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December 4, 2018

The Current State of Tech Startups in the U.S.

In recent decades, tech startups have arguably been among the most profitable and successful in the nation. They’ve turned up all over the world, of course, but the U.S. is one of the top hubs for innovation.

If you understand the current state of tech startups in this country, you have some of the essential tools to start a new tech business if you’re interested in the field.

Startups are Succeeding All Over the Nation

When you think about the regions that host the top tech startups, you probably think automatically of the Silicon Valley in the Bay Area. It’s certainly true that not a few tech firms have launched and prospered there in the past, but according to a report from Zippia, startups may not be having the most success in this region anymore.

The locale may be overcrowded with hungry entrepreneurs trying to create the next unicorn like Google or Apple, which has made it perhaps a little too competitive to succeed. Instead, Zippia found the best places to start a new operation in 2018 and in the future include the following states:
  1. Massachusetts
  2. California
  3. Colorado
  4. Washington
  5. New York
  6. Utah
  7. Virginia
  8. Maryland
  9. Oregon
  10. Texas
The Zippia study authors stated that Massachusetts performed the best for tech startups because “each establishment received an average of $2.5 million to begin operations.” California, including the Silicon Valley, is still a viable option, thanks to the 586 deals the state offers to new companies getting started.

However, it may be better for future hopefuls to look at getting off the ground in regions outside of Silicon Valley if they’d prefer to have less competition. Out of all 50 states, Zippia says that Wyoming, South Dakota, Montana, and Alaska are all terrible places to start a tech business, and Mississippi is the worst of all.

The authors conclude that there are thousands of opportunities for entrepreneurs to get started as long as they have a great idea. A “record $23 billion was invested across 1,416 deals nationwide during Q2. So there’s no time like the present to grab a patent for your game-changing idea,” the study authors say.

The Outlook for Tech Businesses

Opinions are mixed on the general outlook for tech startups in the U.S. Depending on where you’re located, what your idea is, and the target demographic you’re trying to reach, you could be have an excellent shot.

But some tech businesses are on their way out. According to a CNBC report, for example, the Silicon Valley tech bubble is continuing to perform well at the moment, but it may not be long before it pops.

Fewer Silicon Valley unicorns (companies valued at 1 billion dollars or more) are being formed, which signals an oversaturated market. “Billion-dollar start-up valuations are not an indicator of safety. They represent a huge danger of widespread overvaluation,” says Keith Wright, instructor of accounting and information services at the Villanova School of Business.

He argues that we’ve reached a turning point for American tech businesses, and it’s getting harder and harder to create a high-value business. He believes we’ve hit our peak and tech firms will finally begin to fall out of favor.

However, other reports, such as the Zippia study, suggest that successful startups are out there, but it’s essential to identify a market that’s not already overcrowded with competitors. Boston, for example, is becoming a profitable hub for the tech sector, as are other major cities in tech-friendly states.

The popularity of tech is not likely to die out entirely, which means it could still be a potentially profitable industry for the right person with the right idea. Launching a tech business in the future may depend more on choosing a location where one can thrive despite outside competition.

Starting Your Own Tech Business

When you’re starting a tech business, obtaining funding is at least as vital a concern as choosing the best location. Research shows that one of the most common causes of business failure is financial troubles.

Companies that start with insufficient funds or fail to manage them properly are more likely to crash and burn. Startup funding in the tech industry has historically been huge. Tech startups all over the nation landed high-quality deals and crowdfunding money to help them start and run a successful outfit.

Small business startup loans have also helped to keep newer startups alive. They have helped many firms obtain necessary funding.  

If you’re thinking of starting a tech business, it’s vital to understand the market and where you’re heading. You could be opening a brand-new, highly successful operation … as long as you keep the above metrics in mind and do what you have to, to keep it going.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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