Best Places to Start a Business in Northern California

Written by Teddy Nykiel, NerdWallet

The economy of Northern California, home of Silicon Valley, is steeped in innovation and entrepreneurship. Technology companies including Hewlett-Packard, Apple and Intel had their humble beginnings in this region. The San Jose and San Francisco metropolitan areas ranked third and sixth, respectively, on the 2015 Kauffman index of startup activity, which measures the rate at which new entrepreneurs and new businesses are popping up.

To pinpoint exactly where entrepreneurs thrive in this part of the state, NerdWallet analyzed 177 places with populations of 10,000 or more.

Key takeaways
Large and small businesses perform well. Northern California is home to Fortune 500 companies including Oracle, Google and Facebook, but small companies have a place here, too. The state has a network of Small Business Development Centers located throughout Northern California that offer free one-on-one counseling for small-business owners.
The Bay Area is key. Northern California’s economic epicenter is the San Francisco Bay Area. Eight of the top 10 cities on our list are in Alameda, Contra Costa, Marin, San Mateo and Santa Clara counties.
Tourism matters, too. Technology drives Northern California’s economy, but tourism is important, especially for Monterey. All of the cities on our list are within a few hours’ drive of major destinations including California’s dramatic northern coastline, Yosemite National Park and San Francisco.

NerdWallet’s rankings
We analyzed 177 places in Northern California with populations of at least 10,000 and considered six metrics in two categories — business environment and the local economy — to assess each location. For more details, see the methodology section at the end of this article.

Best places to start a business in Northern California

1. Emeryville
Across the bay from San Francisco and just north of Oakland, Emeryville is a small city with a lot going on. Pixar Animation Studios is the city’s largest employer, but small companies thrive here, too. Technology startups in Emeryville include MadeSolid, which sells 3D printing materials, and TubeMogul, a public company that makes software for video advertising. The East Bay Economic Development Alliance supports local businesses by offering site location assistance and connecting businesses with financing options, incubators and other resources.

2. South San Francisco
South San Francisco is home to Genentech Inc., a leading biotechnology company and the city’s largest employer. In 2010, the company dubbed the citythe “birthplace of biotechnology” on highway signs. There are over 200 biotechnology-related companies in the city, according to the city of South San Francisco and the California Life Sciences Association. The San Mateo County Economic Development Association advocates on behalf of South San Francisco businesses and offers members information about policy initiatives and economic research.

3. Grass Valley
In the foothills of the Sierra Nevada, between Sacramento and Reno, Nevada, Grass Valley is a historic Gold Rush town with a diverse economy supported by tourism and technology. The Grass Valley Downtown Association represents downtown businesses including Tess’ Kitchen Store, Carolines Coffee Roasters and Tofanelli’s Gold Country Bistro. Grass Valley has the largest percentage of businesses with paid employees — 44% — compared with other places in our top 10. It also has the lowest median housing costs of the top 10 communities at $922 a month.

4. Burlingame
Burlingame’s convenient location — just south of San Francisco International Airport and between San Francisco and Palo Alto — makes it a hub for tourists. The Downtown Burlingame Business Improvement District and Broadway Burlingame Improvement District support both chain and independently owned restaurants and shops, including Helen’s Jewels and Jougert Bar. The city is also home to a collection of car dealerships known as Auto Row. The San Mateo Small Business Development Center offers advice to small businesses in free one-on-one sessions.

5. Palo Alto
In the heart of Silicon Valley, Palo Alto is widely recognized as one of the most innovative cities in the country. Hundreds of startups are based here, including Piazza, a question-and-answer platform, and Gobble, a meal delivery service. Stanford University is the city’s top employer, and Stanford Research Park is home to 150 companies focused on electronics, biotechnology, space, computer hardware and software. The Palo Alto Downtown Business and Professional Association supports restaurants and retail businesses in the city’s downtown.

6. Fremont
In San Francisco’s East Bay, Fremont is the largest city among our top 10 and has the highest average revenue per business of all places on our list: $6.8 million. Tesla Motors and Western Digital are two of the city’s largest employers. The city also supports small businesses – so much so that it has a designated small-business ally to assist small-business owners in launching and growing their companies. The East Bay Economic Development Alliance supports businesses in the area by connecting them with local financing and development resources.

7. Monterey
In Monterey, with its stunning coastal views, sunny beaches and world-famous aquarium, the economy is largely driven by tourism. The Old Monterey Business Association supports local businesses in the city’s downtown, including Alvarado Street Brewery and Grill and Om Studios. The city’s largest employers include CTB/McGraw-Hill and Dole Food Co. The California State University Monterey Bay Small Business Development Center advises area small businesses for free.

8. Los Gatos
Just southwest of San Jose, Los Gatos attracts both large companies and entrepreneurs. Netflix is headquartered here and is one of the city’s top employers. Los Gatos has a quaint downtown with shops and restaurants, as well as other retail districts throughout the city. Work2future, the area’s economic development organization, provides resources to help businesses start and grow.

9. Walnut Creek
Walnut Creek is a suburb in San Francisco’s East Bay. Its largest employers include John Muir and Kaiser Permanente medical centers. The Walnut Creek Downtown Business Association supports local restaurants, shops and services in the city’s downtown — including Coffee Shop and Swan’s Fine Books. Small businesses can get free one-on-one counseling at the Contra Costa Small Business Development Center.
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10. Mill Valley
​North of San Francisco, in Marin County, Mill Valley is an affluent community near Mount Tamalpais. The city has 24 businesses for every 100 people, the highest number of businesses of all the communities on our list. Residents earn the highest median income in our top 10 — $111,563 a year — and the city has the lowest unemployment rate of at 3.5%. The Renaissance Entrepreneurship Center in Marin offers business development classes, incubation programs and co-working space for small businesses.

Best places to start a business in Northern California data
Scroll through the table below to see the data on 177 places.

Methodology
We analyzed 177 places in Northern California with populations of 10,000 and above. We excluded eight places that had fewer than 500 businesses and 24 places that were missing data from the U.S. Census Bureau’s Survey of Business Owners.

The overall score for each community was calculated using these criteria:

Business climate, 65% of the overall score, is based on three metrics from the U.S. Census Bureau’s Survey of Business Owners.

• Average revenue of businesses is 20% of the score. A higher average contributed to a higher score.
  
• Percentage of businesses with paid employees is 25% of the score. A higher percentage contributed to a higher score.
  
• Businesses per 100 people is 20% of the score. A higher number contributed to a higher score.

Local economic health, 35% of the overall score, is based on three metrics from the U.S. Census Bureau’s American Community Survey.

• Median annual income is 10% of the score. A higher median income contributed to a higher score.
  
• Median annual housing costs are 10% of the score. Lower median costs contributed to a higher score.
  
• Unemployment rate for residents over 16 years old is 15% of the score. A lower rate contributed to a higher score.

NerdWallet staff writer Teddy Nykiel contributed to this article.