Vibrant college towns. States that are home to cities with a strong university network — and a lifestyle that makes college graduates want to stay — have an edge in attracting businesses that need talent, said LaBombard.
California fares well in this regard, he said. "Los Angeles and San Francisco are go-to cities for college grads," he added, pointing to Texas as another example: "Austin and Dallas are very vibrant." That shows up in our Workforce category, where Texas finishes in eighth place — a major factor in the Lone Star State's No.2 overall ranking.
Utah's abundant talent pool of recent college graduates helped lure Nate Quigley to Provo three years ago to co-found Chatbooks, a site where users can create photobooks, with his wife, Vanessa. He moved from the Melbourne, Florida, area, where he launched his last start-up. With one of the most educated workforces in the nation based on U.S. Census data, Utah finished 12th for Workforce in our ranking.
Salt Lake City is home to universities such as University of Utah, while Provo is home to Brigham Young University and Provo College. "That just fills the state with lots of great talent," said Quigley.
As a result, Quigley has been able to staff up quickly to 30 full-time employees and 40 part-timers. The company hit $5.9 million in revenue in 2015, he said.
Some states have created formal initiatives to connect local universities to employers. In Georgia, for instance, the High Demand Career Initiative, launched under Gov. Nathan Deal, connects Georgia's public university system and the Technical College System of Georgia so educators can hear from the private sector about what skill and degrees are needed. That way, they can create relevant programs, said Chris Carr, commissioner of the Georgia Department of Economic Development.
After finding out from the state's burgeoning film industry that there was a need for trained crew members, the state created the Georgia Film Academy to train workers with production skills in January 2015. "We've had 15 different companies locate in our state since 2011," said Carr.
Abundant financing. Although venture capital deal-making has slowed down, states such as California — which led the country in total venture capital invested in 2015, according to the Moneytree Report by PricewaterhouseCoopers and the National Venture Capital Association — have an edge because of their vibrant investing scenes. So do New York, No. 2, and Massachusetts, No. 3. In terms of small-business lending — the other key element in our Access to Capital rankings — California is tops in overall dollars, and it is in the top third in terms of funds per employee.
States with smaller entrepreneurship hubs also have an advantage. This is especially true in Colorado, where Boulder has an active investing scene, and Utah, where investors are abundant, thanks to the start-up culture in cities such as Salt Lake City and Provo.
One draw for Quigley in launching Chatbooks in Provo was the lively venture capital scene in Utah. His firm has raised $8 million in seed and venture funding — $2 million from two local institutional seed-stage investors, and $6 million from Signal Peak Ventures, a venture capital firm based in Salt Lake City. Utah businesses attracted $732 million in venture capital last year.
"That's what I love about Utah," said Quigley. "We're able to attract the financing we needed to grow the company all right here in Utah."
Low taxes. States that lower the tax burden on companies and individuals have a definite edge in attracting businesses, say experts. It's one of the things we consider in our Cost of Doing Business category, with the help of analysis from the Tax Foundation.
For 2016 the top 10 states with the most business-friendly tax climate, according to the Tax Foundation, were, starting with the best:
- South Dakota
- New Hampshire
Texas has attracted many corporate relocations because of its tax climate, noted Holland O'Neil, chair of the board of directors at Gardere, a law firm based in Dallas. The state — the second-biggest state economy in the United States after California — doesn't have a corporate income tax, state property taxes or individual income taxes, O'Neil said, adding, "Texas is very attractive for business."
Among the relocations are Toyota, which plans to establish its headquarters in Plano and move workers from locations in California, Kentucky and New York by early 2017, for instance. Meanwhile, Liberty Mutual Insurance, based in Boston, expects to open a campus in Plano in 2017.
Some states are competing for the most favorable tax climate. Carr of the Georgia Department of Economic Development noted that Georgia eliminated the state's sales tax on energy use in manufacturing to bring new growth to that industry. "We've seen a real resurgence in manufacturing as a result," he said.