Posted on 04/14/2021 by Beverly Kerr

Sign up for the Central Texas Economy Report newsletter

  • Startups account for a larger share of businesses in Austin than in nearly all major U.S. metros in 2018 and Austin ranks 5th for new businesses per 1,000 population.
  • Women-owned firms represent 22.5% of Austin businesses with paid employees.
  • Minority entrepreneurs make up 19.3% and veteran entrepreneurs represent 4.4% of Austin area employer firms.
  • Austin ranks 3rd among the top 50 metros for business owners with engineering degrees.


Young firms account for a larger share of businesses in Austin than in nearly all other major U.S. metros. Of the 41,653 firms in Austin in 2018 with paid employees, 19.0% (7,929) have been in business less than two years, 33.0% (13,758) have been in business less than four years, and 43.1% (17,972) have been in business less than six years. As the table below shows, Austin ranks second for the share of firms in business less than two years or less than four years, and third for share of firms less than six years.

Nationally, 14.4% of firms with paid employees have been in business less than two years, 27.0% have been in business less than four years, and 36.5% have been in business less than six years.

On a per capita basis, Austin ranks fifth for the rate of new business formation. There were 3.7 employer firms with less than two years in business per 1,000 population in Austin in 2018. The rate nationally was 2.5.

This data comes from the second release of the U.S. Census Bureau's Annual Business Survey (ABS). The ABS replaces the five-year Survey of Business Owners and the Annual Survey of Entrepreneurs (2014-2016).[1] This annual survey provides a timely and frequent socioeconomic portrait of employer businesses by gender, race, ethnicity, and veteran status. Other dimensions of the survey include years in business, number of employees, and revenues. This relatively new annual data on job-creating startups and other employer firms is a boon to understanding the economy. Since portions of the survey’s data is available for metropolitan areas, it also brings actionable insights to local policy makers seeking to foster successful entrepreneurial climates and support underrepresented groups.

The majority, 67.5%, of Austin’s paid employees work for the 26.4% of area firms that have been in business 16 or more years. Nationally, 75.1% of employees work for the 32.7% of firms in business 16 or more years.

Only about 4.0% of the 873,449 paid employees of private firms in Austin work for firms that have been in business less than two years. Firms that have been in business less than six years employ 13.1% of the area’s paid employees. Nationally, 2.8% of employees work for the youngest firms and 10.4% work for firms in business less than six years.

New Austin firms, those less than two years old, employ 34,872. Among these firms, the industry creating the most jobs is accommodation and food services. The 780 youngest firms in this industry employ 5,022 workers or 14.4% of jobs at new firms. The other industries with the most significant job creation by new firms include professional, scientific and technical services (3,315 employees or 9.5% of jobs at new firms) and healthcare and social assistance (3,485 employees or 10.0%). Three other industries (retail trade, administrative and support, and other services) are also significant job creators among new firms, but reported data is limited to a range of “2,500-4,999 employees” for each.[2]

Nationally, the top industry for jobs at firms in business for less than two years is the accommodation and food services industry (25.6%); followed by healthcare and social assistance (11.8%); administrative and support (9.2%); and professional, scientific and technical services (8.1%).


In Austin, 9,377, or 22.5%, of employer firms are female-owned, compared to 19.9% nationally. The number of women-owned firms in Austin increased by 6.3% over 2017. Male-owned firms account for 54.2% of firms in Austin and 61.1% nationally. Women-owned firms account for 9.3% of employees, and 6.5% of payrolls in Austin, while women-owned firms account for 7.9% of employees, 5.6% of payrolls, and 4.6% of revenues nationally.[3] Among the 50 largest metros, Austin ranks fourth for percentage of female-owned firms and fifth for employees working for female-owned firms.[4] Virginia Beach has the largest share of female-owned firms (24.6%) and Raleigh has the largest workforce employed by female-owned firms (10.9%).

Additional graphs: Statistics of firms by minority status of owner and Statistics of firms by ethnicity of owner

The rate of minority ownership of employer firms in Austin (19.3%) is slightly above the national rate (18.3%), while non-minority (i.e., non-Hispanic white population) ownership is more markedly lower in Austin (70.7%) than applies nationally (76.6%), due to a higher share in Austin of publicly held or non-classifiable firms. The number of minority-owned firms increased 10.2% in Austin in 2018.

Hispanics, who make up 31.0% of Austin’s labor force in 2018, are owners of 9.1% of employer firms. Hispanics account for 17.6% of the U.S. labor force and 5.8% of all firm owners. Of the 3,793 Hispanic-owned firms in Austin, 622 (16.4%) are in accommodation and food services and 106 (2.8%) are manufacturers. Austin estimates for each remaining industry are suppressed due to data quality or confidentiality. Nationally, the two most significant industries are construction and accommodation and food services, accounting for 16.2% and 13.6% of Hispanic-owned businesses, respectively. In Austin, 4.3% of the private sector workforce is employed by Hispanic-owned firms, compared to 2.3% nationally.

Nationally, veterans own 5.9% of employer firms. In Austin, veterans own 1,833 firms or 4.4% of all firms (the rate is boosted to 6.8% if firms that are equally veteran/nonveteran-owned are included). Austin estimates for veteran-owned business by industry are largely suppressed. However, 19.3% of Austin’s veteran owned businesses are in construction or manufacturing, which is a larger share than the 14.7% those industries represent among all firms in Austin. Nationally, professional, scientific and technical services accounted for the largest number of veteran-owned firms (16.8%). The industry is not estimated for Austin veteran business owners 2018, but according to data from the 2017 ABS, the industry made up 24.8% of Austin’s veteran-owned firms.


Austin’s 41,653 firms with paid employees and Austin’s employed workforce of 873,449 are distributed across the firm employment size classes indicated in the graph below. Note that firm size employment categories in ABS tabulations are based on the nationwide employment of the firm, not the employment of the local establishment of that firm.

The majority (57%) of the 2,082 large firms in Austin, those with 500 or more employees, are concentrated in four industries: retail trade (415 firms); professional, scientific, and technical services (291); finance and insurance (253); and wholesale trade (234).

Over half (51%) of Austin’s private employees work for large firms. While more than half of large firms are concentrated in the four industries noted above, the majority (55%) of large firm employment in Austin is distributed over retail trade; professional, scientific and technical services; healthcare and social services; and accommodation and food services.

In Austin, salaries at large firms are 10.9% higher than the average for all firms ($60,764 for all firms and $67,371 for firms with 500 or more employees). Finance and insurance is the highest paid industry overall with an average salary of $111,039. For the largest finance and insurance employers, the pay is similar at $110,670 (large firms account for 68% of industry employment). Among large firms, the highest average salary is $119,978 in professional, scientific and technical services, which is 18.2% above the all firms average for that industry. Large manufacturing and wholesale trade firms pay the largest premium over industry averages, 22.6% and 30.8% respectively. Employees of the largest retail firms in Austin earn 13.7% less than the average for the industry overall.

Additional graph: Distribution of firms by employment size for selected industries and Distribution of firms by employment size for selected demographic groups


In Austin, 14,750 firms, or 35.4%, have sales, value of shipments, or revenue of $1,000,000 or more. These firms employ 89.9% of workers and expend 94.5% of area payrolls. Nationally, only 28.1% of firms are in this revenue class, but these firms account for 96.5% of employees, 94.4% of payrolls, 96.5% of and revenue. As with employment size, revenue size is based on the total nationwide revenue of the firm.

Additional graphs: Firms by revenue by industry and Distribution by industry of firms with receipts of $1 million or more


The preceding sections are drawn from the ABS’s four “company summary” tables that provide data by industry, sex, ethnicity, race, veteran status, years in business, receipts size of firm, and employment size of firm. Additional ABS tables provide data for other characteristics of the business and the business owner. The following findings are just a partial representation of the topics available from the survey.

Characteristics of the business

Topics in this year’s survey include questions about number of business owners, family ownership, joint ownership or operation by spouses, and types of customers and workers.

“Types of workers employed” questions show that Austin has a larger share of its firms employing contractors, subcontractors, independent contractors, or outside consultants (52.6%) than any other large metro. Nationally, only 34.6% of businesses employed this class of worker. The remainder of the top 10 metros range from 43.5% to 49.2%. San Antonio is also in the top 10 with 44.8%. The lowest concentrations of employers employing contractors are Milwaukee (28.0%) and New York (29.4%).

Businesses also answered questions about types of customer categories they serve. Perhaps not surprisingly for a state capital, more Austin businesses, 10.8%, report state and local governments as a customer category, compared to 7.9% nationally. Six state capitals are among the top 10 for this category and Austin ranks fifth. Austin’s businesses also do business with the federal government at a higher rate, 4.1%, than applies nationally, 2.8%. Austin ranks 10th, but San Antonio ranks third, with 7.1% (following Washington and Virginia Beach).

Other businesses are customers for 43.2% of Austin businesses, compared to 41.7% nationally. Individuals are customers for 66.9% of Austin, compared to 70.6% nationally.

Questions handled in the 2017 survey addressing funding, profitability and factors impacting profitability, and employer-paid benefits were not repeated.

Characteristics of the business owner

Questions about the business owner also cover fewer topics in the 2018 ABS survey than were handled in the 2017 survey. How the business was started or acquired and number of prior businesses owned were topics addressed last year, but not repeated this year.

Like last year, the 2018 survey asks about education completed and the field of the business owner’s highest academic degree, however suppression has a greater impact on available academic fields. The 2017 survey indicated that, in Austin, 31.2% of owners’ highest degree is in a science, technology, engineering or math (STEM) field. This rate ranked fifth among major metros. This year, many metros lack STEM field estimates except for the generally larger engineering and computer/math sciences fields. The top metros for percent of business owners holding an engineering degree in 2018, are San Jose (20.1%), Houston (13.8%), and Austin (12.8%).

While several degree fields are less represented among Austin business than they are elsewhere, health degrees exhibit the largest difference. Health is the highest academic degree of 7.4% of Austin business owners compared to 15.2% of business owners nationally.

Salt Lake City, Las Vegas, and Austin stand out for the youthfulness of their entrepreneurs. Over 30% of business owners in these three metros are under 45 years of age. Nationally, only 22.6% of business owners are under 45.

Among major metros, the prevalence of foreign-born business owners ranges from 6.8% in Milwaukee to 46.2% in San Jose. Houston, with 30.7%, is among the top 10. Austin ranks 24thwith 15.1% of business owners being foreign born, while Dallas-Ft. Worth and San Antonio have rates of 22.2% and 14.7%, respectively.


  1. The survey also replaces the Business R&D and Innovation Survey for Microbusinesses and the innovation section of the Business R&D and Innovation Survey. For the 2017 survey year, content included R&D, innovation, and digital technology. For 2018 there is a set of Technology Characteristics of Businesses tables. However, there is no data below state level for this content.
  2. Data is suppressed or withheld for reasons of data quality (estimates had a relatively high standard error in excess of publication standards) or confidentiality (publishing data would disclose the operations of an individual establishment or business).
  3. While last year’s ABS tables provided metro area revenue estimates, this year’s report only provides ranges.
  4. Note that data is suppressed for seven of the top 50 metros (Boston, Buffalo, Louisville, Milwaukee, Richmond, Riverside, and Sacramento).

Related Categories: Central Texas Economy in Perspective