Watch out Silicon Valley! Some of America’s most unsuspecting cities are luring in a new generation of entrepreneurs. Small business owners nationwide are more confident in the economy now than at any other time since 2008, and they're channeling that optimism into new business ventures. This begs the question: where are the best places in America to launch these new businesses?

First, a look at what makes a city ripe for entrepreneurial activity:

Access to Educated Populations

Entrepreneurs will want to flock to areas with a well-educated workforce. Having access to a pool of workers with bachelors' degrees creates a desirable collection of potential hires for when a startup gets off the ground.

The student labor force represents an eager and innovative crowd willing to work on the cheap. Additionally, professors can direct business owners to up-and-coming talent in universities. It is no coincidence some of the greatest startups were born in dorm rooms. (For more, see: How Education And Training Affect The Economy.)

Strong Local Economies

Entrepreneurs should scope out cities whose banks offer healthy small business lending. This will ensure businesses secure the capital necessary to fund their launch.

Entrepreneurs should also seek out cities with low unemployment rates and high per capita income, two variables that serve as a suitable barometer of a city’s economic health. Additionally, cities with lower costs of living are essential for first-time business owners; entrepreneurs should embrace cities that are affordable to minimize costs. Unfortunately, these two criteria are often in conflict with one another.

Community Engagement

Communities with a significant small business presence will benefit entrepreneurial newcomers as they tend to have established local resources. These cities are likely to have startup incubators or incentives from the local government to assist young businesses and first-time entrepreneurs. 

Tapping into the local community via networking and mentorship organizations or alumni outreach programs is another great way to build awareness around a new business.

Based on the above factors, here are the top U.S. cities for prospective entrepreneurs:

Arlington, VA

Arlington is not only a desirable locale because of its proximity to the D.C. metro area, but it is home to a well-educated crowd. An astounding 74% of its residents over 25 hold a bachelor’s degree or higher: the highest percentage in the nation. This creates a breeding ground for talent.

What’s more, at 3.7%, Arlington boasts one of the lowest unemployment rates in the country. This, coupled with a high per capita income and a bustling startup community, makes Arlington one of the most attractive places in America to start a business.

Denver, CO

Denver is rife with resources for budding entrepreneurs. The University of Colorado houses the Jake Jabs Center for Entrepreneurship to foster new startups in the local community. As part of the city’s attractive financing options, Denver provides up to 50% of a project’s costs for ventures established in certain parts of the city. Additionally, Colorado offers cash incentives to eligible businesses that create permanent jobs that last at least a year.

Business costs are below the national average and the city enjoys a young population and low unemployment. Denver currently maintains 172 small businesses per 10,000 people.

Austin, TX

Austin is increasingly becoming known for its status as a breeding ground for startups. To foster the wave of small businesses coming to the Texas capital, the local government has formed the Small Business Program. This initiative is part of the city’s larger Economic Development Department, which provides assistance and business solutions for entrepreneurs just getting started in Austin.

The city has a large number of young people: 21% of the overall population is between the ages of 25 and 34. This demographic contributes to Austin's vibrant culture, one that embraces new ideas.

Contributing to this inviting climate, low taxes and undemanding regulations further incentivize small businesses to open up shop.

Oklahoma City, OK

Affordability lures new businesses to Oklahoma City. Entrepreneurs are learning that starting a business in the area is facilitated by low living costs and relatively low tax rates. The city’s expeditious filing process gets businesses up and running quickly.

Oklahoma City has a business-friendly economy, with a high rate of small business loans and home to 18,600 small businesses— double the national average. The city also supports new businesses via startup accelerators such as i2e, which provides capital to stimulate early-stage business growth.

The Bottom Line

America is breeding a new landscape of cities that nurture the entrepreneurial spirit. As the economy continues to bounce back from the recession, we should anticipate a surge in cities welcoming small businesses. However, focus should be directed away from cities like New York and San Francisco and toward those that provide a well-rounded and welcoming environment for small businesses.