Entrepreneurs Are Not California Dreamin’

As the nation’s technology and entertainment capital, California’s entrepreneurial credentials seem impeccable. But a new study by a Massachusetts-based consulting firm says 14 other states have shown themselves to be better places for businesses to grow.

In coming up with its list, Cognetics Inc. measured employment growth at companies no more than 10 years old. It also looked at the proportion of start-ups in a given state, region or city. Areas with higher ratios of entrepreneurial businesses rank higher.

Topping its state ranking is Nevada, followed by Arizona and Utah. In Cognetics’ analysis of the nation’s top 50 metro areas, Phoenix, Salt Lake City-Provo and Atlanta led the list. Los Angeles ranked 36th, behind San Diego at 14 and San Francisco-Oakland-San Jose at 24.

In explaining its results, Cognetics cited several factors that notably omit a favorite gripe of big-city business leaders: infrastructure costs.

“Firms are not locating to minimize taxes or costs associated with labor, energy, transportation, etc. In fact, if there is any pattern, it is a shift to higher-, rather than lower-, cost areas,” the report said.

So what makes an area desirable to entrepreneurs? Cognetics says proximity to universities, skilled labor and airports is essential. An area must also be what it calls a “nice place to live,” with a low crime rate, shopping malls, an easy commute, single-family homes and good schools. Also necessary, Cognetics said, is a culture that accepts entrepreneurs’ often convention-busting business style.