How Entrepreneur Friendly are the Top 10 Startup Hubs?

Silicon Valley, Boston, Los Angeles, and New York's Silicon Alley can all boast about their status as top startup hubs for venture capital investment. But when it comes to ease of launch, some of these top cities were found wanting.

We examined the "2013 Thumbtack.com Small Business Friendliness Survey," which focused on ease of starting a business and compared it to National Venture Capital Association's annual ranking of the U.S.'s top cities for investment deals completed. The Thumbtack survey, which was conducted in partnership with the Kauffman Foundation, polled 7,766 small-business owners across 57 cities and evaluated the areas based on a number of criterion including overall friendliness, ease of starting a small business, tax code fairness and licensing regulations.

Here's a look at the top 10 startup hubs and how they fared on a scale of entrepreneurial friendliness. 

1. San Francisco

Overall Grade: C
Part of the Silicon Valley region, venture capitalists invested more than $5.6 billion last year in startups like Pinterest and closed 636 deals. While San Francisco remains the top dog and mecca for investors, it doesn't fair as well when it comes to launching your business.  The city came in a disappointing 41th place, due to low friendliness scores in overall regulatory issues, hiring regulations, taxes and licensing. On a positive note, San Francisco scored a B+ for training and networking programs.

2. San Jose

Overall Grade: D+
The other counterpart to Silicon Valley, San Jose, reaped the benefits of being in close proximity to a multitude of investors, mentors, universities and huge companies like Google. In 2012, the city closed 415 deals, with $4.07 billion invested in the community. Sadly, when it comes to starting a business in San Jose, it echoes the fate of neighbor San Francisco. Coming in 46th place, San Jose got low marks in overall small-business friendliness, the ease of starting a business and zoning requirements. The city's silver lining is ease of hiring new employees, where it scored a B+. 

3. Boston

Overall Grade: C+
With a bevy of universities on its doorstep, including the prestigious Massachusetts Institute of Technology, Boston is also home to many entrepreneurs. While raking in $2.82 billion and securing 381 deals last year, the interest in Boston did little to counter its friendliness towards small businesses. Ranked 35th, hiring was the main issue for Boston. It received a D+ for ease of hiring and a C- for hiring, labor and employment regulations. The highest it scored in any of the 11 categories was a B-. Yikes. 

4. New York City

Overall Grade: C
Dubbed Silicon Alley for its similarities to Silicon Valley's ecosystem, a plethora of entrepreneurs migrate to the Big Apple to launch their startup. And rightfully so. Besides nabbing 302 investment deals last year and businesses securing more than $1.7 billion in equity, Mayor Michael R. Bloomberg is looking to take NYC to the next level with the recent We Are Made in New York program and the upcoming Cornell tech campus. Yet, it ranked only 37th for friendliness towards small businesses. The reasons why were all over the board with entrepreneurs finding it difficult to start a business in the city, not satisfied with health and safety regulations and unhappy with labor policies, to just name a few. On the bright side, the city scored high in environmental regulations and networking opportunities, receiving an A- and A, respectively.

5. Los Angeles

Overall Grade: D
Last year, investors poured $919 million into the City of Angels' businesses, leading to 181 closed deals. Besides having investor Ashton Kutcher on hand, LA is home to hot startups like social commerce conglomerate Beachmint. With all this hype, you might think Silicon Beach would be a great place to start a business. You would be mistaken. Landing in the 53rd position, it is obvious people are struggling when it comes to small-business issues. Getting D's in nine of the eleven categories, entrepreneurs were dissatisfied with everything from labor regulations to taxes to licensing. The only place it scored an above average B was in ease of bringing on new staff.  

6. Washington D.C.

Overall Grade: B

Home to huge startups like LivingSocial and up-and-coming ones like SocialTables, last year Washington D.C. managed to snag $475 million in investments and close 116 deals. Among the top 10 startup hubs, Washington D.C. ranked the highest in small-business friendliness landing in the 22nd spot. While entrepreneurs were disappointed when it came to ease of launching a company,the city received eight A's in everything from overall favorable regulations to friendliness of tax codes to zoning regulations. 

7. Seattle

Overall Grade: B- 
The Emerald City landed 111 deals last year with $885 million invested into its startup ecosystem. Heath tracking startup EveryMove and TechStars alum Sandglaz were among the companies that got a little slice of the investment pie. Seattle scored relatively high on the friendliness survey, coming in at number 28. Entrepreneurs rallied behind the city when it came to ease of starting a business but gave average C marks on other matters like tax codes, employment regulations and overall regulatory friendliness. 

8. San Diego

Overall Grade: F
In 2012, sunny San Diego secured 101 deals and scored more than $1.1 billion in cash from investors for companies like analytics startup Anametrix. Too bad its small-business friendliness score was on the stormy side. Among the top 10 startup ecosystems, San Diego scored the lowest, coming in at a pitiful 54th position (three spots from being dead last). The city received five F's and no grade above a C. San Diego failed when it came to policies concerning zoning and the environment. Entrepreneurs also weren't too keen about how difficult it was to start a business and the city's overall friendliness towards startups.

9. Philadelphia

Overall Grade: D+
While Philadelphia only secured $338 million in equity, it did manage to reel in 98 deals thanks to investments in companies like appRenaissance and its popular accelerator DreamIt Ventures. But when it comes to small businesses, the City of Brotherly Love can be stingy. Getting six D's and two F's, entrepreneurs were dissatisfied with its networking opportunities, licensing regulations and overall policies, to name a few.

10. Oakland

Overall Grade: D
Oakland closed 95 deals last year, amounting to more than $1 billion in investment equity. While Oakland's investments were higher than Philadelphia, the city didn't secure as many deals. In fact, the city has been in a downward spiral since 2008, a time when it was raking in 150 deals. How entrepreneurs view the city probably isn't helping either, as it is in the 51st spot. People are disappointed in everything from health policies to environmental and zoning regulations.

This story originally appeared on Young Entrepreneur

An Online Platform That Simplifies Investor Relations

Last year, Jeff Brenner and Peter Kieltyka were looking for a better way to manage their communication with investors and increase their visibility while trying to raise seed capital for their mobile-media startup, Pressly. So they turned to Gust, an online platform that simplifies investor relations during the early-stage financing process. Startups can get access to potential accredited investors on the Gust network and create a secure company profile, complete with pitch video and slide decks, which they can easily share. Investors, meanwhile, have a secure platform for managing their deals. "The beauty of this is both sides are using the same platform," says Gust founder and CEO David S. Rose.

Gust (originally called Angelsoft) launched in 2004 and is now used by 170,000 companies, 40,000 investors, 800 angel groups and 250 venture funds. The service is free for startups; investment groups and venture capitalists pay a fee. Also using the platform are incubators, accelerators, conferences and business-plan competitions; many of them curate "collections" of startups to watch. "Companies are 37 times more likely to have investors look at them if they're in a collection," Rose says. Although Gust does not bill itself as a matchmaking site, Rose says more than 5,500 startups have received a total of $1.8 billion in funding via Gust.

"Gust does a nice job of breaking down the elements investors want to see," Brenner says. We talked with him about using the platform to raise Pressly's profile.

Why did you start using Gust? 
Doing a raise is not a quick thing. Initially I didn't realize how much the pitch would change--the actual pitch deck and the financial modeling and all those assets that support you going out and getting in contact with investors. I had to constantly go back and update my documents and then resend them to people I had already e-mailed them to. It was getting to be a pain to manage it. So we started using Gust a couple of months into the actual fundraising process.

How did it improve the process?
Gust is the central repository for all my pitch docs: deck, business plan, financial model, video and high-level financials. It always has the most up-to-date information--it's almost like Dropbox for your investment raise. I just gave the links for our Pressly account to all the investors we were talking to, and I didn't have to go back and remember, Who did I send that to?

How many investors did you talk to?
Between the angels and VCs, there were a dozen investors during a six-month time period, and our conversations were all at different stages. We've raised $1.5 million as a seed round from two angel investors and two venture capital companies. The people we ended up doing a raise from were not through Gust, but we did have probably a half dozen or a dozen angels reach out to us on the Gust platform.

Did using Gust yield any other benefits?
We were selected to attend two different events we heard about through Gust. It was like, "We're running this campaign, submit your Gust profile, and we'll see whether you qualify to attend for free." We qualified for free attendance at Demo, which normally costs thousands.

We were fortunate that we were featured in a collection of startups on Gust. Driving some of that awareness obviously benefited us.