Survey: Minneapolis-St. Paul Start-Up Climate Is Chilly

Survey: Minneapolis-St. Paul Start-Up Climate Is Chilly

WalletHub survey ranks metro low for startup climate.

MSP business boosters like to brag about the local entrepreneurial climate. But recently, Washington D.C.-based WalletHub ranked both Twin Cities relatively low on its “Best Cities to Start a Business” tally of 150 U.S. cities. WalletHub ranked St. Paul 87th on its list and Minneapolis in 89th place.
 
According to WalletHub, the best city in America to launch a small business is Shreveport, Louisiana. Newark, New Jersey ranks 150th on the list. Sioux Falls, South Dakota ranks 6th.
 
“Three things pulled the Twin Cities toward the bottom of the list: low employee availability, too many pre-existing small businesses and a shorter average workday than most other cities,” said Jill Gonzalez, spokeswoman for WalletHub, in an email.
 
“From an employee's point of view, that last characteristic might sound great. But from an entrepreneurial viewpoint, you want the few employees you have to be willing, and used to, working longer hours. Another caveat is that Minnesota ranks lower on the Kauffman Index compared to other states, which therefore puts these cities at a disadvantage in regards to this particular study,” Gonzalez added.
 
The Kauffman Index of Entrepreneurial Activity, published by the Kansas City-based Ewing Marion Kauffman Foundation, measures the rate of business creation.
 
In the social media age, there is a seemingly endless supply of polls, rankings, surveys and lists on a range of topics with a variety of methodologies behind each study. 
 
A previous 2014 survey from WalletHub itself ranked Minneapolis as the best city to work for a small business. But Gonzalez noted that it’s not fair to compare the two different WalletHub studies: “As you can tell by looking at the previous methodology, we greatly altered and updated the metrics we used. Therefore, direct comparisons cannot responsibly be made.”
 
“It is inconceivable to me that the Twin Cities would not have ranked higher on any national ranking,” says Matt Kramer, president of the St. Paul Area Chamber of Commerce, with respect to the new WalletHub rankings.
 
Noting the large local presence of U.S. Bank and Wells Fargo, Kramer notes: “If you have a legitimate idea, it is not hard to get small business financing.”
 
The WalletHub ranking analyzed 13 different categories for each metro including the affordability of office space, corporate taxes and the number of small businesses per capita.
 
Drilling into the numbers, Minneapolis and St. Paul tied for 24th place on “Financing Accessibility” and also tied for 42nd place on the ranking of businesses still active five years after being established. The highest ranking for Minneapolis was in the “Workforce Education Level” category, where it ranked 12th.
 
“Studies like these are invariably flawed,” says Kramer, who notes that such rankings usually weigh things that cost money, but don’t do a good job of evaluating things that don’t have a specific cost attached. Kramer says that the number one issue he hears about from business owners is about having access to good employees.
 
Numerous other surveys have given the metro solid rankings for its business climate, though their value is questionable. Many national studies lump the Twin Cities area under the “Minneapolis” banner.
 
A different national group, NerdWallet, ranked Minneapolis as the 4th best city for young entrepreneurs in November 2014.
 
In May 2014 NerdWallet ranked Minneapolis 11th on its “Best Cities to Start a Business” list.
 
In November, Forbes magazine ranked Minnesota as 9th in the nation for best climate for business. It was Minnesota’s second year in the top 10 on the Forbes list.
 
A recent CNBC survey, which tracks 56 “measures of competitiveness,” ranked Minnesota as the 6th best state for business in 2014.