In the landscape of technological advancement, innovation, and entrepreneurship, the United States has become a hotbed for tech startups, fostering groundbreaking ideas and reshaping industries.

Our study explores the states that have become pioneering hubs, fostering a nurturing environment for young entrepreneurs to flourish. On the flip side, we also analyze the challenges the bottom ten states face as they strive to create a brighter future for startups.

Through a thorough analysis of venture capital investments, Science and Engineering (S&E) education rates, workforce statistics, and quality of life indices, we uncover the intricate dynamics shaping tech startup ecosystems nationwide.

Key Findings:

California and Massachusetts lead the way in venture capital investment. Massachusetts holds the top position with $30,608.01 of venture capital per $1M of GDP, followed by California with $29,149.44. Mississippi, on the other hand, stands at the bottom with just $128.10.
Massachusetts again leads in educational attainment, with 38.16 per 1000 18-24 year-olds holding a bachelor's degree in Science and Engineering (S&E). The state with the lowest number is Nevada, where only 13.44 in 1000 18-24 year-olds hold a bachelor's degree in S&E.
Massachusetts and Maryland have the highest percentage of S&E occupants in the workforce, 7.1% and 7.8%, respectively. In comparison, Mississippi has the lowest, with only 2.5%.
Kentucky has the highest business survival rate in the dataset at 52.7%. Mississippi, conversely, has the lowest at 39.5%.
Massachusetts also tops the list regarding quality of life, with a QOL index of 149.7, while California holds the second spot with a QOL index of 137.6. Once again, Mississippi sits at the bottom of the list, with the lowest QOL index of 85.
California has seen the most business applications over the last five years, with an average of 437,447 applications. At the other end of the scale, Mississippi has the fewest average business applications at 46,874.
Colorado and Texas provide favorable tax environments with lower tax rates at 4.4% and Gross Receipts Tax (GRT), respectively. On the other end of the spectrum, Pennsylvania levies a high tax rate of 9%.

The data highlights that states like California and Massachusetts, which excel in key areas such as venture capital investment, educational attainment, workforce composition, quality of life, and entrepreneurial activity, are more likely to be conducive to the growth and development of tech startups. At the same time, states like Mississippi that lag in these areas tend to be less supportive environments for tech startups.

The Best and Worst States to Start a Tech Startup

The 10 Best States to Start a Tech Startup

10 Best States to Start a Tech Startup in 2023

The USA's top ten states for tech startups, including California and North Carolina, are known for innovation, growth, and entrepreneurship. They offer numerous benefits, such as high-quality education, a workforce skilled in Science and Engineering (S&E), considerable tech investment, a strong economy, and good living conditions.

These states stand out with their culture of innovation and resilience. They have many young adults with S&E degrees and workers in S&E fields. They also see a lot of venture capital deals, fostering a positive business environment. This climate helps businesses survive, marking these states ideal for tech startups.

1. California

California takes the top spot with its thriving S&E workforce, with 26.94 bachelor's degrees in S&E per 1000 18 - 24-year-olds and 5.90% S&E occupants in the workforce. It boasts a significant venture capital investment in tech (0.40% of GDP) and impressive business applications (437,447) with a high survival rate of 55.20%.

Data Breakdown for California:

Despite a higher tax rate of 8.80%, the state offers a comfortable average weekly wage of $1,658.50 and a high quality of life index of 137.6, securing its top position with a final score of 88.

Bachelor's in S&E Per 1000 18-24-Year-Olds: 26.94
S&E Occupants in Workforce: 5.90%
Venture Capital Deals in Tech & Knowledge: 0.40%
Venture Capital Per $1M of GDP: $29,149.44
Avg Business Application in Last 5 Years: 437,447
Business Survival Rate: 55.20%
Tax Rate: 8.80%
Avg Weekly Wage: $1,658.50
QOL Index: 137.6
Final Score: 88

2. New York

New York ranks second with strong representation in S&E education and workforce (31.05 bachelor's degrees in S&E per 1000 18-24-year-olds and 4.40% S&E occupants in the workforce). The state sees a higher percentage of venture capital deals in tech (0.50% of GDP). It has a substantial number of business applications (264,837) with a survival rate of 53.90%.

The state's lower tax rate of 6.50% and an average weekly wage of $1,756.50 contribute to a quality of life index of 134.5, resulting in a final score of 76.13.

Data Breakdown for New York:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 31.05
S&E Occupants in Workforce: 4.40%
Venture Capital Deals in Tech & Knowledge: 0.50%
Venture Capital Per $1M of GDP: $13,693.90
Avg Business Application in Last 5 Years: 264,837
Business Survival Rate: 53.90%
Tax Rate: 6.50%
Avg Weekly Wage: $1,756.50
QOL Index: 134.5
Final Score: 76.13

3. Massachusetts

Massachusetts ranks third with an impressive 38.16 bachelor's degrees in S&E per 1000 18-24 year-olds and 7.10% S&E occupants in the workforce. It has a reasonable venture capital investment in tech (0.40% of GDP). It sees many business applications (65,308) with a survival rate of 55.00%. With an 8.00% tax rate and an average weekly wage of $1,757.00, the state offers a high quality of life index of 149.7, resulting in a final score of 74.8.

Data Breakdown for Massachusetts:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 38.16
S&E Occupants in Workforce: 7.10%
Venture Capital Deals in Tech & Knowledge: 0.40%
Venture Capital Per $1M of GDP: $30,608.01
Avg Business Application in Last 5 Years: 65,308
Business Survival Rate: 55.00%
Tax Rate: 8.00%
Avg Weekly Wage: $1,757.00
QOL Index: 149.7
Final Score: 74.8

4. Florida

Florida secures the fourth spot with a relatively lower percentage of S&E graduates (20.57 bachelor's degrees in S&E per 1000 18-24-year-olds) and 3.60% S&E occupants in the workforce. It has a limited venture capital investment in tech (0.10% of GDP). Still, it makes up for it with many business applications (507,669) and a reasonable survival rate of 50.20%.

With a lower tax rate of 5.50% and an average weekly wage of $1,203.50, the state has a quality of life index of 102.8, resulting in a final score of 73.55.

Data Breakdown for Florida:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 20.57
S&E Occupants in Workforce: 3.60%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $2,835.03
Avg Business Application in Last 5 Years: 507,669
Business Survival Rate: 50.20%
Tax Rate: 5.50%
Avg Weekly Wage: $1,203.50
QOL Index: 102.8
Final Score: 73.55

5. Texas

Texas ranks fifth, with 16.3 bachelor's degrees in S&E per 1000 18-24-year-olds and 4.90% S&E occupants in the workforce. The state's venture capital investment in tech is relatively low (0.10% of GDP), but it sees a considerable number of business applications (392,189) with a survival rate of 51.50%.

With a General Revenue Tax and an average weekly wage of $1,338.75, the state has a quality of life index of 92.5, resulting in a final score of 68.28.

Data Breakdown for Texas:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 16.3
S&E Occupants in Workforce: 4.90%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $2,825.53
Avg Business Application in Last 5 Years: 392,189
Business Survival Rate: 51.50%
Tax Rate: GRT
Avg Weekly Wage: $1,338.75
QOL Index: 92.5
Final Score: 68.28

6. Delaware

Delaware takes the sixth spot, boasting a relatively high number of S&E graduates (31.05 bachelor's degrees in S&E per 1000 18-24-year-olds) and 5.70% S&E occupants in the workforce. It sees a significant venture capital investment in tech (0.70% of GDP) and a decent number of business applications (34,877) with a survival rate of 45.00%.

Despite a higher tax rate of 8.70%, the state offers an average weekly wage of $1,303.00 and a quality of life index of 105.6, resulting in a final score of 66.96.

Data Breakdown for Delaware:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 31.05
S&E Occupants in Workforce: 5.70%
Venture Capital Deals in Tech & Knowledge: 0.70%
Venture Capital Per $1M of GDP: $10,215.11
Avg Business Application in Last 5 Years: 34,877
Business Survival Rate: 45.00%
Tax Rate: 8.70%
Avg Weekly Wage: $1,303.00
QOL Index: 105.6
Final Score: 66.96

7. Colorado

Colorado ranks seventh with 28.82 bachelor's degrees in S&E per 1000 18-24 year-olds and 7.30% S&E occupants in the workforce. The state's venture capital investment in tech is 0.30% of GDP, supporting nearly 100,000 business applications.

With a survival rate of 50.60% and a lower tax rate of 4.40%, the state offers an average weekly wage of $1,427.25 and a quality of life index of 104.6, resulting in a final score of 66.68.

Data Breakdown for Colorado:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 28.82
S&E Occupants in Workforce: 7.30%
Venture Capital Deals in Tech & Knowledge: 0.30%
Venture Capital Per $1M of GDP: $8,053.15
Avg Business Application in Last 5 Years: 99,471
Business Survival Rate: 50.60%
Tax Rate: 4.40%
Avg Weekly Wage: $1,427.25
QOL Index: 104.6
Final Score: 66.68

8. Virginia

Virginia secures the eighth spot with 28.11 bachelor's degrees in S&E per 1000 18-24 year-olds and 7.70% S&E occupants in the workforce. The state's venture capital investment in tech is 0.10% of GDP, supporting over 100,000 business applications. With a survival rate of 52.00% and a 6.00% tax rate, the state offers an average weekly wage of $1,347.75 and a quality of life index of 102.8, resulting in a final score of 62.72.

Data Breakdown for Virginia:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 28.11
S&E Occupants in Workforce: 7.70%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $2,671.07
Avg Business Application in Last 5 Years: 107,666
Business Survival Rate: 52.00%
Tax Rate: 6.00%
Avg Weekly Wage: $1,347.75
QOL Index: 102.8
Final Score: 62.72

9. Maryland

Maryland ranks ninth, excelling in education and S&E workforce, with 32.58 bachelor's degrees in S&E per 1000 18-24-year-olds and 7.80% S&E occupants in the workforce. The state's venture capital investment in tech is 0.20% of GDP, supporting nearly 100,000 business applications.

With a survival rate of 51.10% and a higher tax rate of 8.30%, the state offers an average weekly wage of $1,357.75 and a quality of life index of 124, resulting in a final score of 62.72.

Data Breakdown for Maryland:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 32.58
S&E Occupants in Workforce: 7.80%
Venture Capital Deals in Tech & Knowledge: 0.20%
Venture Capital Per $1M of GDP: $3,357.05
Avg Business Application in Last 5 Years: 92,795
Business Survival Rate: 51.10%
Tax Rate: 8.30%
Avg Weekly Wage: $1,357.75
QOL Index: 124
Final Score: 62.72

10. North Carolina

North Carolina takes the tenth spot, with 21.8 bachelor's degrees in S&E per 1000 18-24-year-olds and 5.00% S&E occupants in the workforce. The state's venture capital investment in tech stands at 0.10% of GDP, supporting nearly 135,000 business applications.

With a survival rate of 51.40% and a lower tax rate of 2.50%, the state offers an average weekly wage of $1,202.00 and a quality of life index of 95.7, resulting in a final score of 60.51.

Data Breakdown for North Carolina:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 21.8
S&E Occupants in Workforce: 5.00%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $4,265.55
Avg Business Application in Last 5 Years: 134,909
Business Survival Rate: 51.40%
Tax Rate: 2.50%
Avg Weekly Wage: $1,202.00
QOL Index: 95.7
Final Score: 60.51

The top ten states for tech startups in the USA prioritize education and Science and Engineering (S&E) skills. They attract a lot of venture capital for tech and create a supportive startup environment. These states see many business applications and startups that survive, proving their tech ecosystems are thriving.

Some states are known for low taxes, while others provide high wages and good living conditions. These states are vibrant innovation hubs with various factors contributing to their success in the tech startup world.

The 10 Worst States to Start a Tech Startup

10 Worst States to Start a Tech Startup in 2023

The bottom ten states for tech startups in the USA face several challenges that make them less attractive to entrepreneurs. They generally have lower education levels in Science and Engineering (S&E), fewer workers in the S&E field, limited venture capital, and a less friendly business environment. These issues hinder their ability to support tech startups.

Additionally, they have lower weekly wages, lower quality of life, and fewer business applications. Although these states have room for improvement, their current circumstances make it harder for tech startups to succeed.

1. Mississippi

Mississippi ranks last with a few bachelor's degrees in S&E per 1000 18-24-year-olds (15.7) and a relatively small percentage of S&E occupants in the workforce (2.50%). It lacks significant venture capital investment in tech, and the average weekly wage is relatively low at $882.50.

The business survival rate is also low at 39.50%, contributing to its final score 35.

Data Breakdown for Mississippi:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 15.7
S&E Occupants in Workforce: 2.50%
Venture Capital Deals in Tech & Knowledge: 0.00%
Venture Capital Per $1M of GDP: $128.10
Avg Business Application in Last 5 Years: 46,874
Business Survival Rate: 39.50%
Tax Rate: 4.00%
Avg Weekly Wage: $882.50
QOL Index: 85
Final Score: 35

2. Kansas

Kansas ranks 49th with 20.42 bachelor's degrees in S&E per 1000 18-24 year-olds and 4.40% S&E occupants in the workforce.

There is no significant venture capital investment in tech, and the state has a low business survival rate of 46.90%. The average weekly wage is $1,089.00, contributing to a final score 45.8.

Data Breakdown for Kansas:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 20.42
S&E Occupants in Workforce: 4.40%
Venture Capital Deals in Tech & Knowledge: 0.00%
Venture Capital Per $1M of GDP: $1,139.57
Avg Business Application in Last 5 Years: 26,764
Business Survival Rate: 46.90%
Tax Rate: 4.00%
Avg Weekly Wage: $1,089.00
QOL Index: 87.5
Final Score: 45.8

3. Nevada

Nevada ranks 48th with 13.44 bachelor's degrees in S&E per 1000 18-24 year-olds and 2.50% S&E occupants in the workforce. Although it has a small venture capital investment in tech (0.20% of GDP), the business survival rate is relatively high at 47.60%.

The state has a General Revenue Tax (GRT). It offers an average weekly wage of $1,160.50, resulting in a final score 46.14.

Data Breakdown for Nevada:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 13.44
S&E Occupants in Workforce: 2.50%
Venture Capital Deals in Tech & Knowledge: 0.20%
Venture Capital Per $1M of GDP: $4,286.25
Avg Business Application in Last 5 Years: 54,220
Business Survival Rate: 47.60%
Tax Rate: GRT
Avg Weekly Wage: $1,160.50
QOL Index: 103.2
Final Score: 46.14

4. Arkansas

Arkansas ranks 47th with 16.03 bachelor's degrees in S&E per 1000 18-24-year-olds and 3.00% S&E occupants in the workforce. The state has a modest venture capital investment in tech (0.10% of GDP) and a survival rate of 47.50%.

The tax rate is 1.00%, and the average weekly wage is $1,026.75, resulting in a final score of 47.44.

Data Breakdown for Arkansas:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 16.03
S&E Occupants in Workforce: 3.00%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $2,486.27
Avg Business Application in Last 5 Years: 32,723
Business Survival Rate: 47.50%
Tax Rate: 1.00%
Avg Weekly Wage: $1,026.75
QOL Index: 90.6
Final Score: 47.44

Connecticut

Connecticut ranks 46th with 26.66 bachelor's degrees in S&E per 1000 18-24 year-olds and 5.20% S&E occupants in the workforce. The state has a small venture capital investment in tech (0.10% of GDP) and a survival rate of 48.50%.

With a higher tax rate of 7.50%, the average weekly wage is $1,569.25, resulting in a final score of 47.56.

Data Breakdown for Connecticut:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 26.66
S&E Occupants in Workforce: 5.20%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $3,919.72
Avg Business Application in Last 5 Years: 39,348
Business Survival Rate: 48.50%
Tax Rate: 7.50%
Avg Weekly Wage: $1,569.25
QOL Index: 116.8
Final Score: 47.56

6. Tennessee

Tennessee ranks 45th with 16.7 bachelor's degrees in S&E per 1000 18-24 year-olds and 3.30% S&E occupants in the workforce. It has a limited venture capital investment in tech (0.10% of GDP) but a higher business survival rate of 51.00%.

The state's tax rate is 6.50%, and the average weekly wage is $1,190.00, resulting in a final score of 48.12.

Data Breakdown for Tennessee:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 16.7
S&E Occupants in Workforce: 3.30%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $1,998.39
Avg Business Application in Last 5 Years: 75,613
Business Survival Rate: 51.00%
Tax Rate: 6.50%
Avg Weekly Wage: $1,190.00
QOL Index: 90.2
Final Score: 48.12

7. Nebraska

Nebraska ranks 44th with 22.24 bachelor's degrees in S&E per 1000 18-24 year-olds and 4.40% S&E occupants in the workforce. The state has a limited venture capital investment in tech (0.10% of GDP) but a reasonable % business survival rate of 48.70%. With a tax rate of 5.60%, the average weekly wage is $1,078.00, resulting in a final score of 48.33.

Data Breakdown for Nebraska:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 22.24
S&E Occupants in Workforce: 4.40%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $1,287.46
Avg Business Application in Last 5 Years: 17,514
Business Survival Rate: 48.70%
Tax Rate: 5.60%
Avg Weekly Wage: $1,078.00
QOL Index: 91.9
Final Score: 48.33

8. Louisiana

Louisiana ranks 43rd with 17.29 bachelor's degrees in S&E per 1000 18-24 year-olds and 2.40% S&E occupants in the workforce. The state's venture capital investment in tech is relatively low (0.10% of GDP).

Still, it has a reasonable business survival rate of 50.50%. With a 3.50% tax rate, the average weekly wage is $1,079.50, resulting in a final score of 49.52.

Data Breakdown for Louisiana:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 17.29
S&E Occupants in Workforce: 2.40%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $378.44
Avg Business Application in Last 5 Years: 74,953
Business Survival Rate: 50.50%
Tax Rate: 3.50%
Avg Weekly Wage: $1,079.50
QOL Index: 93.6
Final Score: 49.52

9. Kentucky

Kentucky ranks 42nd with 16.92 bachelor's degrees in S&E per 1000 18-24 year-olds and 3.20% S&E occupants in the workforce. It has a limited venture capital investment in tech (0.10% of GDP). Still, the state's business survival rate is relatively high at 52.70%. With a 5.00% tax rate, the average weekly wage is $1,057.00, resulting in a final score of 50.06.

Data Breakdown for Kentucky:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 16.92
S&E Occupants in Workforce: 3.20%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $1,478.76
Avg Business Application in Last 5 Years: 39,766
Business Survival Rate: 52.70%
Tax Rate: 5.00%
Avg Weekly Wage: $1,057.00
QOL Index: 94.9
Final Score: 50.06

10. New Mexico

New Mexico ranks 41st with 15.48 bachelor's degrees in S&E per 1000 18-24 year-olds and 4.70% S&E occupants in the workforce. It has a limited venture capital investment in tech (0.10% of GDP). Still, the state's business survival rate is relatively reasonable at 49.20%. With a 4.80% tax rate, the average weekly wage is $1,011.00, resulting in a final score of 50.29.

Data Breakdown for New Mexico:

Bachelor's in S&E Per 1000 18-24-Year-Olds: 15.48
S&E Occupants in Workforce: 4.70%
Venture Capital Deals in Tech & Knowledge: 0.10%
Venture Capital Per $1M of GDP: $2,015.70
Avg Business Application in Last 5 Years: 21,107
Business Survival Rate: 49.20%
Tax Rate: 4.80%
Avg Weekly Wage: $1,011.00
QOL Index: 94
Final Score: 50.29

Methodology

Our ranking methodology for the best and worst states for tech startups is based on an analysis of several key metrics that significantly influence the success and viability of startups. These metrics collectively offer a comprehensive overview of each state's business climate, financial support, and workforce competency.

We assessed all 50 states in the US based on nine different criteria and assigned a score out of 100 for each measure. These individual scores were then combined and weighted to obtain a final score of 100.

Research Objective

This research aims to pinpoint and compare the top and bottom ten states for tech startups in the USA. We examined various aspects like education, workforce, tech investment, business climate, and living standards.

Data Collection and Sources

We collect data on each state's performance in these areas from trustworthy, official sources. Initial data includes key indicators such as the number of S&E bachelor's degrees among 18-24-year-olds, percentage of the workforce in S&E fields, venture capital deals in tech, average business applications, survival rates, tax rates, average weekly wages, and quality of life index.

Data was sourced from government-run websites like the National Center for Science and Engineering Statistics, the United States Census Bureau, the Bureau of Labor Statistics, the Tax Foundation, and the Missouri Economic Research and Information Center.

Data Analysis

We use suitable statistical methods to analyze the data and rank each state on the factors listed. The data is organized, compared, and weighted based on the importance of each factor to give a complete ranking.

Ranking and Scoring

Each state is ranked on each factor, and we use a scoring system to assign weights to different factors based on their importance to tech startups. We then rank the states by their total scores.

Interpretation and Insights

We interpret the analysis results to understand the strengths and weaknesses of the top and bottom ten states for tech startups. We identify patterns, trends, and correlations in the factors influencing a state's tech startup performance.

Limitations

We discuss any study limitations, such as data availability, quality, or potential biases, to provide transparency and context to the results.

Conclusion

This research provides valuable insights into the best and worst states for tech startups in the USA, guiding policymakers, entrepreneurs, and investors in understanding a thriving tech ecosystem.

The study shows that top states like California do well because of quality education, skilled labor, ample venture capital, and a favorable business environment. These elements drive their success in tech startups.

Parallelly, states ranked lower face challenges with education and limited venture capital, which restricts their tech growth. However, addressing these issues can create a better environment for tech startups, promoting innovation, economic development, and jobs across the country.

Due Diligence Services

These firms rely on our M&A expertise