Being your own boss can be exhilarating — and risky. An entrepreneur is defined as a solo business owner, which means you reap most of the rewards if successful but shoulder all the downside if your startup fails to get off the ground.
It’s a high-wire act, and one that requires significant capital. Yet entrepreneurs have access to money streams beside their own liquidity. Partners, venture capital and angel investors, hedge funds, crowdfunding, and bank loans can provide the seed funding. Small business loans through the Small Business Administration are also available.
A Cato Institute report notes startup formation declined in 2020 as the pandemic slammed many small and upstart businesses. Yet the decline in startups has been on a downward trajectory since the early 1980s. The startup rate dropped from more than 10% in the early 1980s to 8% in 2018. In 2020, small business revenues and the number of small businesses operating slumped by 30% compared to the previous year.
The report argues states should ease up on regulations to boost entrepreneurial startups. It lists Georgia, South Dakota, North Dakota, Colorado, New Hampshire, Kansas, Indiana, Wyoming, Utah, and Ohio as most welcoming to entrepreneurs. Conversely, Rhode Island, Oregon, Nevada, New York, West Virginia, Washington, Hawaii, California, New Jersey, and Connecticut put up the highest barriers. (Here’s how every state ranks for starting a business in 2021.)
To identify the states with the most successful entrepreneurs, 24/7 Wall St. developed an index based on several indicators measuring venture capital activity, patent activity, and earnings for self-employed workers, using data from PitchBook-National Venture Capital Association Venture Monitor third quarter report, the U.S. Patent and Trademark Office, and the Census Bureau.
Despite the Cato Institute’s citing California as a high-barrier state, the Golden State ranks as No. 1 on the list as the state with the most successful entrepreneurs. The average venture capital deal hit a whopping $22 million, with state’s entrepreneurs granted the most patents.
This is likely not surprising considering California is home to Silicon valley among other tech and business centers. Entrepreneurs are apparently willing to navigate the state’s regulatory hoops and ladders to gain access to its technology hubs, large workforce, and consumer base. (These are large cities where starting a business is worth the risk.)
Similarly, It is not surprising to find Massachusetts, a biotech hub, and Washington – home to Amazon, Microsoft, and more – in the top five. Nor is it surprising to find New York, which boasts the world’s financial capital in New York City, and New Jersey – home to several giant pharmaceuticals like Johnson & Johnson, Pfizer, and Merck – in the top 10. Often, large companies encourage innovation and entrepreneurial spirit and themselves invest in startups.
Click here to see the states with the most successful entrepreneurs
Click here to read our detailed methodology
50. Alaska
> Avg. VC deal size, 2019-2021: $2,769,896 (6th smallest)
> Patents granted in 2020: 9.2 per 100,000 residents (3rd least)
> Earnings premium for self-employed workers: +$361 (the smallest)
> Pct. self-employed workers: 8.2% (6th least)
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49. Hawaii
> Avg. VC deal size, 2019-2021: $2,334,696 (4th smallest)
> Patents granted in 2020: 11.4 per 100,000 residents (5th least)
> Earnings premium for self-employed workers: +$1,462 (2nd smallest)
> Pct. self-employed workers: 10.4% (12th most)
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48. West Virginia
> Avg. VC deal size, 2019-2021: $817,045 (the smallest)
> Patents granted in 2020: 7.5 per 100,000 residents (2nd least)
> Earnings premium for self-employed workers: +$8,585 (21st smallest)
> Pct. self-employed workers: 6.7% (the least)
47. Mississippi
> Avg. VC deal size, 2019-2021: $949,002 (2nd smallest)
> Patents granted in 2020: 6.9 per 100,000 residents (the least)
> Earnings premium for self-employed workers: +$10,328 (19th largest)
> Pct. self-employed workers: 8.5% (13th least)
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46. Oklahoma
> Avg. VC deal size, 2019-2021: $2,900,313 (7th smallest)
> Patents granted in 2020: 17.3 per 100,000 residents (9th least)
> Earnings premium for self-employed workers: +$7,842 (17th smallest)
> Pct. self-employed workers: 10.4% (13th most)
45. Maine
> Avg. VC deal size, 2019-2021: $2,513,897 (5th smallest)
> Patents granted in 2020: 16.9 per 100,000 residents (8th least)
> Earnings premium for self-employed workers: +$8,438 (19th smallest)
> Pct. self-employed workers: 13.9% (2nd most)
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44. Arkansas
> Avg. VC deal size, 2019-2021: $3,356,672 (12th smallest)
> Patents granted in 2020: 17.7 per 100,000 residents (10th least)
> Earnings premium for self-employed workers: +$7,714 (13th smallest)
> Pct. self-employed workers: 9.3% (24th least)
43. New Mexico
> Avg. VC deal size, 2019-2021: $5,164,087 (21st smallest)
> Patents granted in 2020: 24.2 per 100,000 residents (16th least)
> Earnings premium for self-employed workers: +$5,091 (7th smallest)
> Pct. self-employed workers: 8.7% (18th least)
42. Nebraska
> Avg. VC deal size, 2019-2021: $4,529,526 (18th smallest)
> Patents granted in 2020: 22.0 per 100,000 residents (15th least)
> Earnings premium for self-employed workers: +$7,797 (15th smallest)
> Pct. self-employed workers: 9.8% (18th most)
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41. Louisiana
> Avg. VC deal size, 2019-2021: $4,033,395 (15th smallest)
> Patents granted in 2020: 11.0 per 100,000 residents (4th least)
> Earnings premium for self-employed workers: +$10,389 (18th largest)
> Pct. self-employed workers: 10.2% (14th most)
40. Alabama
> Avg. VC deal size, 2019-2021: $3,343,635 (11th smallest)
> Patents granted in 2020: 12.3 per 100,000 residents (6th least)
> Earnings premium for self-employed workers: +$11,301 (11th largest)
> Pct. self-employed workers: 8.6% (16th least)
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39. Wisconsin
> Avg. VC deal size, 2019-2021: $4,047,909 (16th smallest)
> Patents granted in 2020: 50.4 per 100,000 residents (15th most)
> Earnings premium for self-employed workers: +$5,003 (6th smallest)
> Pct. self-employed workers: 8.3% (10th least)
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38. South Carolina
> Avg. VC deal size, 2019-2021: $3,268,633 (10th smallest)
> Patents granted in 2020: 26.5 per 100,000 residents (18th least)
> Earnings premium for self-employed workers: +$11,892 (9th largest)
> Pct. self-employed workers: 9.1% (21st least)
37. Montana
> Avg. VC deal size, 2019-2021: $3,757,754 (13th smallest)
> Patents granted in 2020: 16.7 per 100,000 residents (7th least)
> Earnings premium for self-employed workers: +$12,818 (6th largest)
> Pct. self-employed workers: 14.5% (the most)
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36. Missouri
> Avg. VC deal size, 2019-2021: $7,389,551 (24th largest)
> Patents granted in 2020: 26.9 per 100,000 residents (19th least)
> Earnings premium for self-employed workers: +$8,603 (22nd smallest)
> Pct. self-employed workers: 8.3% (9th least)
35. Kansas
> Avg. VC deal size, 2019-2021: $6,590,735 (23rd smallest)
> Patents granted in 2020: 31.1 per 100,000 residents (21st least)
> Earnings premium for self-employed workers: +$8,625 (23rd smallest)
> Pct. self-employed workers: 9.6% (21st most)
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34. Virginia
> Avg. VC deal size, 2019-2021: $7,079,179 (25th largest)
> Patents granted in 2020: 34.9 per 100,000 residents (24th least)
> Earnings premium for self-employed workers: +$9,577 (24th largest)
> Pct. self-employed workers: 8.3% (11th least)
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33. Rhode Island
> Avg. VC deal size, 2019-2021: $2,993,644 (8th smallest)
> Patents granted in 2020: 47.6 per 100,000 residents (17th most)
> Earnings premium for self-employed workers: +$11,258 (12th largest)
> Pct. self-employed workers: 7.8% (4th least)
32. South Dakota
> Avg. VC deal size, 2019-2021: $8,320,311 (18th largest)
> Patents granted in 2020: 18.5 per 100,000 residents (12th least)
> Earnings premium for self-employed workers: +$9,108 (25th largest)
> Pct. self-employed workers: 12.9% (3rd most)
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31. Delaware
> Avg. VC deal size, 2019-2021: $4,884,582 (19th smallest)
> Patents granted in 2020: 36.3 per 100,000 residents (25th least)
> Earnings premium for self-employed workers: +$11,661 (10th largest)
> Pct. self-employed workers: 8.5% (14th least)
30. Iowa
> Avg. VC deal size, 2019-2021: $3,998,203 (14th smallest)
> Patents granted in 2020: 38.0 per 100,000 residents (22nd most)
> Earnings premium for self-employed workers: +$11,196 (13th largest)
> Pct. self-employed workers: 10.0% (16th most)
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29. Tennessee
> Avg. VC deal size, 2019-2021: $7,842,955 (23rd largest)
> Patents granted in 2020: 21.7 per 100,000 residents (14th least)
> Earnings premium for self-employed workers: +$10,733 (14th largest)
> Pct. self-employed workers: 9.3% (25th least)
28. Arizona
> Avg. VC deal size, 2019-2021: $6,903,463 (24th smallest)
> Patents granted in 2020: 42.3 per 100,000 residents (20th most)
> Earnings premium for self-employed workers: +$7,816 (16th smallest)
> Pct. self-employed workers: 10.1% (15th most)
27. Indiana
> Avg. VC deal size, 2019-2021: $3,213,705 (9th smallest)
> Patents granted in 2020: 37.4 per 100,000 residents (23rd most)
> Earnings premium for self-employed workers: +$12,731 (7th largest)
> Pct. self-employed workers: 7.4% (2nd least)
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26. Maryland
> Avg. VC deal size, 2019-2021: $8,176,519 (20th largest)
> Patents granted in 2020: 41.0 per 100,000 residents (21st most)
> Earnings premium for self-employed workers: +$9,092 (25th smallest)
> Pct. self-employed workers: 8.6% (17th least)
25. Florida
> Avg. VC deal size, 2019-2021: $7,957,135 (22nd largest)
> Patents granted in 2020: 25.4 per 100,000 residents (17th least)
> Earnings premium for self-employed workers: +$10,238 (20th largest)
> Pct. self-employed workers: 11.6% (7th most)
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24. North Carolina
> Avg. VC deal size, 2019-2021: $11,662,184 (9th largest)
> Patents granted in 2020: 36.9 per 100,000 residents (25th most)
> Earnings premium for self-employed workers: +$3,895 (5th smallest)
> Pct. self-employed workers: 9.6% (19th most)
23. Texas
> Avg. VC deal size, 2019-2021: $8,269,605 (19th largest)
> Patents granted in 2020: 44.9 per 100,000 residents (19th most)
> Earnings premium for self-employed workers: +$7,741 (14th smallest)
> Pct. self-employed workers: 9.8% (17th most)
22. Vermont
> Avg. VC deal size, 2019-2021: $9,870,329 (13th largest)
> Patents granted in 2020: 57.6 per 100,000 residents (12th most)
> Earnings premium for self-employed workers: +$3,611 (4th smallest)
> Pct. self-employed workers: 12.6% (4th most)
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21. Colorado
> Avg. VC deal size, 2019-2021: $8,131,782 (21st largest)
> Patents granted in 2020: 64.4 per 100,000 residents (10th most)
> Earnings premium for self-employed workers: +$6,935 (12th smallest)
> Pct. self-employed workers: 11.4% (9th most)
20. Ohio
> Avg. VC deal size, 2019-2021: $8,915,163 (15th largest)
> Patents granted in 2020: 46.1 per 100,000 residents (18th most)
> Earnings premium for self-employed workers: +$8,574 (20th smallest)
> Pct. self-employed workers: 7.6% (3rd least)
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19. Kentucky
> Avg. VC deal size, 2019-2021: $8,841,044 (16th largest)
> Patents granted in 2020: 19.4 per 100,000 residents (13th least)
> Earnings premium for self-employed workers: +$13,376 (5th largest)
> Pct. self-employed workers: 8.3% (7th least)
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18. New Hampshire
> Avg. VC deal size, 2019-2021: $4,256,310 (17th smallest)
> Patents granted in 2020: 80.7 per 100,000 residents (7th most)
> Earnings premium for self-employed workers: +$9,823 (21st largest)
> Pct. self-employed workers: 9.6% (20th most)
17. Idaho
> Avg. VC deal size, 2019-2021: $4,896,175 (20th smallest)
> Patents granted in 2020: 66.4 per 100,000 residents (9th most)
> Earnings premium for self-employed workers: +$9,667 (23rd largest)
> Pct. self-employed workers: 12.5% (5th most)
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16. Georgia
> Avg. VC deal size, 2019-2021: $12,042,143 (7th largest)
> Patents granted in 2020: 31.4 per 100,000 residents (22nd least)
> Earnings premium for self-employed workers: +$10,525 (17th largest)
> Pct. self-employed workers: 9.5% (23rd most)
15. North Dakota
> Avg. VC deal size, 2019-2021: $9,463,026 (14th largest)
> Patents granted in 2020: 18.0 per 100,000 residents (11th least)
> Earnings premium for self-employed workers: +$16,825 (2nd largest)
> Pct. self-employed workers: 11.4% (8th most)
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14. Pennsylvania
> Avg. VC deal size, 2019-2021: $11,785,444 (8th largest)
> Patents granted in 2020: 37.1 per 100,000 residents (24th most)
> Earnings premium for self-employed workers: +$10,594 (16th largest)
> Pct. self-employed workers: 8.1% (5th least)
13. Michigan
> Avg. VC deal size, 2019-2021: $6,913,985 (25th smallest)
> Patents granted in 2020: 75.0 per 100,000 residents (8th most)
> Earnings premium for self-employed workers: +$7,940 (18th smallest)
> Pct. self-employed workers: 8.5% (12th least)
12. Wyoming
> Avg. VC deal size, 2019-2021: $2,042,280 (3rd smallest)
> Patents granted in 2020: 27.3 per 100,000 residents (20th least)
> Earnings premium for self-employed workers: +$23,416 (the largest)
> Pct. self-employed workers: 11.7% (6th most)
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11. Oregon
> Avg. VC deal size, 2019-2021: $6,549,366 (22nd smallest)
> Patents granted in 2020: 96.5 per 100,000 residents (5th most)
> Earnings premium for self-employed workers: +$6,196 (11th smallest)
> Pct. self-employed workers: 11.1% (11th most)
10. Illinois
> Avg. VC deal size, 2019-2021: $11,303,513 (12th largest)
> Patents granted in 2020: 49.1 per 100,000 residents (16th most)
> Earnings premium for self-employed workers: +$12,286 (8th largest)
> Pct. self-employed workers: 8.3% (8th least)
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9. New Jersey
> Avg. VC deal size, 2019-2021: $13,675,659 (5th largest)
> Patents granted in 2020: 56.6 per 100,000 residents (13th most)
> Earnings premium for self-employed workers: +$9,789 (22nd largest)
> Pct. self-employed workers: 8.5% (15th least)
8. Nevada
> Avg. VC deal size, 2019-2021: $11,514,190 (10th largest)
> Patents granted in 2020: 33.3 per 100,000 residents (23rd least)
> Earnings premium for self-employed workers: +$16,034 (4th largest)
> Pct. self-employed workers: 9.0% (20th least)
7. New York
> Avg. VC deal size, 2019-2021: $16,618,753 (3rd largest)
> Patents granted in 2020: 54.5 per 100,000 residents (14th most)
> Earnings premium for self-employed workers: +$8,687 (24th smallest)
> Pct. self-employed workers: 9.1% (22nd least)
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6. Connecticut
> Avg. VC deal size, 2019-2021: $8,596,322 (17th largest)
> Patents granted in 2020: 97.8 per 100,000 residents (4th most)
> Earnings premium for self-employed workers: +$10,682 (15th largest)
> Pct. self-employed workers: 9.4% (24th most)
5. Washington
> Avg. VC deal size, 2019-2021: $11,427,526 (11th largest)
> Patents granted in 2020: 118.4 per 100,000 residents (3rd most)
> Earnings premium for self-employed workers: +$1,557 (3rd smallest)
> Pct. self-employed workers: 9.5% (22nd most)
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4. Minnesota
> Avg. VC deal size, 2019-2021: $15,207,090 (4th largest)
> Patents granted in 2020: 83.7 per 100,000 residents (6th most)
> Earnings premium for self-employed workers: +$5,439 (9th smallest)
> Pct. self-employed workers: 9.2% (23rd least)
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3. Utah
> Avg. VC deal size, 2019-2021: $12,966,235 (6th largest)
> Patents granted in 2020: 62.6 per 100,000 residents (11th most)
> Earnings premium for self-employed workers: +$16,654 (3rd largest)
> Pct. self-employed workers: 9.3% (25th most)
2. Massachusetts
> Avg. VC deal size, 2019-2021: $21,576,408 (2nd largest)
> Patents granted in 2020: 127.5 per 100,000 residents (2nd most)
> Earnings premium for self-employed workers: +$5,833 (10th smallest)
> Pct. self-employed workers: 8.7% (19th least)
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1. California
> Avg. VC deal size, 2019-2021: $22,218,451 (the largest)
> Patents granted in 2020: 128.3 per 100,000 residents (the most)
> Earnings premium for self-employed workers: +$5,386 (8th smallest)
> Pct. self-employed workers: 11.3% (10th most)
Methodology
To identify the states with the most successful entrepreneurs, 24/7 Wall St. developed an index based on several indicators measuring venture capital activity, patent activity, and earnings for self-employed workers.
Specifically, we included these measures:
- The average size of a venture capital deal in each state was calculated using the number of VC deals from Jan. 1, 2019 to Sept. 30, 2021 and the total dollar amount of VC deal activity over the same period with data from PitchBook-National Venture Capital Association Venture Monitor third quarter report. This measure was included in the index at full weight.
- The number of patents issued in 2020 per 100,000 residents in each state was calculated using data on the number of patents granted in 2020 from the United States Patent and Trademark Office and population estimates for July 1, 2020 from the U.S. Census Bureau’s Population and Housing Unit Estimates program. This measure was included in the index at full weight.
- The ratio of average earnings for self-employed workers at incorporated and unincorporated businesses to the average earnings for employed workers was calculated using one-year Public Use Microdata Sample data from the U.S. Census Bureau’s 2019 American Community Survey. and was included in the index at full weight.
Supplemental data on the percentage of workers who are self-employed and the percentage of self-employed workers in each industry also came from the 2019 ACS.
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