The 10 Most Affordable Startup Hubs

by John Egan

When Americans think of startup hubs, places like San Francisco, CA, and Austin, TX, instantly come to mind. However, some entrepreneurs balk at setting up shop in San Francisco or Austin, given the high cost of living in the former and the rising cost of living in the latter.

Fortunately, San Francisco and Austin aren’t the only spots that are nurturing the Facebooks and Googles of the future. In the Kauffman Foundation’s new ranking of startup activity in the U.S., metro areas like Columbus, OH, and Kansas City, MO, earn higher grades than bigger -- and more expensive -- areas such as Boston, MA, and Seattle, WA.

If you’re an entrepreneur who’s bootstrapping a startup, the cost of putting a roof over your head or filling up your gas tank might tip the scale toward living in an area like Kansas City rather than San Francisco.

Some startups have been priced out of markets like San Francisco.
Photo: Flickr/David D’Amico

‘Too Expensive’

In a recent blog post, venture capitalist Fred Wilson envisions that over the next five to 10 years, more and more tech companies will shy away from high-priced places like San Francisco and New York City, NY, in favor of areas where it costs less to do business.

“That’s a very healthy and positive dynamic for everyone, including the big tech centers that are increasingly getting too expensive to live in for many tech employees,” Wilson writes.

Affordable Areas

In light of the looming shift described by Wilson, we here at LawnStarter, an Austin-based tech startup, wondered which startup hubs are not too expensive for employees and entrepreneurs.

To compile our ranking, we started with the top 20 metro areas in the latest Kauffman Index of Startup Activity, which measures the healthiness of startup activity in a metro. The Kauffman Foundation, based in Kansas City, produces the index. We then looked at the median home price per square foot in each metro, as determined by Trulia, and the median monthly rent for a one-bedroom apartment, as reported by Apartment List. Finally, we added each metro area’s cost-of-living rank to the mix, with those figures courtesy of Expatistan.com.

We assigned 25 percent of a metro’s score to median home price, 25 percent to median monthly rent and 50 percent to overall cost of living. Our ranking takes into consideration the costs of an entrepreneur or employee to live in a startup hub; it does not include business expenses, such as payroll and office rent.

San Antonio-based Codeup trains people to become software developers.
Photo: Flickr/Roger

‘The Good Life’

After we did those calculations, San Antonio, TX, rose to the top of our list.

“San Antonio truly provides ‘the good life’ with an excellent business climate and an attractive, affordable lifestyle,” the San Antonio Economic Development Foundation says on its website. “Not only do employees enjoy working in San Antonio, they appreciate the lifestyle and cost of living. San Antonio’s cost of living continues to rank among the lowest of U.S. cities, particularly among large metropolitan areas.”

Michael Girdley, co-founder of Codeup, a San Antonio-based startup that trains people to become software developers, says the low cost of living in the Alamo City actually isn’t a huge selling point for startups.

“This is a great place to live and the people here love being on the ground floor of something great. It’s a magical time in San Antonio now,” Girdley says.

However, he does note that San Antonio is “a great place to find a mate and settle down when you can’t afford it in other places.”

Local official Nelson Wolff announces the Tech Fuel startup competition in San Antonio.
Photo: Silicon Hills News

Talent Pool

From the perspective of startups, San Antonio also is a great place to find employees.

“I can ... hire qualified people here in San Antonio, while in Austin, I can’t find people easily — they already have jobs at Facebook or Google,” Jason Luce, co-founder and CEO of San Antonio-based tech startup ScaleFT, tells the Rivard Report. “San Antonio today is ripe; it’s where Austin was 10 years ago.”

Most Affordable Startup Hubs

With San Antonio holding the No. 1 position, here is our list of the 10 Most Affordable Startup Hubs. As you might imagine, San Francisco, New York and Austin don’t appear on the list.

1. San Antonio, TX

Photo: Flickr/Nan Palermo

Kauffman startup rank: 13
Median home price per square foot: $90.42
Median monthly rent for 1-bedroom apartment: $850
Cost-of-living rank in U.S.: 55 (higher number is better)

2. Phoenix, AZ

Photo: Flickr/Alan Stark

Kauffman startup rank: 10
Median home price per square foot: $130.31
Median monthly rent for 1-bedroom apartment: $840
Cost-of-living rank in U.S.: 46 (higher number is better)

3. Kansas City, MO

Photo: Flickr/Susan T

Kauffman startup rank: 18
Median home price per square foot: $216.72
Median monthly rent for 1-bedroom apartment: $710
Cost-of-living rank in U.S.: 51 (higher number is better)

4. TampaSt. Petersburg, FL

Photo: Flickr/John T. Howard

Kauffman startup rank: 19
Median home price per square foot: $78.79
Median monthly rent for 1-bedroom apartment: $1,000
Cost-of-living rank in U.S.: 35 (higher number is better)

5. Columbus, OH

Photo: Flickr/Always Shooting

Kauffman startup rank: 14
Median home price per square foot: $101.63
Median monthly rent for 1-bedroom apartment: $790
Cost-of-living rank in U.S.: 33 (higher number is better)

6. Nashville, TN

Photo: Flickr/Serge Melki

Kauffman startup rank: 16
Median home price per square foot: $95.72
Median monthly rent for 1-bedroom apartment: $1,290
Cost-of-living rank in U.S.: 29 (higher number is better)

7. Las Vegas, NV

Photo: Flickr/Tracy Hunter

Kauffman startup rank: 5
Median home price per square foot: $203.14
Median monthly rent for 1-bedroom apartment: $850
Cost-of-living rank in U.S.: 28 (higher number is better)

8. Dallas, TX

Photo: Flickr/Daxis

Kauffman startup rank: 12
Median home price per square foot: $110.25
Median monthly rent for 1-bedroom apartment: $1,210
Cost-of-living rank in U.S.: 27 (higher number is better)

9. Houston, TX

Photo: Flickr/Fernando Garcia

Kauffman startup rank: 7
Median home price per square foot: $90.83
Median monthly rent for 1-bedroom apartment: $1,130
Cost-of-living rank in U.S.: 24 (higher number is better)

10. Atlanta, GA

Photo: Flickr/Dinh Tran, Esq.

Kauffman startup rank: 15
Median home price per square foot: $91.23
Median monthly rent for 1-bedroom apartment: $1,380
Cost-of-living rank in U.S.: 23 (higher number is better)

Data and photo sources

http://www.kauffman.org/microsites/kauffman-index/rankings/metropolitan-area?Report=StartupActivity&Indicator=Rank
http://www.trulia.com/blog/trends/room-to-roam/
https://www.apartmentlist.com/rentonomics/national-rent-data/
https://www.expatistan.com/cost-of-living
https://www.flickr.com/photos/nanpalmero/