This Is Now the Most Popular City in the U.S. for New Businesses

Anna Hensel

Meanwhile, the Bay Area continues to lose its appeal for fledgling entrepreneurs.

It's official: the hottest place for new startup activity is the South.

That's according to the Kauffman Foundation, which released Thursday its annual Startup Activity Index detailing national, state, and metro area trends in entrepreneurship in the U.S. The metro area that was deemed to have the highest amount of startup activity wasn't San Jose or San Francisco, but Miami.

Along with topping the overall list, the Miami metro area tied with Los Angeles for the highest rate of new entrepreneurs in the 39 metro areas that Kauffman analyzed, with a rate of 0.56 percent. That means that in a given month, 560 out of 100,000 adults in Miami started a new business. Miami also had the second-highest startup density on the list--measured as the number of startups less than than one year old per 1,000 businesses with at least one employee. There are nearly 108 startups for every thousand employer businesses in Miami.

Miami has consistently ranked highly on Kauffman's Startup Activity Index for the past several years, coming in at No. 2 last year. However, this doesn't necessarily mean that South Florida is poised to become the next Silicon Valley. Kauffman includes both incorporated and unincorporated businesses, as well as businesses with no employees, when calculating the rate of new entrepreneurs. Not all of these businesses will turn into venture-backed startups.

Meanwhile, two of the metro areas traditionally thought of as popular startup hubs--San Francisco and San Jose--both dropped significantly in Kauffman's Startup Activity Index this year from last year. San Francisco, which ranked last year as the metro area with the fourth highest-amount of startup activity, ranked No.14 on Kauffman's list this year.

"In San Francisco and San Jose, there are simply less people trying their hands at entrepreneurship--going full-time on their businesses" Arnobio Morelix, a senior research analyst from the Kauffman Foundation, said in an email. In San Francisco, the rate of new entrepreneurs declined from 0.46 to 0.37 percent from 2016 to 2017. In the same period of time, the rate of new entrepreneurs in San Jose dropped from 0.31 to 0.25 percent.

Miami's startup scene has been buoyed in particular by support from the Knight Foundation, which has made more than 200 investments totaling $25 million in entrepreneurial initiatives in the city of Miami over the last five years. The Knight Foundation has invested money in EndeavorMiami (an organization that aims to help "high-impact businesses" scale), as well Europe's largest startup accelerator, StartupBootcamp.

StartupBootcamp announced in 2015 that it would be launching its first U.S. accelerator--one focused on identifying startups in the digital health field--in Miami. Miami is becoming known as a hub for healthcare startups thanks to its proximity to eight different hospitals, including the Nicklaus Children's Hospital. Another advantage the city has over other startup hubs is access to a talent pool with a global background. About 60 percent of Miami's population is foreign-born, according to Census data.

"We see this as a key differentiator and an enormous asset in a world where technology needs to be built by the people that use it," Matt Haggman, the Knight Foundation program director for Miami, said in an email.

Like many other second-or-third tier startup markets, one of the biggest challenges Miami businesses face is finding top technical talent. Andrs Fcil, the managing director and founder of digital marketing company WMT, which was no. 298 on this year's Inc. 5000 list, says his company has circumvented this problem by hiring engineers who can work remotely from the Bay Area. But Fcil says that "there's been an emergence of coding academies," in Miami over the past few years, adding that, "I think this is an area where there will start to be improvement over the next three or four years."