Posted on 08/11/2020 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 2017 and Austin ranks 6th for new businesses per 1,000 population.
  • Women-owned firms represent 21.8% of Austin businesses with paid employees.
  • Minority entrepreneurs make up 18.8% and veteran entrepreneurs represent 5.5% of Austin area employer firms.
  • Austin ranks 5th among the top 50 metros for business owners with STEM degrees.


Young firms account for a larger share of businesses in Austin than in nearly all other major U.S. metros. Of the 40,476 firms in Austin in 2017 with paid employees, 18.8% (7,597) have been in business less than two years, 34.2% (13,851) have been in business less than four years, and 44.7% (18,086) have been in business less than six years. As the table below shows, Austin ranks third for the share of firms in business less than two years and second for share of firms less than four or six years.

Nationally, 14.8% of firms with paid employees have been in business less than two years, 27.2% 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 sixth for the rate of new business formation. There were 3.5 employer firms with less than two years in business per 1,000 population in Austin in 2017. The rate nationally was 2.6.

This data comes from the inaugural release 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 sales/receipts. 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, counties, and places, it also brings actionable insights to local policy makers seeking to foster successful entrepreneurial climates and support underrepresented groups.

The majority, 66.5%, of Austin’s paid employees work for the 25.3% of area firms that have been in business 16 or more years. Nationally, 73.8% of employees work for the 31.0% of firms in business 16 or more years.

Only about 4.0% of the 842,633 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 14.8% of the area’s paid employees. Nationally, 2.9% of employees work for the youngest firms and 10.3% work for firms in business less than six years.

New Austin firms, those less than two years old, employ 33,678. Among these firms, the industry responsible for creating the most jobs is accommodation and food services. The 739 youngest firms in this industry employ 7,580 workers or 22.5% of jobs at new firms. The other industries with the most significant job creation by new firms are professional, scientific and technical services (5,199 employees or 15.4% of jobs at new firms); healthcare and social assistance (2,881 employees or 8.6%); retail trade (2,661 employees or 7.9%); and construction (2,577 employees or 7.7%).

Nationally, the top industry for jobs at firms in business for less than two years is accommodation and food services industry (25.1%), followed by healthcare and social assistance (11.3%), administrative and support (9.3%), and construction (8.6%).

Additional graphs: Firms by years in business by industry and Distribution of young firms by industry


In Austin, 8,824, or 21.8%, of employer firms are female-owned, compared to 19.7% nationally. The number of women-owned firms in Austin increased by 1.0% over 2016. Male-owned firms account for 55.0% of firms in Austin and 60.6% nationally. Women-owned firms account for 8.8% of employees, 6.5% of payrolls, and 4.3% of receipts in Austin, while women-owned firms account for 7.9% of employees, 5.5% of payrolls, and 4.1% of receipts nationally. Among the 50 largest metros, Austin ranks seventh for percentages of female-owned firms and employees working for female-owned firms.

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 (18.0%) is similar to the national rate (17.7%), while nonminority (i.e., non-Hispanic white population) ownership is lower in Austin (71.1%) than applies nationally (76.1%), due to a higher share in Austin of publicly held or non-classifiable firms. The number of minority-owned firms increased 4.1% in Austin in 2017.

Hispanics, which make up 30.9% of Austin’s labor force in 2017, account for 8.8% of employer firms. Hispanics account for 17.3% of the U.S. labor force and 5.6% of all firm owners. Of the 3,245 Hispanic-owned firms in Austin, 430 (13.3%) are in professional, scientific and technical services and 414 (12.8%) are in accommodation and food services. Last year’s estimates showed 17.5% of Austin’s Hispanic-owned businesses were in the construction industry, but this year that industry and several others are subject to data suppression.[2] Nationally, the two most significant industries are construction and accommodation and food services, accounting for 15.6% and 13.0% of Hispanic-owned businesses, respectively. In Austin, 3.1% of the private sector workforce is employed by Hispanic-owned firms, compared to 2.2% nationally.

Nationally, veterans own 6.1% of employer firms. In Austin, veterans own 2,243 firms or 5.5% of all firms (the rate is boosted to 7.6% if firms that are equally veteran/nonveteran-owned are included). Professional, scientific, and technical services account for 24.8% of veteran-owned firms in Austin, which is higher than the 21.7% share that the industry accounts for among all firms. Veterans are notably more represented in wholesale trade, which accounts for 9.0% of veteran-owned firms compared to 4.9% for all firms. Veterans are less concentrated than firm owners overall in accommodation and food services (2.2% vs. 8.0%) and retail trade (6.2% vs. 10.1%).


Austin’s 40,476 firms with paid employees and Austin’s employed workforce of 842,633 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 (56%) of the 2,137 large firms in Austin, those with 500 or more employees, are concentrated in four industries: retail trade (393 firms); professional, scientific, and technical services (308); finance and insurance (259); and wholesale trade (229).

Over half (54%) of Austin’s private employees work for large firms. While more than half of large firms are concentrated in four industries, employment in large firms is distributed over a broader range of industries in Austin (the eight largest industries account for 53% of jobs).

In Austin, salaries at large firms are 12.6% higher than the average for all firms ($56,991 for all firms and $64,189 for firms with 500 or more employees). Information is the highest paid industry overall at $110,058 and for the largest Information employers the pay is higher at $117,466. The differential is only 6.7%, however 70% of the industry’s jobs are at firms with 500 or more employees. Large manufacturing and wholesale trade firms pay the largest premium over industry averages, 20.0% and 22.1% respectively. Employees of the largest retail firms in Austin earn 7.2% less than the average for the industry overall.

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


In Austin, 14,125 firms, or 34.9%, have sales, value of shipments, or revenue of $1,000,000 or more. These firms employ 89.1% of workers, expend 93.7% of area payrolls, and earn 97.1% of the receipts of employer firms. Nationally, only 26.9% of firms are in this receipts class, but these firms account for percentages of employees (87.8%), payrolls (93.2%), and receipts (96.6%) that are similar to Austin’s. As with employment size, receipts size is based on the total nationwide receipts of the firm.

Additional graphs: Firms by sales, value of receipts or 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 2017 survey.

Characteristics of the business

The ABS answers questions about the sources and amounts of business funding and capital for the acquisition of the business. Among the top 50 metros, Austin ranks 12th for the percent of businesses receiving funding from outside investors but third for the percent receiving venture capital investment.

Questions about profitability indicate that 67.5% of Austin business are profitable, which is close to the national rate of 66.5%, and Austin ranks 23rd among large metros. Businesses are also asked about what negatively impacts their profitability.

Locally and nationally, more businesses name taxes as having a negative impact on profitability than any other cause surveyed. In Austin 37.1% name taxes and that rate is nearly equivalent to the national rate of 37.3%. Among major metros, Hartford and Sacramento are the most aggrieved, with 45% or more indicating a negative impact from taxes, while Miami businesses appear to be the least impacted with only 23.3% citing taxes. Houston businesses cite taxes as a source of negative impact least among Texas metros (32.3%, ranking sixth least impacted).[3]

Nationally, 5.3% of business cite access to financial capital as a negative impact on profitability. Among major metros between 4.1% (St. Louis) and 7.1% (San Jose) of business owners indicate this cause. Austin, with 6.4% of businesses naming this reason, ranks 7th among large metros. The rate is the same in San Antonio, while 6.3% of Dallas-Ft. Worth businesses and 5.5% of Houston businesses cite access to financial capital.

Finding qualified labor and changes or updates to technology are two other sources of negative impact to profitability cited more often by Austin businesses than businesses nationally. Finding qualified labor is cited by 23.4% in Austin and 20.7% nationally. Changes or updates to technology is cited by 7.3% of Austin businesses compared to 5.3% nationally.

Government regulation is cited less often by Austin business compared to those in most major metros (16.4% makes Austin the 18th least impacted). Sacramento (27.3%), Riverside and San Diego rank highest for government regulation’s negative impact on profitability, but interestingly, San Antonio (19.7%) is also in the top 10 most impacted.

The ABS asked questions on the types of employer-paid benefits offered. In Austin, 46.0% of firms are paying for some portion of employees’ health insurance putting the metro 12th among large metros. This coverage means that 85.1% of Austin workers have some portion of health insurance premiums paid by their employer and that rate puts Austin in the middle of major metros, ranking 26th. Boston is the No. 1 metro for businesses offering employer-paid health insurance (51.1%), but San Francisco ranks first for the percent of employees working for businesses offering this benefit.

“Types of workers employed” questions show that Austin has a larger share of its firms employing contractors, subcontractors, independent contractors, or outside consultants (43.2%) than any other large metro. Nationally, only 29.7% of businesses employed this class of worker. The top 10 metros range from 37.1% to 43.2% and, interestingly, San Antonio, Dallas-Ft. Worth, and Houston are also within the top 10.

Businesses also answered questions about types of customer categories they serve. Perhaps not surprisingly for a state capital, more Austin businesses, 9.0%, report state and local governments as a customer category, compared to 6.9% nationally. Five state capitals are among the top 10 for this category and Austin ranks fifth. Austin’s businesses do business with the federal government at the same rate as applies nationally, 2.8%, but San Antonio ranks fourth, with 5.5% (following Washington, Virginia Beach, and Baltimore).

Other businesses are customers for 40.6% of Austin businesses, compared to 35.0% nationally. Individuals are customers for 66.8% of Austin, compared to 72.6% nationally.

Characteristics of the business owner

Questions about the business owner covered about 15 topics in the 2017 ABS survey.

Austin business owners are more experienced, in terms of having owned one or more businesses prior to establishing, purchasing, or acquiring their current business than business owners in nearly every other major metro. In Austin, 40.0% of business owners have owned a prior business. Only Las Vegas ranks higher, with 40.4% sharing this characteristic.

Austin ranks third for the percent of business owners who founded or started the business, as opposed to acquiring it through purchase, inheritance, or other transfer of ownership. In Austin, 76.1% of the businesses are being operated by their founders, compared to 68.9% nationally. Miami tops the ranking with 79.4% and Dallas, with 73.5%, is also in the top 10.

The survey asks about education completed and the field of the business owner’s highest academic degree. In Austin, 31.2% of owners’ highest degree is in a science, technology, engineering or math (STEM) field. This rate ranks fifth among major metros. San Jose, with 47.1%, ranks first and Houston, with 32.9%, ranks third. Dallas is also in the top 10 with 28.6%.

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 10.9% of Austin business owners compared to 14.9% of business owners nationally.

Among major metros, the prevalence of foreign-born business owners ranges from 5.8% in Pittsburgh to 44.6% in San Jose. Houston, with 28.4%, is among the top 10. Austin ranks 29th with 14.3% of business owners being foreign born, while Dallas-Ft. Worth and San Antonio have rates of 20.9% and 16.0%, 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 2018 survey year, content will include R&D, innovation, and technology.
  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. Responses on this question about taxes appear disconnected from a simple measure like the corresponding state’s per capita state and local tax burden. State and local taxes per capita in 2017 were $4,161 in Texas, $6,170 in California, and $9,073 in New York. Businesses in New York, San Francisco, Los Angeles, and San Jose identify taxes as having an impact on profitability at a greater rate than businesses in Houston (32.3%), but at a lower rate than businesses in Dallas-Ft. Worth (35.8%).

Related Categories: Central Texas Economy in Perspective