2015’s Best Cities to Start a Business

by John S Kiernan

Best-Worst-Cities-to-Start-a-Business-BadgeAmericans are born with an entrepreneurial streak. It’s in our DNA. From Manifest Destiny and the Gold Rush to the Industrial Revolution and the Internet Age, intense periods of innovation have molded our economy and sparked important societal advancements.

Innovation is never easy, though. Hardship and necessity underpin much of our entrepreneurial progress, largely because the motivation to enter the unknown in the face of bleak odds simply is not in abundance when more comfortable avenues remain to be explored. Driven by a dearth of traditional job opportunities and a reenergized hesitancy to put one’s fate in the hands of others, somewhere between 15 million and 53 million Americans are now working for themselves. There is always room in the market for new ideas, products, services and multi-million-dollar success stories — if one knows where to look.

In order to help aspiring entrepreneurs — from restaurant owners to high-tech movers and shakers — maximize their chances for long-term prosperity, WalletHub analyzed the relative start-up opportunities that exist in the 150 most populated U.S. cities. We did so using 13 unique metrics, ranging from 5-year survival rate and the affordability of office space to the educational attainment of the local labor force. Our findings, as well as expert commentary and a detailed methodology, can be found below.

Main Findings

 

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Overall Rank City “Access to Resources” Rank “Business Environment” Rank
1 Shreveport, LA 6 13
2 Tulsa, OK 18 1
3 Springfield, MO 1 70
4 Chattanooga, TN 2 65
5 Jackson, MS 4 72
6 Sioux Falls, SD 39 2
7 Memphis, TN 14 39
8 Augusta, GA 15 21
9 Greensboro, NC 31 11
10 Columbus, GA 26 19
11 Fort Wayne, IN 10 74
12 Amarillo, TX 22 38
13 Columbus, OH 27 30
14 New Orleans, LA 23 41
15 Birmingham, AL 11 79
16 Wichita, KS 8 88
17 Grand Rapids, MI 17 64
18 Laredo, TX 21 56
19 Winston-Salem, NC 33 23
20 Nashville, TN 56 3
21 Oklahoma City, OK 43 14
22 Brownsville, TX 13 87
23 Lubbock, TX 19 68
24 El Paso, TX 29 46
25 Toledo, OH 4 119
26 Louisville, KY 32 48
27 Fayetteville, NC 41 26
28 Montgomery, AL 20 77
29 Rochester, NY 3 127
30 Omaha, NE 48 16
31 Baton Rouge, LA 33 57
32 Knoxville, TN 35 54
33 Corpus Christi, TX 40 43
34 Lincoln, NE 30 60
35 Reno, NV 42 42
36 Kansas City, MO 51 22
37 Stockton, CA 9 112
38 Indianapolis, IN 45 47
39 Tallahassee, FL 24 91
40 Spokane, WA 12 115
41 Houston, TX 70 5
42 Lexington, KY 53 33
43 Salt Lake City, UT 69 8
44 Cincinnati, OH 36 76
45 Mobile, AL 47 59
46 Fresno, CA 16 120
47 Milwaukee, WI 7 144
48 St. Louis, MO 57 45
49 Dallas, TX 70 15
50 Richmond, VA 50 75
51 Colorado Springs, CO 68 29
52 Des Moines, IA 28 111
53 Norfolk, VA 72 37
54 Port St. Lucie, FL 46 100
55 Little Rock, AR 36 117
56 Detroit, MI 25 132
57 Virginia Beach, VA 82 12
58 Jacksonville, FL 66 58
59 San Antonio, TX 75 27
60 Arlington, TX 85 10
61 Newport News, VA 63 66
62 Charlotte, NC 94 6
63 Fort Worth, TX 77 31
64 Huntsville, AL 62 81
65 Buffalo, NY 38 130
66 Honolulu, HI 79 51
67 Tucson, AZ 44 131
68 Boise, ID 80 55
69 Tampa, FL 84 35
70 Atlanta, GA 107 6
71 Albuquerque, NM 64 97
72 Madison, WI 58 109
73 San Bernardino, CA 52 128
74 Akron, OH 54 126
75 Irving, TX 110 9
76 Garland, TX 101 34
77 Chesapeake, VA 91 44
78 Las Vegas, NV 74 88
79 Orlando, FL 90 52
80 Modesto, CA 55 136
81 Bakersfield, CA 87 62
82 Cleveland, OH 49 144
83 St. Petersburg, FL 85 71
84 Chicago, IL 60 137
85 Grand Prairie, TX 106 25
86 Cape Coral, FL 73 105
87 St. Paul, MN 59 143
88 Los Angeles, CA 81 96
89 Minneapolis, MN 64 134
90 Durham, NC 113 17
91 Austin, TX 114 20
92 Phoenix, AZ 97 69
93 Plano, TX 125 4
94 Henderson, NV 108 40
95 Aurora, CO 94 83
96 Worcester, MA 67 140
97 Overland Park, KS 109 53
98 Baltimore, MD 78 121
99 Aurora, IL 83 113
100 Anchorage, AK 105 80
101 Moreno Valley, CA 87 108
102 North Las Vegas, NV 100 95
103 Denver, CO 122 24
104 Sacramento, CA 99 97
105 New York, NY 102 93
106 Raleigh, NC 125 18
107 Mesa, AZ 103 99
108 Miami, FL 93 115
109 Philadelphia, PA 60 148
110 Fort Lauderdale, FL 115 73
111 Pittsburgh, PA 89 141
112 Santa Rosa, CA 97 129
113 Glendale, AZ 117 85
114 Tempe, AZ 119 84
115 Boston, MA 96 142
116 Tacoma, WA 103 134
117 Hialeah, FL 91 147
118 Riverside, CA 112 109
119 San Diego, CA 127 78
120 Rancho Cucamonga, CA 132 67
121 Fontana, CA 116 104
122 Chandler, AZ 141 31
123 Gilbert, AZ 141 36
124 Long Beach, CA 123 102
125 Seattle, WA 129 93
126 Huntington Beach, CA 145 49
127 Irvine, CA 146 49
128 Santa Clarita, CA 136 82
129 Glendale, CA 134 88
130 San Francisco, CA 143 61
131 Scottsdale, AZ 150 27
132 Vancouver, WA 121 124
133 Pembroke Pines, FL 138 86
134 Washington, DC 133 101
135 Providence, RI 75 149
136 Peoria, AZ 148 63
137 Oxnard, CA 123 125
138 Oceanside, CA 130 107
139 Portland, OR 119 139
140 Chula Vista, CA 128 122
141 Anaheim, CA 131 118
142 San Jose, CA 140 103
143 Santa Ana, CA 118 146
144 Oakland, CA 134 114
145 Ontario, CA 136 123
146 Fremont, CA 149 92
147 Yonkers, NY 144 106
148 Garden Grove, CA 139 133
149 Jersey City, NJ 147 138
150 Newark, NJ 111 150

 
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Ask the Experts

As current self-employment figures have shown, an increasing number of Americans aim to become more economically self-reliant by working for themselves. To assist them in that goal, WalletHub asked some of the foremost entrepreneurship experts what advice they would offer an aspiring entrepreneur. Click on the experts’ profiles to read their bios and responses to the following key questions:

  1. What tips would you offer an aspiring entrepreneur?
  2. How important is the city an entrepreneur picks to start a new company?
  3. Which are some of the biggest mistakes entrepreneurs make?
  4. Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?
  5. What is the best source of funding for new companies?
  6. What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

 

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  • Peter R. Russo Executive-in-Residence and Senior Lecturer at the Boston University Questrom School of Business
  • Wade T. Brooks Executive Director of the Angel Investment Fund and Contributing Assistant Professor of Entrepreneurship at Willamette University, Atkinson Graduate School of Management
  • Christopher L. Shook Management Department Chair and Russell Professor at Auburn University, Raymond J Harbert College of Business
  • Jeffrey York Assistant Professor of Management and Entrepreneurship, and the Shane Faculty Scholar at the University of Colorado Boulder
  • Lou Marino Frank Mason C&BA Faculty Fellow in Family Business, and Professor of Entrepreneurship and Strategy at University of Alabama
  • David L. Deeds Schulze Chair in Entrepreneurship at University of St. Thomas, Schulze School of Entrepreneurship
  • Linda F. Edelman Professor of Strategic Management at Bentley University
  • Felipe G. Massa Assistant Professor of Management, and Kloor Professor of Entrepreneurship and Small Business at Loyola University New Orleans
  • Shaker A. Zahra Robert E. Buuck Chair of Entrepreneurship, and Academic Director of the Entrepreneurship Center at University of Minnesota, Carlson School of Management
  • Jeremy Short Professor and Rath Chair in Strategic Management at University of Oklahoma, Price College of Business
  • Gregory L. Stoller Adjunct Lecturer of Operations Management at Boston College, Carroll School of Management
  • Larry W. Cox Associate Professor of Entrepreneurship at Pepperdine University, Graziadio School of Business and Management
  • David Thomas Assistant Professor of Management at University of Northern Colorado, Monfort College of Business
  • Kathleen Allen Professor of Entrepreneurship at Lloyd Greif Center for Entrepreneurial Studies, and Director of the Center for Technology Commercialization at University of Southern California, Marshall School of Business
  • Starr Marcello Director and Chief Operating Officer of the Polsky Center for Entrepreneurship and Innovation at University of Chicago Booth School of Business
  • Joel H. Dobbs Executive in Residence in Entrepreneurship, and Director of the Office of Innovation and Entrepreneurship at University of Alabama at Birmingham, Collat School of Business
  • Franz T. Lohrke Brock Family Endowed Chair in Entrepreneurship at Samford University, Brock School of Business
  • Daniel J. Freeman Director of the Horn Program in Entrepreneurship and Associate Professor of Marketing at University of Delaware, Alfred Lerner College of Business and Economics
  • Nik Rokop Industry Assistant Professor of Entrepreneurship at Illinois Institute of Technology, Stuart School of Business
  • Paul T. Thomas Executive in Residence and Assistant Professor of Practice at Northern Arizona University, W.A. Franke College of Business
  • David Y Choi Associate Professor & Director of the Fred Kiesner Center for Entrepreneurship at Loyola Marymount University
  • Jerry White Director of the Caruth Institute for Entrepreneurship at Southern Methodist University, Cox School of Business
  • John Bradley Jackson Director of the Center for Entrepreneurship at California State University, Fullerton
  • Jason Harkins Associate Professor of Management at University of Maine, Business School

Peter R. Russo

Executive-in-Residence and Senior Lecturer at the Boston University Questrom School of Business
Peter R. Russo
What tips would you offer an aspiring entrepreneur?
  1. Build your network. To succeed, you will need the help of others.
  2. Get out and talk with people. Be sure that you understand how your product or service solves a problem someone cares about and that the customer agrees.
  3. Be willing to commit. It is OK to do some initial research and product validation as a part time pursuit, but you need to be prepared to go “all in” at some point.
How important is the city an entrepreneur picks to start a new company?

Depending upon the type of business, it certainly can be easier to start a business in some cities than others. Access to funding, proximity to customers and potential partners and availability of helpful resources are all important factors. That said, I believe an entrepreneur can find a way to succeed wherever they are. Technology has made location less critical and there are resources available almost everywhere these days.

Which are some of the biggest mistakes entrepreneurs make?

This is a difficult question to answer, because the list is a very long one! Some that I see more frequently than others:
  • Over emphasis on secrecy, to the point where the entrepreneur fails to get market validation and sound advice.
  • Being overly focused on maintaining control or retaining equity. Remember, the size of the pie is more important than your share.
  • Believing that they can build a venture on their own schedule, without regard to the “window of opportunity” that may be closing.
  • Failure to attract the very best team.
Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

Rather than try to guess, I’d rather point out that opportunities are everywhere, and that it is not necessary to “catch the next wave” in order to find success. Where can we find customers who are not well served by the products or services currently available to them? What unsolved problems might we help them with? How might emerging technologies allow us to do things in a new and better way?

What is the best source of funding for new companies?

Raising money can be a huge challenge for an entrepreneur. The best sources of funding are ones that add value to the venture and hopefully increase the probability of future funding. Customer funding has the added benefit of demonstrating market validation, so that is one that I like to see. Depending on the stage of development, angels and VC’s can both validate a venture idea and provide helpful advice. The key is to understand your needs and those of potential investors and to spend your time targeting those sources that represent the best match.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

There are a number of things that they can do. Supporting an education climate that will stimulate entrepreneurship is a big one. Promoting and supporting events and resources that help create a community of entrepreneurs is another. I do think that one underdeveloped opportunity is in supporting the existing small and emerging ventures in their efforts to scale. These entrepreneurs have already demonstrated the validity of their ideas, but may lack the education, skills and access to resources to grow their business and create more jobs. Helping them is less exciting than stimulating new venture creation, but the upside can be greater.

Wade T. Brooks

Executive Director of the Angel Investment Fund and Contributing Assistant Professor of Entrepreneurship at Willamette University, Atkinson Graduate School of Management
Wade T. Brooks
What tips would you offer an aspiring entrepreneur?

Entrepreneurship is hard and there will be numerous challenges, long days, and difficult decisions. Passion for your industry, solution, and team will be critical to maintaining focus and pushing through those tough times.

Write down an inventory of your skills, resources and contacts. You'll find that list to be longer than you thought - use them as your foundation.

How important is the city an entrepreneur picks to start a new company?

The city isn't as important as the local contacts and resources you have. If you move to a new city to start a company, and have few if any contacts, that will be a real challenge. As your business grows and you get a foothold you might consider a new location that is closer to your largest customers, financiers, or an industry hub. One caveat, if you get accepted into Y-Combinator, you should relocate for that opportunity.

There are a few places with exceptional startup infrastructures including startup communities with incubators, accelerators, labs, etc., in addition to access to capital through local angles, angel groups, and venture funds. My most highly recommend city is Portland, Oregon which is currently booming and not as competitive as Silicon Valley, but of course I'm biased. Others that come to mind include Austin, Seattle, Cambridge, Denver, etc. It's a much longer list than it used to be.

Also, depending on what your product/service is, I wouldn't rule out an international location where labor may be less expensive. Access to capital will be more constrained and exit opportunities limited but it's becoming a more connected global marketplace and countries such as Chile and New Zealand have started to cater to entrepreneurs and angel investors.

Which are some of the biggest mistakes entrepreneurs make?

The biggest mistake I consistently see is not talking to customers early and not taking their feedback. This doesn't mean you should chase every opportunity, but you should reassess your solution, business model, and financial model when confronted with large resistance from customers or slow adoption.

Selling is hard and selling starts with talking to customers and being told no. No one likes rejection, it stings no matter who you are, but if you're doing it correctly you should be getting good data from those interactions. That data should help you create a better product/service. As you hone your solution, and better identify your market, it will get easier. If rejection is hard for you turn it into your success - set a goal to get 10 noes every day and accomplish your goal. Again, make sure you're learning why potential customers are saying no, this is invaluable data.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

This isn't something I chase. I look for folks that are hard workers, that know their industry inside and out, that have experience and contacts in their field, and can create their own future. You have to have a passion to make the dream the reality. It doesn't matter if that's in genetics, nanotechnology, 3D printing, geolocation, cryptocurrency, alternative energy, cyber security, or disrupting the way houses are built.

What is the best source of funding for new companies?

If you are looking to get outside investment, and I hope you don't need to, but if you do, your company will have to meet three key criteria:
  1. Scalable - you can make money while you sleep.
  2. Durable - your company can withstand market competition as it grows.
  3. Sellable - there needs to be active acquirers for companies like yours.
Without all three of those it's hard to get anything beyond friend and family money.

The best money you can get is money you've generated through sales. I've founded companies that grew organically on their own earnings and ones that have had multiple financing round. There is nothing quite like the freedom of running a shop that you own 100% of. Still, that isn't always an option.

There is a natural progression when raising money and it's true in almost all cases:
  1. Savings, Credit Cards, Refinance (5k-200k)
  2. Friends, Family, Fools (10k-500k)
  3. Local Angel Investors/groups (25k-3M)
  4. Angle Funds (100k-1M)
  5. Seed Stage VC funds (250k-3M)
  6. VC Funds (1M-50M+)
What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

The big three are money, infrastructure and tax incentives.

Money

The city/state is typically a poor investor as their main goal (employment) is not aligned with the goals of early stage companies (doing the most with the least), however, in Oregon the state has invested in a number of existing privately run angel funds and that has provided much needed capital to early stage companies. This is a model that should be emulated.

Infrastructure

Discounted physical space, access to university resources and labs, high speed internet, community support for entrepreneurship, top-tier education at all grade levels, a good tax structure that keeps both companies and successful cashed-out entrepreneurs in the community and reinvesting.

Tax Relief

Angel investing and early stage investing can be increased by providing tax breaks, credits and incentives. A number of states have passed, or are working on passing, this type of legislation.

Christopher L. Shook

Management Department Chair and Russell Professor at Auburn University, Raymond J Harbert College of Business
Christopher L. Shook
What tips would you offer an aspiring entrepreneur?

First, follow your passion. Second, do adequate information gathering. Don’t’ let your enthusiasm cloud your judgment. Try to get objective assessments of your product, service and potential location. Tap into the local resources available. There may be many local governmental resources that may offer various forms of assistance. Ask friends and acquaintances for honest and objective feedback. Look for someone to be the “devil’s advocate.”

How important is the city an entrepreneur picks to start a new company?

Sometimes, the city matters on the margin, and other times, the city is crucial to success. In some startups, access to a specific resource is key. Sometimes, those resources are concentrated in certain cities. For example, take biotechnology startups, where access to the human resources is limited to certain cities. All things equal, entrepreneurs benefit from being around other entrepreneurs. Service providers (e.g. accounting and legal services) become familiar with the special needs of startup companies and can form a web of support. A culture of entrepreneurship can develop in cities and that can be a very powerful thing.

Which are some of the biggest mistakes entrepreneurs make?

The biggest mistakes are overoptimistic forecasting and underestimating the capital needed to survive until the business can generate the necessary cash flow. Startups in the early stages, may experience incredible sales growth, but the cash flow has to be reinvested, so entrepreneurs should not plan on taking cash out of the company anytime soon.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

I don’t think it will be one sector, it will be the melding of two sectors. The place to look for opportunities is at the intersection of the sector boundaries that are blurring. I would look for where technology and service sectors are melding.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

State and local authorizes should look at a portfolio of approaches. A combination of tax credits for new businesses, along with low cost office/meeting spaces can be quite effective in jump starting business development. Most startups can’t afford the expense of their own space and can’t utilize support staff effectively, so shared space and services that is subsidized can be quite helpful to new startups.

Jeffrey York

Assistant Professor of Management and Entrepreneurship, and the Shane Faculty Scholar at the University of Colorado Boulder
Jeffrey York
What tips would you offer an aspiring entrepreneur?

Start with yourself as a creator of opportunity, rather than seeking the “next big thing.” An easy way to do that is by reflecting on your identity, your network, your knowledge, and your beliefs. A simple table with what comes to mind under each of these is a nice starting point. Then, ask, based on what you wrote, what can you do today to start a business? Then actually do that and see where it leads next!

How important is the city an entrepreneur picks to start a new company?

I think it depends. For businesses aligned with some broader cultural norm, I think it can matter a great deal. For example, in two research projects I’ve been involved in, we found that entrepreneurs were more likely to enter the solar energy and green building industries in areas with strong environmental socio-cultural norms. More recently, we’ve been finding that such entrepreneurs are also more likely to survive. While I don’t know of research in other areas showing similar effects, in all startups I think it is helpful to have a community of available mentors, partners, and investors.

Which are some of the biggest mistakes entrepreneurs make?

In my classes, the biggest mistake I see budding entrepreneurs make is to ignore what potential stakeholders are telling them, and “stick to their guns.” A far better approach is to co-create the business with customers, partners, and even competitors, so that you find a truly compelling value proposition.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

Well, if I knew that I wouldn’t be a Professor; I’d be investing there! But, I think that we will continue to see environmentally relevant innovations across all industries as the impacts of human-induced climate change become more apparent and impactful. While this represents one of our biggest challenges, it’s clearly also one of the biggest entrepreneurial opportunities of our time.

What is the best source of funding for new companies?

Sales. There is no better source of funding than actual paying customers. I always encourage companies to begin selling their product before they are even sure what it is. A product that a customer helps to create has a built in market.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

I’m not sure that there is that much they can actually do in many cases. I think there have to be entrepreneurs on the ground first. However, we are finding that entrepreneurs tend to be attracted to places with a high quality of life, great education, and recreation possibilities. So, my best advice would be to focus on doing a great job at creating those things to attract entrepreneurs.

However, for specialized industries, I do think policy can help. For example, we found that renewable portfolio standards, as well as incentive based policies, were key to growing entrepreneurship and entry in the the wind energy sector both nationally, and here in Colorado. So, for a specialized industry, policy can be critical.

Lou Marino

Frank Mason C&BA Faculty Fellow in Family Business, and Professor of Entrepreneurship and Strategy at University of Alabama
Lou Marino
What tips would you offer an aspiring entrepreneur?

Choosing the right location is critical both for a new store location, and a new business.

How important is the city an entrepreneur picks to start a new company?

The city in which an entrepreneur chooses to operate can be critical to their success. Despite the plethora of online resources and the use of virtual teams, nothing can take the place of the ecosystem that exists in the city in which your base of operations is located. Perhaps even more important than the formal institutional support that exists in a city for entrepreneurship, the culture an livability of the city can significantly impact your ability to get the best people to work for you and how happy they are to be there.

Which are some of the biggest mistakes entrepreneurs make?

Three major mistakes I see entrepreneurs make are 1.Not understanding the value proposition of their product or service from the customer's perspective, 2. Not budgeting and managing properly for cash flow, and, 3. failing to plan for growth.

What is the best source of funding for new companies?

I am a major proponent of growing from personal funds and trying to avoid debt early on. If this is not possible, then look first to crowd sourced funding opportunities that leverage premiums, next look to friends and family, then to crowd sourced equity funding, finally to angel investors. If the idea is big enough you can go for VC's but for many startups that is simply not a viable option.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Tax credits and other incentives are all nice to have, but if your city is not vibrant and does not value diversity, in all of its forms, you will have a serious uphill battle in building a successful entrepreneurial ecosystem.

Entrepreneurs also do not like bureaucracy, so it is critical to foster a "can do" attitude and to avoid onerous legislation.

David L. Deeds

Schulze Chair in Entrepreneurship at University of St. Thomas, Schulze School of Entrepreneurship
David L. Deeds
What tips would you offer an aspiring entrepreneur?

Do your homework. Specifically, research the market, customer needs and how you will reach those customers. A strategy based on “If you build it they will come almost never works”. Talk to as many potential customers as possible, get a simple prototype together – it doesn’t have to be perfect it just has to be able to communicate the idea. The original prototype for the mouse was a chunk of 2x4 with handball set into it.

How important is the city an entrepreneur picks to start a new company?

Critical, but not in the way most people think about. An absolutely critical asset for every entrepreneur is her/his network. Networks are geographically centered, so shifting cities to start a business because of taxes, the supposed availability of investment capital, etc., is rarely a good idea, unless you happen to have a strong network in that city. If you’re in Minneapolis and have a decent network, your odds of success are far higher in Minneapolis then they are in the Silicon Valley where you have little or no network.

Which are some of the biggest mistakes entrepreneurs make?

Not doing their homework and refusing to listen to the market.

What is the best source of funding for new companies?

Depends on the stage of development but it always starts with your money and friends and family money. This is the most readily available, generally comes with the best terms and is usually the most patient.

I am about to commit heresy, but credit cards are a wonderful source of seed stage capital and cheap, relative to almost every other source out there. If you need expansion/development capital beyond your personal sources then you are also committing to an exit, assuming you bring in professional money (Angels & VC’s). The best source of capital is the one that is available and fits with the plans of the entrepreneur and the type of venture. If you’re not revolutionizing a market don’t chase VC money because you’re not a VC type of venture. Build your business the old fashioned way with your money, retained earnings and bank lending.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Great Education systems – starting with K-12 and moving on to higher education. Build great education and get out of the way and let the products of the system create the future. Great K-12 education provides a talented and creative workforce and attracts and retains talent in a region. Education is the most important input and gets the least amount of press and attention because it’s hard, takes a long time and is difficult to directly correlate with outcomes.

There’s a reason Massachusetts and California were the epicenter of entrepreneurship and innovation in the 70’ & 80’s – they had great education systems in 1960’s that provided the most important raw material for entrepreneurship – smart, creative, motivated people.

Linda F. Edelman

Professor of Strategic Management at Bentley University
Linda F. Edelman
What tips would you offer an aspiring entrepreneur?

I always tell my students to learn everything they can about the competitive landscape, because they will be looking to figure out ways to do things faster and better than the competition. I also remind them that others have overcome what seem like insurmountable obstacles right now, and that there is no shame in asking other entrepreneurs how they overcame a particular hurdle. My experience is that people are very helpful when asked.

How important is the city an entrepreneur picks to start a new company?

That is a great question. Of course the buzz in tech is to go to the west coast, but I think that people undervalue the importance of their personal network. I tell aspiring entrepreneurs, there is a great amount of wisdom in staying wherever they currently are, because that is likely where they know the most people who can help out, and they will need help.

Which are some of the biggest mistakes entrepreneurs make?

Trying to grow too fast, before they really understand their business. Having big ideas is fantastic, but at the very beginning, when cash is tight, count every penny and grow slowly to get a sense of the challenges inherent in the business model. There is a time for fast growth, but learning the business first always makes sense.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

I wish I had a crystal ball, however, I do think there will be a lot of movement in the energy sector. Right now cheap new oil is slowing down the economic incentive in this space, but that will not last forever and I just don’t see us solely dependent on fossil fuels in the foreseeable future.

What is the best source of funding for new companies?

Friends and family at first. If an entrepreneur has a great idea, then they should be able to use their network to get enough seed money to give it a try. Once that has run out, the entrepreneur should have a pretty good idea if their idea can scale, and then they can go for outside money in the form of debt or early stage equity investors.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

I think that governments can provide the environment that is conducive to small business, and then once that is done to leave business alone to figure things out. I am not a big fan of governments making investments in new ventures, I prefer to see that left to the professionals.

Felipe G. Massa

Assistant Professor of Management, and Kloor Professor of Entrepreneurship and Small Business at Loyola University New Orleans
Felipe G. Massa
What tips would you offer an aspiring entrepreneur?

Embed yourself in your focal community. Starting a business is as much about passion and personal drive as it is about the network of mentors and customers that help you formulate a business model, find funding and execute. An important initial step, therefore, is to identify a community of people starting businesses in your community or industry and get to know what issues are important to them. Who are their customers? What are their needs?

How important is the city an entrepreneur picks to start a new company?

Although the influence of founding location will vary depending on what kind of business you are starting, it is crucial for any entrepreneur to understand how their city will impact their potential for sustainable success. While Silicon Valley provides entrepreneurs with access to some of the best tech talent in the world, cost of living and operating a business there can be extremely high.

The key is to find a city that can give you what you need to establish your business and scale without breaking the bank. I advise entrepreneurs in New Orleans. We have a burgeoning ecosystem with entrepreneurs willing to give advice, with buildings in great locations with cheap rent, and several universities that can provide businesses with a steady flow of human capital as they grow. We are, however, lacking in the kind of tech talent and investor networks that one might find in Silicon Valley or San Francisco. Each place has pros and cons, so think carefully about what matters in your particular situation.

Which are some of the biggest mistakes entrepreneurs make?

The biggest mistake I see entrepreneurs making is that they adopt a "field of dreams" strategy. They expect that if they build a shiny new app, start a restaurant in a great location, or begin manufacturing their clever invention, customers will eventually burst through their doors clamoring for whatever it is they are selling. Instead, they often find themselves struggling to attract a handful of customers and eventually have to declare bankruptcy. Instead, entrepreneurs should talk to their customers while they are iterating on their business model and optimize their product or service to fit the needs of a specific target market that is big enough to sustain their startup. In short, successful startups are rarely formed from the musings of the lone genius. They are, more likely, born out of the conversations between founders and potential customers.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

Investors typically like technology companies because they can scale quickly and provide them with a profitable exit (e.g., acquisition by some Fortune 500). If you are looking for the next big thing, start by looking for startups that have high margins and that take months, not years to grow their customer base ten times over.

What is the best source of funding for new companies?

Each company will typically follow their own unique path to financial sustainability. Some entrepreneurs might find that their product is amenable to a Kickstarter campaign, some will "bootstrap" their businesses by using their own money or borrowing from friends and family, some might try to get a bank loan, while others may design a business for a clean and profitable exit that will appeal to Angel investors. I typically advise entrepreneurs to ask entrepreneurs in their ecosystem that have similar businesses garnered funding or to reach out to universities and accelerator programs that offer free advice.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Authorities can do a lot to help their entrepreneurial ecosystems succeed. By making it less time-consuming and expensive to obtain licenses, to find information and by creating programs that support early-stage startups financially, state and local government can address needs that private enterprise might not be willing to tackle.

Perhaps one of the most important roles government can play is to legitimize - through awards, mentions, and events - the efforts of leaders that are trying to strengthen the mentor networks, pitch events and workshops that create a self-sustaining community of innovators.

Shaker A. Zahra

Robert E. Buuck Chair of Entrepreneurship, and Academic Director of the Entrepreneurship Center at University of Minnesota, Carlson School of Management
Shaker A. Zahra
What tips would you offer an aspiring entrepreneur?

Do your homework.

Test your ideas; talk to others.

Balance intuition and excitement with analysis.

How important is the city an entrepreneur picks to start a new company?

Location makes all the difference; some cities are rich with opportunities and resources that are relatively easier to exploit. Other cities offer more limited opportunities and resources. Cities also differ in the qualities of their infrastructure, human capital, and supporting industries that make the creation and growing of new companies feasible.

Which are some of the biggest mistakes entrepreneurs make?

Over optimism; ignoring common sense rule of managing companies and people, narrow span of attention; and focusing on the "techniques" in doing things -- creativity and flexibility are crucially important.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

Things that are essential to our daily life are most likely to be the next arenas for disruption. radical ways to produce, distribute and store basic things such as water, food, nutrition, and the like are among the best.

Educational Institutions are well over-due for disruptions as current institutions increasingly fail to offer the training and skills needed for an ever changing global existence. Who teaches, as well as what, and how is taught are likely to change.

What is the best source of funding for new companies?

Family and friends remain a great source of funding of new business, especially in a company's early years. The best source of business varies by the stage of business development, amount of money needed, and a company's business model. Newer ways of funding, such as crowd funding, complement traditional means of raising capital.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Creating and upgrading infrastructure, reducing red tape, reducing taxes, and connecting companies to promote business, learning and growth.

Jeremy Short

Professor and Rath Chair in Strategic Management at University of Oklahoma, Price College of Business
Jeremy Short
What tips would you offer an aspiring entrepreneur?

I believe aspiring entrepreneurs can take a page out of one of the key ideas often promoted on popular crime dramas. In such shows, a cunning detective or forensic expert will let data ‘speak’ to them as valuable information helps to tell a particular story that leads to solving a case. In contrast, entrepreneurs might often be tempted to rely too much on following their gut instincts or passions in their quest to build new ventures. But, some data about a particular market, or demographic, or trend in goods or services can often be of equal value to put all of the pieces of the puzzle of starting a new business together effectively. Along the same lines, I would encourage entrepreneurs to make sure they are launching a career instead of feeding a hobby. In some cases, the outcome can be the same. But in many cases, the passion is best saved for leisure time rather than business time.

How important is the city an entrepreneur picks to start a new company?

Selecting the ‘right’ city at the right time is crucial in many entrepreneurial ventures because many towns may or may not be ready for a given enterprise. At the same time, a number of viable businesses might be old hat in some towns.

Right now, where I live, Oklahoma City is seeing a renaissance in ‘foodie’ culture including thriving growth in unique restaurants and an abundance of clever food carts. In contrast, this culture is very well established in other cities. So a concept that might be warmly embraced today in OKC as novel might be met with a lukewarm reception in another city.

Which are some of the biggest mistakes entrepreneurs make?

I mentioned the importance of seeking data before starting a new business and I believe failure to follow the old cliché of ‘look before you leap’ is likely one of the biggest mistakes.

For example, a large body of research in strategic management and entrepreneurship finds that industry membership is one of the biggest determinants of the success of a particular firm. Yet, many entrepreneurs overlook the perils associated with certain industries (the restaurants industry in particular comes to my mind) and these entrepreneurs feel they will no doubt succeed where others fail.

I believe a number of decision biases many individuals can struggle with can be particularly troublesome for entrepreneurs. There is a general bias of overconfidence that many of us must overcome. Most individuals believe they are above average drivers. In the same vein, most entrepreneurs believe they are more likely to be successful than their peers. But everyone can’t be above average in driving and business acumen. One way to combat this tendency is to find a friend or colleague who can act as a ‘devil’s advocate’ by providing candid feedback about a particular business idea. Of course, this only works if the entrepreneur is willing to listen to and internalize such feedback.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

I often tell my students that a good idea is worth nothing. The notion is that what is of value in the market is getting the idea for a particular good or service to market. With this premise, I believe that many goods and services may see previously unmet potential as crowdfunding take a more prominent role in our economy. The impact can range from platforms that target social ventures (Kiva), goods and services (Kickstarter/ Indiegogo), and now we are even starting to see crowdfunding of franchise concepts (crowdfranchise.com)

What is the best source of funding for new companies?

The old entrepreneurial cliché is that most new ventures are funded by family, friends, and fools. I believe this adage still remains true. But I do believe crowdfunding is becoming a valuable additional funding source to complement these traditional methods.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

I believe the best way for state and city leaders to stimulate entrepreneurship is to create a place where people want to live.

For example, years ago, Oklahoma City passed a temporary one-cent sales tax. This money funded renovations to performing art centers that now host Symphonies and Broadway shows, state fairgrounds, a downtown entertainment warehouse district, and improvements to other parks and public works. The beauty and quality of these improvements encourages more individuals to live in the city and more businesses to cater to such individuals.

I believe if authorities adapt the idea of throwing a party they want to attend to building a city where they would like to visit, things will fall into place and create a halo effect that results in a thriving business community.

Gregory L. Stoller

Adjunct Lecturer of Operations Management at Boston College, Carroll School of Management
Gregory L. Stoller
What tips would you offer an aspiring entrepreneur?

Begin planning your business as early as possible, even before you begin developing your products (or services), or actually selling them to customers. Areas to consider are: 1) Type of incorporation entity and any necessary, and associated, Partnership Agreements, and 2) What types of people you’ll be raising money from, as this might require separate registrations in individual states across the US.

You’ll also want to give some thought to what I consider the “Big 3” questions, through a carefully honed 3-minute Elevator Pitch: 1) How does the business make money, 2) What is its competitive advantage and 3) Why will your management team positively contribute toward its success?

How important is the city an entrepreneur picks to start a new company?

This will depend on the type of business you’ll be starting. If it’s retail focused, not only the city but also the street address / location will matter significantly, in terms of visibility or walk-in traffic. If you’re in the manufacturing or tech space, the city choice will be important in terms of partners, vendors and suppliers, whom you might need to be in close proximity. But, with the internet and mobile telephony being what it is today, the choice of city isn’t necessarily as crucial as it once was.

Which are some of the biggest mistakes entrepreneurs make?

The biggest mistake is engaging in what I call a “ready, fire, aim” strategy, either externally or internally.

Externally, I see lots of executives, 99% of whom have the best of intentions, going full throttle launching a company or product too soon without having first more carefully researched the market’s potential acceptance, pricing, competitive landscape or barriers to entry.

Internally, entrepreneurs need to ensure they’ve vetted the chemistry and capabilities of people on their management team, the amount of assistance investors can provide well beyond the monies they have access to, and ensuring an entrepreneur has a solid network of service providers (i.e., lawyers, accountants, insurance, landlords, etc.).

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

There are 2 ways entrepreneurs can make their mark:

1) Changing existing behaviors such that customers will have disincentives to *stop* using their products once they’re adopted. Consider how reliant we’ve become on ATMs or auto bill pay. These are comparatively low-tech solutions but now that we’re used to them, people will likely avoid going back to the “old system” of in-person bank tellers or paper checks.

2) The second way an entrepreneur can be positively disruptive is by improving an existing process, but doing so without needing to re-invent the proverbial wheel. Satellite radio was one of the pioneers here in that it charges a modest subscription fee for something which used to be free (i.e., listening to the radio) but now gives consumers a huge of amount of additional choices through access to more channels. Leveraging the same resources across multiple channels, often with pre-recorded content, greatly reduces overall cost.

What is the best source of funding for new companies?

If a company has collateral it can lend against, then debt financing is preferable. While less expensive than equity, the cost is, in general, more predictable (especially with a long-term loan or fixed rate line-of-credit) and the lender is the ‘partner which goes away,’ once the indebtedness is repaid. Equity is, of course, more effective for new companies just starting out and although it will be more expensive financing, it will also likely include strategic counsel from the investors providing the funds.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

They can assist in two ways — 1) Provide tax breaks to new businesses as an incentive for entrepreneurs to set up shop in their particular city or state. 2) Help craft long-term legislation so it benefits local or US business sectors, in terms of allowing them to be competitive in the wake of potential off-shore, lower-cost entrants.

Larry W. Cox

Associate Professor of Entrepreneurship at Pepperdine University, Graziadio School of Business and Management
Larry W. Cox
What tips would you offer an aspiring entrepreneur?

Always be on the lookout for interesting problems to solve – especially in areas of personal passion. This is where it all starts. Then move forward based on who you are, what you know and whom you know.

How important is the city an entrepreneur picks to start a new company?

Entrepreneurs almost never pick a city to start their company. They start the company in the city where they currently live. This is because most aspiring entrepreneurs (at least in the US) are employed, and have homes and families. They have come to their home city for some reason other than entrepreneurship (e.g., a job, to go to school, because they like the surroundings, etc.) and they do not uproot everything for a business idea that is somewhere between conception and wildly successful.

They only relocate at a much later stage of the business to be closer to key resources. I recently invested in a start-up called "Champion Technology Company, Inc.” The technology came from Pacific Northwest National Laboratory in the state of Washington. The CEO/Founder continues to live in LA. The CTO/Founder and Inventor continues to live in Washington. Neither of them will move until the business requires it and is large enough to make it possible.

Which are some of the biggest mistakes entrepreneurs make?

Surprisingly, one of the biggest mistakes for (especially novice) entrepreneurs occurs when they have a product or service with multiple potential vertical markets – when they indeed have something revolutionary. They rightly understand that their technology or process could solve problems in multiple domains. So, they “lock up” for fear of choosing the “wrong" opportunity. They waste time trying to “figure it out” rather than simply taking action in one direction and then pivoting when necessary.

In entrepreneurship, there are no “right answers” and no way to move forward other than to take action, risking only what you can afford to lose.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

There is absolutely no way to know this. By the time any of us know what “the next big thing” is, someone is already there. Seasoned entrepreneurs don’t worry about this. They just find interesting problems to solve and apply creativity to develop an innovative solution to that problem. Then they start with who they are, what they know and whom they know to move the project forward.

What is the best source of funding for new companies?

This is another question that is impossible to answer. It all depends on how much money is needed, the goals and preferences of the entrepreneur, and the nature of the business.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Entrepreneurship is, at its core, a creative activity. However, very few of us have been trained in the principles, skills, tools and processes of creativity. This is where entrepreneurship begins. So, start with training people to use more of their creative capacity.

We have also started a non-profit research foundation called the Early X Foundation to connect entrepreneurs with technologies coming out of national labs and universities. These two things are producing an amazing number of new ventures. The traditional “levers” that governments use with regard to entrepreneurship (e.g., incubators, accelerators, small business assistance, tax breaks for VC funding, etc.) are further downstream. They’re good, but you need a lot of people heading down the pipeline to produce the few businesses that will move the economic needle. My advice – begin at the beginning!

David Thomas

Assistant Professor of Management at University of Northern Colorado, Monfort College of Business
David Thomas
What tips would you offer an aspiring entrepreneur?

Complete a feasibility analysis to ensure your idea is viable. Do this before you spend any money or invest valuable resources in your business idea. Research dollars spent now, reduce waste later.

How important is the city an entrepreneur picks to start a new company?

A local network of like minded individuals makes for a favorable ecology for start ups...pick a city with a business incubator and university.

Which are some of the biggest mistakes entrepreneurs make?

Under-estimating the competition and over-estimating the value of your business offerings...and not completing a feasibility study before spending dollar one.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

Answer lies in what your research reveals.

What is the best source of funding for new companies?

Depends...business plan competitions are excellent avenues to test your idea, plan and attract investors.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

They can get out of the way. Most governments and their managers have no clue on how to start and operate a small business. Keep taxes low, eliminate unnecessary regulations, and look for ways to build partnerships with local universities and business incubators.

Kathleen Allen

Professor of Entrepreneurship at Lloyd Greif Center for Entrepreneurial Studies, and Director of the Center for Technology Commercialization at University of Southern California, Marshall School of Business
Kathleen Allen
What tips would you offer an aspiring entrepreneur?

Make sure you’re ready to start a business. It’s not as easy as it looks; you need the support of people you care about and you need to put some personal resources (money) in place so you can maintain control of what you’re doing.

Think twice before starting a business with close friends. You may be risking that friendship in favor of a business partner. The most successful teams are built from people who bring specific expertise and experience to the table, rather than simply a social relationship.

Do your homework before you launch. Customer discovery and finding the right business model are critical steps to a successful launch. Too many entrepreneurs start with a solution looking for a problem. That’s backwards. Get out and talk to people to find out where there’s a real need or pain that you can solve.

How important is the city an entrepreneur picks to start a new company?

It depends on the type of business. There is value in being near other businesses in your industry; that’s why you find clusters of businesses — for example, biomedical businesses in San Diego and financial services in New York City. Clusters attract investment dollars and facilitate collaboration for greater productivity. However, most pure Internet businesses can operate from anywhere and they do.

Which are some of the biggest mistakes entrepreneurs make?
  • Not solving a compelling problem for customers. If you solve a real problem, customers will pay for the solution. If you’re solving a “nice to have” type of need, you will spend far more in marketing dollars to bring customers on board.
  • Not validating a business model. Getting feedback from the market on the value proposition, customers, strategic partners and all the other elements of the business model before you launch in a big way is critical. Most business models don’t completely survive first contact with the marketplace. You increase your chances that first contact won’t be a complete disaster if you test the model with small experiments first, revise, then go back out and test again until you’re confident enough to launch.
  • Splitting equity in the business too soon. Unless your team has a long history of working together, you don’t want to hand out equity immediately to any co-founder with whom you’ve never worked. Too many co-founders break up before the business becomes successful. If you have given equity before you know that the team is solid, you will pay for that perhaps for the life of the business. Some teams choose to have dynamic equity sharing agreements where they specify how much equity each member gets, should they still be part of the venture at some designated point in the future and contribute what they were supposed to contribute.
What is the best source of funding for new companies?

Personal resources. The longer you can go before taking formal capital, the more leverage you have in negotiations with angels and venture capitalists because you have reduced some of the risk associated with your new venture. Every time you take a round of capital from an outside investor, you lose some of the ownership you had in your company; and if you’re not careful, you will lose control of your company’s destiny.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Stay out of their way. Make it easy for businesses to get started without going through a lot of hurdles that cost time and resources.

Starr Marcello

Director and Chief Operating Officer of the Polsky Center for Entrepreneurship and Innovation at University of Chicago Booth School of Business
Starr Marcello
What tips would you offer an aspiring entrepreneur?
  • Be fanatical about knowing what your customers need;
  • Know what you know and what you don’t know;
  • Surround yourself with good leaders and mentors;
  • Practice your elevator pitch on your toughest critic;
  • Always know what your competition is up to and who your competition could be.
  • How important is the city an entrepreneur picks to start a new company?

    Choosing a city to start a new company is important when your business requires close interactions with customers, partners, mentors, suppliers or manufacturers; when you need access to a specific talent pool or industry hub; or when the local government provides incentives that are beneficial for launching your business in that city.

    Which are some of the biggest mistakes entrepreneurs make?

    One of the biggest mistakes we see entrepreneurs often make is jumping right in without knowing who their customers are; or failing to realize that their purchasing customer is different than their end-user customer.

    Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

    One of the benefits of someone in my position is the opportunity to work with all kinds of ideas across a wide range of industries. There are opportunities for disruption in many sectors. Real estate and education, including higher education, are sectors I am watching.

    What is the best source of funding for new companies?

    Early-stage companies can tap friends and family, launch a Kickstarter or Indiegogo campaign, apply to join an accelerator program or incubator, or try to win any number of city or university-sponsored competitions that provide funding. An entrepreneur has a greater chance of getting funding from angel investors or venture capital firms once the company’s idea has been vetted with customers, once it has an MVP (minimum viable product), and once it has a sound business plan. An entrepreneur must always consider how much equity he/she is willing to share with outside investors and should ensure that his/her goals are aligned with the investor’s goals, expectations, and exit strategies.

    What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

    Since entrepreneurship and new business development stimulates job creation and the local economy, it’s essential for state and local governments to invest in education and partner with institutions to educate, train and help equip its citizens to have the skills required to act on their entrepreneurial ambitions. Access to resources, such as low-cost office space and a mentor network, can also foster local ecosystems in addition to solving frequent challenges for early-stage founders.

Joel H. Dobbs

Executive in Residence in Entrepreneurship, and Director of the Office of Innovation and Entrepreneurship at University of Alabama at Birmingham, Collat School of Business
Joel H. Dobbs
What tips would you offer an aspiring entrepreneur?

Fall in love with the problem you are solving, not your solution. Chances are you will need to make multiple changes or pivots to your initial product. If you are focused passionately on solving a problem you are likely to decide wisely when making these choices. If you are focused on your solution, you may find yourself pursuing a dead end. Be prepared to experiment, learn and evolve.

How important is the city an entrepreneur picks to start a new company?

Having an entrepreneurial support system is really important, especially in technology and scientifically-based startups. For instance, here in Birmingham we have one of the country’s leading business incubators, Innovation Depot. Incubators, business accelerators, and the proximity to investors, all facilitate a startup environment. In addition, the support of fellow entrepreneurs is important.

Which are some of the biggest mistakes entrepreneurs make?

Probably number one is underestimating the level of commitment required to successfully start and grow a business.

The second is failing to validate the market for their product or service. Just because you think it is a good idea doesn’t mean that people will buy it.

Third is underestimating their competition. I frequently hear investor pitches in which the entrepreneur boldly states, “We really don’t have any competition.” Wrong! The status quo is competition.

Finally, getting the pricing right. Part of validating the market is understanding the best price. Usually, new entrepreneurs either underprice (“We’re better and cheaper”), or they overprice, believing that what they offer is far better than it actually is.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

I wish I knew the answer to that one!

I believe that most, if not all truly disruptive innovations will involve technology. I would look at the medical and health care sectors, which are ripe for innovation given the current cost and complexity of health care along with the current demographic trends. I’m not just talking about new therapies but new and novel ways of delivering care, empowering patients to manage their health, process improvements in hospitals and clinics and advances in diagnostics and medical devices.

I also believe than any sector that utilizes “gatekeepers” is ripe for disruption. Historically, travel agents are an example of intermediaries who have been “disintermediated” by technology. Others ripe for this same fate are realtors (we are already beginning to see this now with apps such as Zillow and Trulia). Publishing is another example as is the music industry, which has been turned on its head by iTunes, among others.

What is the best source of funding for new companies?

For early stage startups, I recommend looking to business plan competitions as well as the “3Fs”, friends, family and fools. For really novel ideas crowdfunding can be a lucrative source of early funds. Use small amounts of money to validate your business model and products by learning to fail fast, fail cheap and learn quickly. Wait as long as you can before engaging with third parties who will take a piece of your business in exchange for their investment. These types of deals will have very unfavorable terms for a very young business. As you begin to grow, generate significant revenues, and claim market share, you will likely get much better terms plus you will now be using these funds for growth.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Invest in building an environment that is favorable for innovation and entrepreneurship. Look to partner with universities. Start business plan competitions to help fund early stage companies. A favorable tax climate can also be a big plus.

Franz T. Lohrke

Brock Family Endowed Chair in Entrepreneurship at Samford University, Brock School of Business
Franz T. Lohrke
What tips would you offer an aspiring entrepreneur?
  1. Gain a wide range of experiences before starting a business. Work experience can help aspiring entrepreneurs spot new opportunities in the industry in which they plan to start a business. In addition, experience in or knowledge about other fields can enhance an entrepreneur’s creativity. For example, Steve Jobs adapted his interest in the arts (he took calligraphy in college) to designing computers.
  2. Network constantly. Having a diverse network also can help generate new ideas, and it is often impossible to know who knows whom. So, even though talking with several people about ideas can potentially increase the threat that someone will “take your idea and run with it,” it can also lead to unforeseen opportunities. For example, Leah Busque, who founded TaskRabbit, credits a dinner conversation with friends to gaining access to important mentors and residency in Facebook’s business incubator.
  3. Build credibility. One critical step to convincing potential investors, employees, and customers about a business idea is to demonstrate how trends are converging to make a particular business viable. The second step, though, is to demonstrate that you and your team (as opposed to someone else) are the ones who can build the business and compete successfully with current or future competition. Gaining industry experience will help, but potential entrepreneurs should consider writing a blog, working as an intern (maybe even an unpaid one) or sponsoring an event to gain experience or generate publicity.
  4. Stay flexible. Many successful companies were built on Plans B, C or D, rather than Plan A. Paypal, for example, resulted from a company that had originally designed secure interactive software for PalmPilots pivoting to employ this knowledge online.
  5. Recruit a solid management team. Building a successful new business requires a diverse set of skills. For example, Steve Jobs provided the product design and marketing skills at Apple, but Steve Wozniak brought critical technical skills to the team.


  6. How important is the city an entrepreneur picks to start a new company?

    Location can be critical for some new companies. For example, some provide access to well developed “entrepreneurial ecosystems” with customers, mentors, technically skilled employees and financial resources. A particular location (like Silicon Valley) can also provide credibility to a new business.

    At the same time, location may be less important for some businesses. For example, an ecommerce-based business can be run from just about any location having good Internet connections and a reliable transportation network.

    In addition, some strong ecosystems are beginning to emerge outside the traditional entrepreneurship centers of Silicon Valley, Boston, and New York City. For example, access to high speed Internet, business incubators, educated employees, and/or government entrepreneurship incentives have made cities like Austin, Denver, Oklahoma City, and Chattanooga attractive places to start businesses in the U.S.

    Which are some of the biggest mistakes entrepreneurs make?

    Aspiring entrepreneurs will make mistakes. The uncertainty surrounding the startup process ensures that nothing will go exactly according to plan. Some mistakes can be great learning experiences, but others can be fatal to a business.

    Externally, entrepreneurs often underestimate the speed and intensity with which established competitors will respond to their new business. Although these competitors may ignore a new entrant or see its new product/service as nonthreatening, they often have the capabilities to respond. Thus, objectively analyzing competitors’ strengths and weaknesses is critical to a startup’s success.

    Entrepreneurs may also not seek enough customer feedback before and after they launch a new business. Entrepreneurship expert Steven Blank stated that “no business plan survives first contact with customers,” so entrepreneurs need to seek out frequent customer feedback. In addition, entrepreneurs need to understand the production process for how their product/service goes from raw materials to final customer. Different parts of this production process provide different opportunities and threats to the business, because they can have important partners or gatekeepers that can help or threaten a new business’ success.

    Internally, entrepreneurs have to understand how cash flows into and out of a business, particularly during the startup or growth stage. New and growing businesses often burn through cash, and running out of cash will kill a business. Thus, forecasting, conserving, and managing cash flow is a vital survival skill.

    Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

    Instant connections available from social media, mobile technology, and location tracking have helped launch several new successful businesses. These and other technologies have allowed entrepreneurs to develop new business models that reduce customer pain points or enhance convenience and customizable experiences.

    Industries that are ripe for disruption are those having high fixed costs, which can be reduced via technology and/or that have enjoyed protected status, provided regulations or other industry characteristics providing this protection can be overcome or circumvented. For example, Bellhops, a successful startup focusing on customers moving into or out of dorms or apartments, has employed mobile technology to find customers and manage its employees. In addition, because the company does not have the high fixed costs of established moving companies (it doesn’t own any moving vans), it doesn’t have to support the traditionally high overhead costs of the moving industry, allowing it to quickly scale up its business.

    What is the best source of funding for new companies?

    Startups currently have several funding opportunities that were unavailable a decade ago. The traditional sources of borrowing from banks and selling equity to “accredited investors” still exist, but some of the long-standing problems like difficulties obtaining loans from banks also persist.

    The growth in social media and on-line funding sources, however, has improved startup funding opportunities. Reward-based crowdfunding through sites like Kickstarter and Indiegogo has allowed startups to raise money and, in some cases, avoid some cash flow problems by preselling their inventory to supporters instead of first having to produce inventory and then hope it sells. In addition, 17 states and the District of Columbia have passed intrastate equity crowdfunding laws that allow entrepreneurs to raise money from non-accredited investors (those with a net worth of less than $1 million or less than $200,000 in annual income).

    Each of these new sources has its risks, but as a group, they have helped democratize startup funding.

    What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

    Two things: (1) identify and support private organizations focused on building stronger entrepreneurs, and (2) support educational programs that demonstrate effectiveness in developing the entrepreneurial mindset of students to ensure a better future.

Daniel J. Freeman

Director of the Horn Program in Entrepreneurship and Associate Professor of Marketing at University of Delaware, Alfred Lerner College of Business and Economics
Daniel J. Freeman
What tips would you offer an aspiring entrepreneur?

Make sure you’re working on something you’re going to want to stick with for several years because building great businesses takes time. Focus on raising customers first and capital will follow. Time is your most precious resource so invest it wisely.

How important is the city an entrepreneur picks to start a new company?

It depends on the business. You want to be reasonably close to customers, advisors, relevant talent pools and capital.

Which are some of the biggest mistakes entrepreneurs make?

They focus on perfecting their technology rather than their value proposition to customers. They attempt to scale before developing a sales process that is repeatable and financially viable. They fail to address vesting schedules for founder equity, leaving the company in disarray if a disagreement, loss of enthusiasm for the business or life event causes a founder to stop actively working to build the business.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

Certainly lots of money is pouring into the internet of things, but there will probably be a lot of big next things as entrepreneurs find ways to apply new technologies to address major pains or realize big potential costs savings. For example, self-driving technology seems like it has the potential to disrupt the transportation and shipping industry. Imagine how much a self-driving big rig that could work 24/7/365 would reduce operating costs.

What is the best source of funding for new companies?

Revenue from customers is always the best because it validates demand for the product and it’s non-dilutive of the entrepreneur’s ownership.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Two things: (1) identify and support private organizations focused on building stronger entrepreneurs, and (2) support educational programs that demonstrate effectiveness in developing the entrepreneurial mindset of students to ensure a better future.

Nik Rokop

Industry Assistant Professor of Entrepreneurship at Illinois Institute of Technology, Stuart School of Business
Nik Rokop
What tips would you offer an aspiring entrepreneur?

Learn how to look for problems. Listen to what prospective customers (people or companies) have to say and understand their pain points. Work very hard to articulate clear value proposition(s) to solve those pain points.

How important is the city an entrepreneur picks to start a new company?

For most, not very important. If your startup requires raising a significant amount of money, particularly from VCs, then certain cities are better suited for particular types of businesses - for example, building a massive user base without initial revenue (Silicon Valley), growing a business with revenues and strategic partnerships (Chicago).

Which are some of the biggest mistakes entrepreneurs make?

Solo entrepreneurs don't build a team early enough. Technical entrepreneurs build what they want instead of what customers are looking for. Pricing on a cost basis instead of value leaves a lot of profit uncaptured. Not thinking about the big picture and the context in which they are building their business.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

Small scale manufacturing technologies are getting more capable - 3D printing, table top CNC, customized prototyping capabilities.

Sensors are getting smaller and more integrated into devices like smartphones, smart watches, etc. Data from sensors will first be analyzed to provide better knowledge of systems, and thereafter that knowledge will be applied to controlling those systems. Great early examples are health apps and self-driving cars.

What is the best source of funding for new companies?

Customers (i.e., sell stuff). Friends, family, & fools. Competitions, particularly for university based startups.

Science/research-based companies often get early funding from SBIR and similar non-dilutive government grants.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Support the creation of entrepreneurial communities in their regions. Provide space, seed funding, tax relief and grants to create organizations such as 1871, Catalyze and Blue1647 (all examples in Chicago).

Paul T. Thomas

Executive in Residence and Assistant Professor of Practice at Northern Arizona University, W.A. Franke College of Business
Paul T. Thomas
What tips would you offer an aspiring entrepreneur?

Remember that it isn’t easy. Trust your gut and keep fighting. Get help and be open to advice. Be persistent and know that others will tell you all the reasons it won’t work. Entrepreneurship involves risk, long hours, hard work and failure. But every win will make it all worth it.

How important is the city an entrepreneur picks to start a new company?

It all depends on what phase the company is in. Great ideas can come up in any city/country. As you move through, the stages of the company where you are located is critical for raising funding (some venture capital firms won’t invest in a company they can’t drive to in an hour). The talent may be regional and depending on how specialized the product is, you may have a tough time finding employees. But great ideas come up from any place. And every city has folks that have been there and done that to help.

Which are some of the biggest mistakes entrepreneurs make?

Fail to ask for help or follow great advice. Entrepreneurs by their nature are big risk takers and will sometimes make foolish decisions because they also believe they don’t need help. There needs to be some basic planning (you don’t need a 50 page business plan, but you need to think through some important things like the market, competition, funding, etc.)

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

Not sure I agree that technology is what I would go after. I had a mentor that once told me, “solve a basic problem with technology and you’ll be successful”. I don’t think entrepreneurs need to create the next greatest app, or a faster or smaller widget. Instead find something that is a basic issue or problem and use technology to solve it… a better potato peeler, a more effective mouse trap, a solution for parallel parking, a better post-it note, etc.

What is the best source of funding for new companies?

Almost all of my experience is working with venture capital firms. But these firms look to invest a minimum of $5m. They see literally thousands of deals a year and if they are lucky they will invest in 25 a year. So vc’s invest in very few companies.

If at all possible, self fund your start-up or look to friends and family. Crowdfunding is a great alternative, especially if your start-up addresses a cause or issue.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Not sure that getting the government involved really helps. Entrepreneurs by their nature tend to live and work “outside the box” and I haven’t seen many government agencies that think that way.

While i hate to say it, i think the best thing they can do is just stay out of the way and leave it to the private sector. I know of no great start-up that started in a local or state agency.

David Y Choi

Associate Professor & Director of the Fred Kiesner Center for Entrepreneurship at Loyola Marymount University
David Y Choi
What tips would you offer an aspiring entrepreneur?

Do it! Take action!

How important is the city an entrepreneur picks to start a new company?

Very important. I have known great inventions coming out of certain cities and states that just could not get funded themselves. In addition to funding, the overall ecosystem of other entrepreneurs, advisors, and potential partners is very important.

Which are some of the biggest mistakes entrepreneurs make?

Entrepreneurs overestimate the value of their ideas (and therefore) underestimate the amount of work involved to get a business headed to success.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

When most people say technology, for some people they mean information technology. Other technologies like bio, environmental, material science… are also ripe for rapid innovation. Look at the new hopes in cancer drugs for examples. I think there are many innovations that are possible that apply certain technology for consumer products, skin care, etc. I think material science especially pertaining to energy storage and battery could be huge.

What is the best source of funding for new companies?
  1. Any source you can get.
  2. The ones most helpful without being time-consuming to raise and work with. For example, angel groups are great, but it takes too long to raise and too many people involved - they all want to add a clause into the contract and that is very time consuming.
What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Most states have stupid programs like tax deductions, etc. The best and most direct way is to create more pools of money to invest in early startups.

Jerry White

Director of the Caruth Institute for Entrepreneurship at Southern Methodist University, Cox School of Business
Jerry White
What tips would you offer an aspiring entrepreneur?

You need to have knowledge and experience in the business you want to go into. If you don’t have that, go to work for an established competitor for a few years and learn the business. Also, learn the difference between profit and cash flow. Cash flow is probably the most important financial management concept an entrepreneur has to deal with.

How important is the city an entrepreneur picks to start a new company?

It is always important; sometimes, critically so. The availability of your target market, sources of financing, availability of skilled workers in your industry, business friendly local government, etc. can make a big difference in an entrepreneur’s ability to survive and grow.

Which are some of the biggest mistakes entrepreneurs make?

The biggest mistakes are:

Failure to understand how to calculate the amount of financing needed and to arrange for it. Hiring friends instead of the most qualified person they can afford.

A belief that “if you build it they will come”, when the truth is ”if you build it…” and market the heck out of it they might come… and then again, they might not.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

One possibility: more efficient organization and utilization of existing assets with examples being Uber and Airbnb.

What is the best source of funding for new companies?

There is a progression of sources depending on the evolution and experience of the entrepreneur and the evolution and development of that entrepreneur’s business concept. The sequential sources (and in this order) are: personal savings, friends and relatives, business associates, angel investors, venture capitalists.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Genuinely seek ways to reduce regulatory and administrative burdens, lower taxes to the degree feasible, and develop specialty financing programs.

John Bradley Jackson

Director of the Center for Entrepreneurship at California State University, Fullerton
John Bradley Jackson
What tips would you offer an aspiring entrepreneur?

Seek feedback and criticism from others, especially those outside your comfort zone -- this can help improve the business concept.

How important is the city an entrepreneur picks to start a new company?

While the web gives us access to everything, there is no substitute for face to face contact. Your location choice can make this easy or difficult.

Which are some of the biggest mistakes entrepreneurs make?

Not talking to prospective customers before coming up with a solution.

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

Privacy, which is quickly becoming a luxury good.

What is the best source of funding for new companies?

Bootstrapping.

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Incubators can help fledgling startups move faster.

Jason Harkins

Associate Professor of Management at University of Maine, Business School
Jason Harkins
What tips would you offer an aspiring entrepreneur?

Develop hypotheses about just about everything and then test them in the best way you can. There is a lot written about the value of the customer discovery process and validating hypotheses related to a company’s value proposition and customer segments, but this philosophy extends well beyond that. You can develop hypotheses about which method is best for connecting with customers, what you need to do and what you should buy, who your key partners are, what costs you must bear and which ones you can shift. There are many ways to get to the same end point, but some are decidedly more efficient.

How important is the city an entrepreneur picks to start a new company?

I believe the city is key, but no one specific city is key. You don’t have to startup in Silicon Valley or Silicon Alley to be successful, but you do need to startup your business in a place where there are the right people to support growing that business. The human capital available to you plays a large role in what you can consider when you look to scale the business, especially if you need to scale quickly.

Which are some of the biggest mistakes entrepreneurs make?

The biggest mistake I see time and again is not asking for help. No one expects entrepreneurs to be able to know and do everything, but some entrepreneurs try anyways. You need to make sure that you reach out early and often to get information, connections and skills that will enable you to develop your business and scale it.

Additionally, finding a good set of advisors early is key. Get 5 people who come from different backgrounds and who will speak their mind and pull them together as often as it feasible and have them chew on the biggest challenges you are facing. Make sure these are people you can trust to help you grow your business and then use them as a periodic resource.

What is the best source of funding for new companies?

This really depends on the stage your company is in. You can do a lot of hypothesis testing, and raise $10k or more in the process, through engagement with crowdfunding. Also at the earliest stages, you will likely need to tap friends, family and “fools” for money to be able to develop your idea. Once you have refined the idea and can put together a cogent story, equity investment goes from angel investors to VC firms. If you aren’t looking to part with equity, you can bootstrap your company if it can generate revenue without having to be at scale. Bootstrapping involves taking the profit generated in operating the business and building the business from the reinvestment of these funds.

 

Methodology

To help aspiring entrepreneurs find the most fertile ground in which to plant their start-ups, WalletHub gauged the relative entrepreneurial opportunities that exist in the 150 largest U.S. cities. We analyzed each city across two key dimensions, namely “Access to Resources” and “Business Environment.” We then identified 13 metrics that are relevant to both dimensions. Our data set is listed below with the corresponding weight for each metric.

For this report, we chose each city according to the size of its population. Please note that city refers to city proper and excludes surrounding metro areas. In addition, the metrics marked with an asterisk were available only at the state level.

Access to Resources – Total Weight: 5

  • Financing Accessibility (Total Annual Value of Small Business Loans Divided by Total Number of Businesses): Full Weight
  • Office Space Affordability (Cost per Square Foot): Full Weight
  • Employee Availability (Number of Job Openings Minus Number of Unemployed Residents): Full Weight
  • Median Annual Income (Labor Costs): Full Weight

Business Environment – Total Weight: 5

  • Corporate Taxes: Full Weight
  • Cost of Living: Full Weight
  • Length of Average Workday: Full Weight
  • Workforce Education Level (Percentage of Population with at Least a Bachelor’s Degree): Full Weight
  • Entrepreneurial Activity: Half* Weight
  • Five-Year Establishment Survival Rate: Half* Weight
  • Number of Small Businesses Per Capita: Half Weight
  • Industry Variety: Half Weight
  • Small Business Friendliness Index: Half* Weight

 
Sources: Data used to create these rankings were obtained from the U.S. Census Bureau, the U.S. Bureau of Labor Statistics, Indeed.com, the Kauffman Foundation, the Tax Foundation, the Council for Community and Economic Research, Thumbtack, LoopNet and the Federal Deposit Insurance Corporation.

Author

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John Kiernan is Senior Writer & Editor at Evolution Finance. He graduated from the University of Maryland with a BA in Journalism, a minor in Sport Commerce & Culture,…
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Discussion

 
Apr 14, 2014
There are many reasons Port St Lucie, FL has few businesses. Definitely do your infrastructure homework, for one.
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