The Kansas City and St. Louis metro areas both saw increases in startup growth in the last year and maintained or improved their position in a ranking of metro areas by growth business activity, according to the 2016 Kauffman Index of Growth Entrepreneurship.
The report, released Thursday by the Kansas City-based Ewing Marion Kauffman Foundation, measured 40 metropolitan areas across the U.S. on the basis of three criteria: rate of startup growth, share of scaleups, and density of high-growth companies. Those three indicators were equally weighted to produce the growth entrepreneurship index, by which the 40 markets were then ranked.
Kansas City maintained its ranking from 2015, at No. 24. St. Louis moved up two spots, to No. 29 from No. 31.
This year’s top three metro areas were Washington; Austin, Texas; and San Jose, Calif. Detroit had the lowest ranking.
For the Kansas City area, the startup growth rate increased to 54.43 percent this year from 40.84 percent in 2015. The index defines the rate of startup growth as how much a city’s startup employee counts have grown, on average, in the five years since companies were founded.
Kansas City’s number of scaleups, defined as small firms that have grown to employ more than 50 people in 10 years, increased slightly, to 1.81 percent from 1.73 percent.
However, Kansas City saw a slight dip in the number of high-growth companies per 100,000 private businesses, which dropped to 87.4 this year from 90.2 in 2015. High-growth companies are defined as private businesses with at least $2 million in annual revenue that achieve three years of 20 percent annualized growth.
In St. Louis, there was a sizable uptick in startup growth, to 67.05 percent in 2016 from 38.01 percent last year. The share of scaleups increased marginally since last year, to 1.44 percent from 1.42 percent. The rate of high-growth companies dropped slightly, to 68.6 from 70.6.
Overall, the report noted that the geography of entrepreneurship growth was widespread, with growth occurring on both coasts and in the Midwest. It also reported that entrepreneurial businesses are growing for the third year in a row, suggesting steady recovery from the recession. Additionally, the report noted, startups are growing faster in their first five years, and more companies are expanding.