The Pittsburgh region’s rate of new business creation improved slightly in the past year — but not enough to boost it from the bottom of a list of 40 metro areas ranked by startup activity.
Pittsburgh tied with Milwaukee, Wisconsin, for 39th place in the latest Startup Activity Index compiled by the Ewing Marion Kauffman Foundation.
A year ago, the Pittsburgh region was ranked 40th and Milwaukee was 39th.
Topping this year’s index was the Miami metro region which includes Fort Lauderdale and Pompano Beach.
Austin, Texas, which ranked first the last couple years, fell to second place.
The index, released Thursday, tracks business creation across industries in each region. Components of the index include the rate of new entrepreneurs starting firms, how many entrepreneurs start businesses based on opportunity vs. necessity, and startup density defined as the number of new businesses as a component of all firms in a metro area.
Startup activity is one in a series of indexes that the Kansas City-based foundation produces as part of its mission to provide research, education and financial resources to promote entrepreneurship.
While some cities that ranked high on the list — such as Miami and Los Angeles — benefit from a much larger population, other factors are at play in those places where startup activity is dynamic and thriving, said Arnobio Morelix, senior research analyst at the foundation.
Capital and other resources for business owners have to be easily accessible, entrepreneurs need to connect with mentors and other business owners, and the region needs not only racial and gender diversity but a diversity of industries and worker skills.
Pittsburgh performs much better on two other indexes produced by Kauffman: one that measures growth of entrepreneurial firms; and the Main Street index that tracks how many small firms survive and grow five years after their launch.
In fact, Pittsburgh ranked first out of 40 metro regions on last year’s Main Street report.
While Pittsburgh still ranked low on the startup activity index this year, the region did see gains in all categories measured.
The rate of new entrepreneurs — adults who started businesses monthly — was 130 out of 100,000, or 0.13 percent, up from 0.12 percent last year.
The percent of entrepreneurs who started businesses for opportunity and were not unemployed just prior to launching their firms jumped to 72 percent from 65 percent last year.
The density of startups in the Pittsburgh area — or number of firms less than a year old that employ the founder and at least one other employee — rose from 53 out of 1,000 to 57 out of 1,000.
“Pittsburgh is improving,” said Mr. Morelix. “This is good news.”
In the Miami area, by comparison, the rate of new entrepreneurs was 0.56 percent, those starting businesses for opportunity were 81 percent of all entrepreneurs, and startup density was 107.8 firms out of 1,000.
Nationwide, startup activity increased for the third consecutive year after falling to its lowest point in two decades after the Great Recession. However, startup activity has yet to hit a pre-recession peak reached in 1996.
Among the factors fueling new firm creation the last few years, said Mr. Morelix, is a growing population of immigrants. About 30 percent of all new entrepreneurs were not born in the U.S. and immigrants are about twice as likely as native-born Americans to start a new company, he said.