NC ranks the fifth best state for new startups

RALEIGH – Think you could take the entrepreneurship leap and start a business in North Carolina? You may find that the entrepreneurial ecosystem in the Tar Heel State is quite friendly and focused on your potential success.

That’s because the state ranks among the best in the nation when it comes to infrastructure, business climate and access to capital, according to a new study by Lensa, a US-focused job board.

Although North Carolina didn’t crack first place, it finished fifth behind Texas, Georgia, California and Illinois.

Ohio, Minnesota, Massachusetts, Colorado and New Jersey rounded out the top 10 states.

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What’s happening

There are signs that North Carolina’s entrepreneurial economy continues to grow, even in a macro environment where the flow of venture capital transactions appears to be slowing.

Take this week’s NC IDEA 2022 Ecosystem Summit, where the organization announced it awarded $2.3 million in grants this quarter alone to help boost nationwide startup ecosystems as well as certain businesses through non-dilutive grants support financially.

And remember, even as the economy changes and many worry about layoffs, the rate of new business creation continues to rise.

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Behind the ranking

The analysis tracked eight key metrics associated with startup success, including new business applications, business survival rate, rate of new entrepreneurs, corporate tax rate, percentage of the state’s population who had earned a bachelor’s degree or higher, average labor costs Per capita income in 2020 dollars, the cost of living, and a measure of access to venture capital compared to total venture capital disbursed per $1 million of government gross domestic product.

North Carolina had 171,355 business formations, according to the analysis, which pulled data on that metric from the United States Census Bureau. But the North Carolina Secretary of State’s office has been pursuing a little more than that in 2021, WRAL TechWire reported in January.

And Secretary of State Elaine Marshall told WRAL TechWire in August that the pace of startups remained “hot” in 2022, with 93,000 startups nationwide through mid-year.

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The Lensa analysis also found that North Carolina’s business survival rate surpassed every other top five states except California, with a 7.03% survival rate.

North Carolina also scores above its weight in venture capital paid out per $1 million of state gross domestic product, according to the study, at $6,082, ranking third among the top 10 states in the study.

At $3,000, that’s more than twice the price of first place finisher in Texas and more than second place finisher in Georgia ($3,824) and fourth place finisher in Illinois ($4,175). Still, third-place California and eighth-place Massachusetts top the field at $29,416 and $31,792, respectively, and ninth-place Colorado also tops North Carolina at $8,193.

North Carolina also led the top ten spots in the labor cost study, at $31,993, slightly beating Texas, Georgia and Ohio. However, this measure was analyzed using data from the United States Census Bureau for 2016-2020 as average trailing 12-month per capita income expressed in 2020 dollars.