< Previous88 NOVEMBER 2024 SITE SELECTION Site Selection’s 2024 Top State Business Climate Rankings Source: Conway Data Projects Database OVERALL RANKINGSTATE EXECUTIVE SURVEY PTS 2023 CONWAY PROJECTS/ PC PTS 2024 YTD CONWAY PROJECTS/ PC PTS 2024 TAX CLIMATE PTS INC. 5000/PC PTS 2024 RANKINGS THAT MATTER PTS 2024 CNBC TOP STATES PTS 2024 CYBERSTATES TECH EMP/% PTS 2024 INFRA PROJECTS/$ PTS FINAL TOTAL POINTS 1Texas5050/4750/45549/36454849/249/49574 2Georgia4546/4349/463544/46354741/1438/39568 3North Carolina4941/3647/464637/24504940/1336/35549 4Virginia4738/3141/382746/50275046/3134/34540 5Florida4443/1440/124348/47424647/446/45521 6Ohio4148/4646/393035/19254438/748/42508 7Arizona4333/2443/423841/40223934/2129/48497 8Indiana3944/4547/494828/13284027/1743/28496 9Illinois1949/4945/36245/44203644/1045/44488 10Michigan4040/3241/322634/21384235/1144/41477 11Tennessee4834/3037/351038/41494329/1828/30470 12Alabama4235/4043/503627/14333124/2430/20449 13South Carolina4536/4137/483130/25443225/259/17445 14Colorado2428/2632/272740/48153537/3832/32441 15California3647/939/71750/38132850/150/50435 16New York2745/1835/111347/37192948/542/47423 17Missouri129/2931/255029/20473332/2839/27420 18Pennsylvania3142/2727/92043/28243442/841/43419 19Utah1914/629/374433/49373828/4621/14415 20Washington1931/2021/131832/27294145/3340/37406 21Louisiana3832/3936/432026/1731416/931/38380 22Kansas2725/4228/433322/26152223/4513/10374 23Kentucky139/4834/413420/9172422/2224/33368 24Minnesota130/3319/22931/33124533/3433/26361 25Wisconsin127/2330/262523/10453030/2735/2235490 NOVEMBER 2024 SITE SELECTION and works with around 35 independent contractors around the country who deliver web courses and other services to help students ace those tests. “We are a Covid baby,” Koduru says, with those three straight years of Inc. 5000 success coming straight out of the pandemic. But as the company gains critical mass, Koduru sees the need for gathering team members together at a physical location soon, perhaps starting in the Collin County community where those few direct employees convene today. Its name? No joke: Prosper, Texas. A Big Draw “Texas has many advantages which attract business to the state,” says Raymond Garfield, chairman and co- founder of Garfield Public/Private LLC. “Texas is universally known as enterprise friendly.” Garfield leads a financing and legal team that engineers creative financing structures and secures capital for public/ private developments, with a track record over more than 40 years that includes the development or disposition of more than 9,000 acres of urban properties totaling over $1 billion and the financing or sale/ acquisition of major properties totaling over $6 billion nationwide. His firm, he says, “has worked across the nation in other states, including those that are ‘no or slow growth,’ mired in weighty regulations that take years to navigate. By contrast, Texas is pro-growth and accommodating to new businesses and new real estate developments.” Garfield develops nationally and is currently engaged in Texas, Florida, Missouri and Minnesota. “We are pursuing developments in Ohio, Indiana, Illinois, Michigan, New York, Washington and Kansas,” he says. “We look for opportunities nationwide and have confidence in the economies of the states listed, but over the past several years the majority of our activities have been in Texas. Wherever we develop we consider several factors before we compete. The regulatory issues in a state are critical to any decision to move forward. Because we are a public/private developer, almost all our developments are ventures with government agencies, so permitting, entitlements and other issues are minimized because our public clients find these items to be the low-hanging fruit in facilitating their developments. “A few states in which Garfield has competed for projects have provided challenges, and will remain nameless,” he continues, “but key hurdles have included regulatory red tape, lack of unanimity among municipal governing Dr. Karthik Koduru is founder and CEO of Archer Review, an education technology company based in Prosper, Texas. Photos courtesy of Archer Review (continued from page 83)92 NOVEMBER 2024 SITE SELECTION bodies, poor histories of achievement, and inadequate financial credit or funding capacity.” So why is Texas so conducive to development? “Texas has a favorable tax structure with no personal income tax and a minimal corporate franchise tax,” Garfield says. “This has contributed to the state’s success and drawn people from around the nation.” He also echoes Koduru’s observation about infrastructure and related logistics advantages: “Texas has outstanding infrastructure including state-of-the-art telecommunications, thoroughfares, utilities and airports, most notably the second busiest airport in the nation at Dallas/Fort Worth International Airport. Texas’ location on the Gulf of Mexico enables it to excel in the shipment of goods. Texas has led the United States in state export revenues for over two decades and boasts more oil refineries than any other state, including the nation’s largest refinery — Marathon on Galveston Bay.” Survey Says In the executive survey portion of the rankings index (where corporate location decision-makers were asked to rank their top state business climates), Texas also reigned supreme, followed by North Carolina and Tennessee. Among comments left by survey respondents to explain their choices were these: • “Anywhere in the Southeast and South … business climate (i.e. liberal states are losing businesses and conservative states are gaining), low tax base, available work force, power, water and infrastructure all matter.” • “Flexibility on terms and deals — no deal is easy and these states find a way to be way more flexible and will be willing to work harder to make a deal come through.” • “Cost of doing business, responsiveness of economic development agencies, applicability of incentives, site readiness programs, site availability, tax/ regulatory environment, political stability (consistency).” • “Utility access, workforce, government responsiveness and tax burden.” • “Ecosystem for and attractiveness to manufacturing: workforce (quality, cost, training capability), utilities (capacity, quality, cost), transportation infrastructure/access, ready available sites, focus on and friendliness to manufacturing.” • “Long track record of reasonable business regulation, moderate taxation, investment in infrastructure, strong emphasis on workforce, moderate business costs.” • “Taxes, labor availability, inward migration and ability to generate electricity needs.” • “Growing economy, ongoing economic development efforts, transportation & utility infrastructure, talent and universities.” The Small and the Mighty Look at the new Business Ready rankings from World Bank and it’s apparent: The countries deemed most business-friendly tend toward the entrepreneurial: Estonia and Singapore lead the way. Why shouldn’t the 50 states and their regions be the same? It’s one reason Site Selection introduced Inc. 5000 data (total companies and companies per capita) into the rankings’ 14-metric index alongside factors such as our proprietary Conway Projects Database data tracking major facility projects from mostly major-sized companies. This year’s top states are familiar leaders. Their rosters of growing TOP 10 STATES 2024 EXECUTIVE SURVEY RANK STATE 1 Texas 2 North Carolina 3 Tennessee 4 Virginia 5 Georgia 5 South Carolina 7 Florida 8 Arizona 9 Alabama 10 Ohio94 NOVEMBER 2024 SITE SELECTION operations from familiar large corporations are legendary: ExxonMobil’s new HQ in the Houston area is one of several examples from the company, which in October executed the largest offshore carbon dioxide (CO 2 ) storage lease in the U.S. with the Texas General Land Office (GLO). The company also is ramping up a massive low-carbon hydrogen and ammonia production facility in Baytown, Texas, that has attracted an equity stake from Abu Dhabi-owned petrochemical giant ADNOC. SK’s giant battery manufacturing complex along I-85 in Georgia and Eli Lilly’s gargantuan investments in North Carolina are but a few examples from other leading states. What might be unfamiliar is how friendly these states are to startups and small to medium-sized companies (SMEs) — the proverbial “bedrock” of the American economy, as McKinsey stated in October. Examining their trajectories is a way to turn the usual storyline on its head: Yes, smaller firms often cluster around the big boys. But it’s also true that where multinationals see an abundance of fast-growing firms, they see dynamic clusters and networks they too want to be a part of. Data and the latest research corroborate this hunch. In the Q3 2024 PitchBook-NVCA Venture Monitor report released by Pitchbook and the National Venture Capital Association in October, the number of year-to-date venture capital deals in Texas (569) was the nation’s fourth highest through three quarters, after besting legendary venture capital leader Massachusetts in calendar year 2023 to be No. 3 in the nation with 897 deals. By VC deal dollar amount, Texas was No. 4 year-to-date at more than $5.1 billion after finishing 2023 at fourth in the nation with nearly $7 billion in deals. Ranked by their percentage revenue growth over the last three years, the 2024 Inc. 5000 collectively have generated 874,940 jobs and $317 billion in revenue over three years and have displayed median revenue growth of 1,637%. They also generate momentum for the states and regions in which they are headquartered. Here are the top 10: Outside the top 10 states but still boasting more than 100 Inc. 5000 firms were the following, including four states in this year’s Business Climate Top 10: Analyzed on a per-capita basis, Virginia tops the Inc. 5000 list, followed by fellow Top 10 Business Climate states Florida at No. 4, Georgia at No. 5, Illinois at No. 7 and Tennessee at No. 10. The 481 Inc. 5000 firms in Texas are attracted to the state’s top- ranked business climate and growing populations in multiple metro areas. TOP 10 STATES BY NO. OF 2024 INC. 5000 FIRMS STATE COUNT California 672 Texas 481 Florida 471 New York 336 Virginia 269 Illinois 247 Georgia 227 Pennsylvania 163 Massachusetts 139 Arizona 137 STATE NO. OF FIRMS Colorado 134 New Jersey 133 Tennessee 132 North Carolina 126 Maryland 116 Ohio 116 Michigan 10296 NOVEMBER 2024 SITE SELECTION Based in the Houston-area community of The Woodlands, Segment HR is the top-ranked Texas Inc. 5000 firm at No. 32, followed by Austin-based raw dog food company Maev at No. 38, Archer Review at No. 46 and Austin’s Bucket List Events at No. 61. Compare the top 10 metro areas by number of Inc. 5000 firms (below) to our Business Climate top 10 and you’ll see that four of the top seven and six of the top 10 correlate. The Austin-Round Rock-San Marcos metro area just misses out on the top 10 with 124 firms. But when calibrated on a per-capita basis against its population of just over 2.4 million, metro Austin is No. 4 in the country and No. 1 among tier-one metro areas with populations of 1 million or more (the next closest is the nation’s capital). Metro Houston is No. 14 on this year’s metro list but its namesake city is way up at No. 6 when the numbers are parsed by municipality instead of metro region, as the city proper accounts for 69 of the region’s 99 Inc. 5000 firms. When looking at municipalities instead of metro areas, three of the top six cities by number of fast- growing companies are in Texas, accounting for 259 of the state’s 481 Inc. 5000 firms. That said, these cities’ neighbors are doing their part: Even though Dallas has a healthy 82 firms, that’s less than 40% of the 206 Inc. 5000 firms in the Dallas-Fort Worth-Arlington metro area. Irving, for example, is home to 22 of those companies, ranking it No. 7 in the nation on a per-capita basis against its population of 216,300. No. 10 on that national per-capita list is Texas Instruments’ chosen fab expansion location of Richardson, with 10 such firms spread across its population of 99,200. Two-Way Street The McKinsey Global Institute recently aggregated “a richly granular data set” of MSMEs (micro, small and medium-sized enterprises) and large companies across 12 broad sectors, 68 level-two subsectors and more than 200 level-three subsectors in 16 countries with different income levels, accounting for more than 50% of global GDP. “MSMEs play a large role across the board,” the report stated. “In the advanced economies, they average 66% of employment and 54% of value added.” They also have a good chance at outgrowing their MSME status: Meta and Zoom are among one-quarter of the large public tech companies that were MSMEs within the past 25 years, McKinsey notes. “Why do MSMEs in some states and metros perform better than others?” the report asks. “Reasons could include differences in the business environment and policies. Some states have tax, regulations and compliance systems that support the expansion of large and small companies alike. Some states have TOP 10 METRO AREAS BY NUMBER OF 2024 INC. 5000 COMPANIES METRO AREA NO. OF INC. 5000 FIRMS 1. New York-Newark-Jersey City, NY-NJ 392 2. Washington-Arlington-Alexandria, DC-VA-MD-WV 287 3. Los Angeles-Long Beach-Anaheim, CA 284 4. Chicago-Naperville-Elgin, IL-IN 235 5. Miami-Fort Lauderdale-West Palm Beach, FL 214 6. Atlanta-Sandy Springs-Roswell, GA 207 7. Dallas-Fort Worth-Arlington, TX 206 8. San Francisco-Oakland-Fremont, CA 150 9. Boston-Cambridge-Newton, MA-NH 129 10. Phoenix-Mesa-Chandler, AZ 128 NO. OF 2024 STATE INC. 5000 FIRMS 1. New York City 192 2. Chicago 120 3. Austin 108 4. Atlanta 107 5. Dallas 82 6. Houston 69Next >