skiing so much.

Today, IBM is one of the biggest employers in Vermont. Other notable companies include General Electric and Ben & Jerry’s.

Smaller biotech, bioscience, environmental engineering and other tech companies are drawn to Vermont’s vibrant venture capital network and state funding for startups. If Vermont has a downside, it’s the high rates for individual income and businesses taxes.

Many innovative firms get their start in incubators based at the state’s top-notch schools, like the University of Vermont’s Fletcher Allen Medical School. Such academic powerhouses also help produce a highly skilled workforce for entrepreneurs to hire.

And when they need to take a break from business, entrepreneurs can let off steam at the the state’s beautiful parks and hiking trails.




9  Idaho

2011 startup rate: 380 per 100,000 adults

Technology companies have long had a love affair with Idaho. Nestled between a mountain and a desert, Boise’s geographic isolation appeals to a certain breed of innovators who prefer not to be distracted by urban sprawl.

Its capital city Boise has grown into a technology hub, hosting Micron Technology’s headquarters as well as a large Hewlett-Packard campus focused on R&D.

The recession led to layoffs at tech companies around the state, and those who lost their jobs often were inspired to start their own businesses. The fastest growing startups are in nanotechnology, renewable energy and IT.

For cost-conscious startups, high personal income and business taxes can be a turnoff. But entrepreneurs do enjoy lower electricity costs — Idaho is a strong hydro power state — and low overall living costs. Growing businesses also are offered tax credits for adding new jobs and expanding facilities.

Idaho also backs innovative businesses through programs such as the Idaho Global Entrepreneurial Mission (IGEM), which gives away $5 million annually in startup grants and funding for technology research in universities.



10 Florida

2011 startup rate: 380 per 100,000 adults

By touting its business-friendly environment, Florida has become a magnet for technology startups and other small businesses. The best example is Space Exploration Technologies, better known as SpaceX, which recently launched the first private delivery capsule to the International Space Station.

As the U.S. phases out its national space shuttle program, Florida’s done some quick thinking to keep the space coast alive by inviting private companies to utilize its existing infrastructure and skilled talent.

And the push goes beyond the space coast. Medical device manufacturers are springing up in Fort Lauderdale. Robotic device makers catering to aerospace and defense companies are expanding around the state.

Small businesses now make up 75% of the state’s gross domestic product. One of every five domestic exporters is based in Florida.

To boost its competitiveness, Florida has reduced regulations and business taxes. There’s also no personal income tax. Coming soon is a one-stop shop state online portal where entrepreneurs can access all the information they need to start a business.

One drag is high unemployment in the state. Then again, that means a bigger labor pool for small employers.






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Walter Unger CCIM, CCSS, CCLS

I am a successful Commercial Investment Real Estate Broker in Arizona now for 20 years and I worked with banks and their commercial REO properties for 3 years. I am also a commercial landspecialist in Phoenix and a Landspecialist in Arizona.





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