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Methodology for Tech Startup Hotspots

We started with the top 50 largest Combined Statistical Areas (CSAs) in the country and looked at the prevalence of startup IT workers in each area, as well as their typical wages to develop a Tech Startup Hotspot Score.

Definitions:

Metro Areas: The metro areas are based on Combined Statistical Areas (CSAs), which are areas made up of multiple metropolitan and micropolitan areas as defined by the US census. The Office of Management and Budget is responsible for their designation. They can cover multiple metro areas, as is the case of the San Jose-San Francisco-Oakland combined statistical area.

Tech Startup Median Annual Pay: The median pay is the 50th Percentile annual total cash compensation. Half the people doing the job earn more than the median, while half earn less. We have defined startups as tech companies with 75 or fewer employees.

Total Cash Compensation (TCC): TCC combines base annual salary or hourly wage, bonuses, profit sharing, tips, commissions, and other forms of cash earnings, as applicable. For example, when overtime is typical for a given job, TCC also includes overtime pay. It does not include equity (stock) compensation, cash value of retirement benefits, or value of other non-cash benefits (e.g., healthcare).
For this study, employees with between 1 and 10 years of experience were examined, with a median of 5 years.

Years of Experience: This is the number of years the respondent has spent in the field/career. Therefore the years of experience will incorporate all applicable jobs in the field, not just the current job.

Tech Startup Worker Ratio:
This is a measure of how many startup tech jobs are in each CSA; we find the ratio of IT workers at tech startup companies to all workers in the CSA and standardize the ratio by the national proportion of IT workers at a startup IT companies.

A ratio greater than one implies the metro has more startup IT positions available than average, while a ratio less than one implies the metro has fewer startup IT positions available than average.

Tech Startup Hotspot Score:
This is the final score we base our rankings on and is the product of the Tech Startup Worker Ratio and Tech Startup Median Annual Pay (which we also calculated as a score relative to the national tech startup median annual pay). Multiplying these two scores provides a combined measure of how many jobs there are in each CSA in addition to how well they pay. Certain CSAs excel in one or the other, while others are more balanced in both measures.