Is Texas a top state for business? New reports find mixed results

by the numbers

When it comes to Texas being a top state for business, we guess the jury's out. Photo via Getty Images

Texas economic development boosters are crowing about a new top-in-the-nation ranking. But they’re probably frowning about a different business ranking that’s mediocre.

First, the good news.

Business Facilities magazine just named Texas the 2023 State of the Year in recognition of its business climate, economic development leadership, and “blockbuster” year for capital investment and job creation. It’s the fifth time that Business Facilities has crowned Texas as the top state.

“Texas moves at the speed of business,” Gov. Greg Abbott said in a news release. “As recognized by Business Facilities magazine, Texas leads the nation for corporate relocations, business expansions, and job creation.”

“With the best business climate in the nation, leading investments in education and workforce development, and our young, skilled, diverse, and growing workforce, Texas is poised to lead the nation in 2024,” the governor added.

Additionally, Texas again appears on WalletHub's annual list of "Best States to Start a Business" — but ranks lower than last year. The Lone Star State ranked No. 8 this year compared to last year's No. 3 spot. This ranking looked at business environment, access to resources, and business costs across 25 relevant metrics by analyzing data from U.S. Census Bureau, Bureau of Labor Statistics, and other resources.

Now, the not-so-good news.

Texas landed at No. 32 on Forbes Advisor’s new list of the best states to start a small business in 2024. The Lone Star State received especially low marks economy, workforce, and business climate, but fared better in two other categories: business costs and financial accessibility.

Topping the Forbes Advisor list was North Dakota, followed by Indiana, Arkansas, South Dakota, and North Carolina.

Texas recently was awarded three other No. 1 business climate rankings, though: Best Business Climate in the U.S. by Business Facilities in June, Best Business Climate in the U.S. by corporate executives in September, and Top Business Climate in the U.S. by Site Selection Magazine in November.

“In a state the size of Texas, business is not just finding a home in the metros. A laser focus by economic developers across the state to foster established businesses as well as innovative startups is paying off for communities of all sizes,” Anne Cosgrove, editorial director of Business Facilities, says in a news release.

The magazine covers corporate site selection and economic development.

Other contenders for 2023 State of the Year were:

  • Arizona
  • Florida
  • Georgia
  • Indiana
  • Missouri
  • Nevada
  • North Carolina
  • Tennessee
  • Utah
  • Virginia
Texas has been known for ages as a business-friendly state, but one recent report suggests it might be falling from grace. Photo via Getty Images

Texas' business friendliness gets mixed reviews from 2 recent reports

lone star standings

It’s a tale of two views of Texas’ business-friendly reputation. For the first time ever, the Lone Star State has fallen out of the top five in CNBC’s annual ranking of the best states to do business. Meanwhile, Texas tops Business Facilities’ new ranking of the best state business climates.

On July 11, CNBC released the 2023 edition of its ranking of the top states for doing business. The ranking puts Texas at No. 6, leaving the Lone Star State out of the top five for the first time since CNBC launched its study in 2007. Texas appeared at No. 5 in 2022 and No. 4 in 2021. The state finished first in 2008, 2010, 2012, and 2018.

For the second consecutive year, North Carolina leads the CNBC ranking, thus “solidifying its position as an economic powerhouse,” according to the Economic Development Partnership of North Carolina.

Despite dropping out of the top five, CNBC acknowledges that Texas remains an economic powerhouse.

Texas grabs CNBC’s No. 2 spot, behind Florida, for the best state economy. And the state witnessed year-over-year job growth of four percent through May, the highest rate of any state. Furthermore, Texas ties with California for access to capital, the study says, and snags the No. 2 spot in the workforce category.

Texas’ fall this year includes a slide from No. 15 to No. 24 in the infrastructure category. CNBC mentions the 2021 wintertime collapse of the state’s electric grid in its explanation of the nine-spot drop.

Other knocks against Texas:

  • A decline from No. 21 to No. 35 in the education category.
  • A dip from No. 12 to No. 16 in the cost-of-doing-business category.
  • A plunge from No. 14 to No. 22 for cost of living.
  • A bottom-of-the-barrel ranking in the life, health, and inclusion category, down from No. 49 last year.

In an email to CNBC, an unnamed spokesman for Gov. Greg Abbott shrugged off this year’s sixth-place showing.

“People and businesses vote with their feet, and continually they are choosing to move to Texas more than any other state in the country,” the spokesman wrote.

The spokesman cited the state’s national lead in job creation, attracting more than 280 new corporate headquarters since 2015, and its status as a perennial front-runner in economic development projects.

“Texas remains number one because people and businesses are choosing our state over any other for the unmatched competitive advantages we offer: no corporate or personal income taxes, a predictable regulatory climate, and a young, skilled, diverse, and growing workforce,” the spokesman wrote.

While Texas didn’t fare as well in this year’s CNBC study, it can brag about its 2023 designation as Business Facilities magazine’s state with the best business climate. In second place: North Carolina.

“The strength and sustained momentum of the Texas economy made the state a clear choice for [No. 1] in this year’s rankings,” Anne Cosgrove, editorial director of Business Facilities, says in a June 26 statement. “Taking the top spot this year is based not only on the impressive capital investment and job creation numbers, but also for diversity of industries, robust infrastructure, and a business-friendly regulatory and tax climate.”

Abbott took the opportunity to publicize the No. 1 ranking from Business Facilities.

“When businesses succeed, so do Texans — and our business climate ensures that Texas continues to offer world-class educational opportunities, good-paying careers to support families, and endless possibilities to prosper,” Abbott says in a news release.

Houston's moving on up in the worlds of economics and startup activity. Photo by Tim Leviston/Getty Images

Houston ranks high on lists for startup ecosystems and economic growth potential

We're No. 4!

The number four appears to be a sign of good fortune for Houston.

A new ranking from Business Facilities magazine places Bayou City at No. 4 for economic growth potential among large metro areas and at No. 4 for the country's best startup ecosystems.

Regarding the No. 4 ranking for economic potential, Susan Davenport, senior vice president of economic development for the Greater Houston Partnership, says Houston's industrial diversity has helped the region weather downturns in certain economic sectors "and now has us on a solid growth trajectory."

"The region's steady population increases, coupled with our relatively low costs of living and doing business, bode well for our economic growth potential reflected in this ranking," Davenport says.

Houston's status as the one of the top locations for Fortune 1000 headquarters in the U.S. elevates the region's position as a hub where both large and small companies can prosper, she adds.

Houston appeared at No. 1 in Business Facilities' 2018 ranking of the top large metros for economic growth potential. Representatives of Business Facilities couldn't be reached to explain why Houston dropped three places from 2018 to 2019.

Last year, the magazine pointed out that Houston's economy extends far beyond its standing as the Energy Capital of the World.

"The nation's fourth-largest city has a dynamic, diversified economy that is brimming with innovation, technology, and entrepreneurship," said the magazine, citing advantages such as Houston's strong manufacturing base, enormous healthcare presence, and storied aerospace legacy.

The magazine went on to hail Houston's "distinctly favorable business climate."

"The region benefits from a skilled workforce, world-class infrastructure and transportation system, and a pro-business environment that stimulates rather than stifles business growth," Business Facilities noted.

As for the No. 4 ranking in this year's Business Facilities startup category, Davenport says this indicates the recent work of the Houston Exponential initiative to foster the local startup environment is paying off.

Houston Exponential, established in 2017, seeks to make Houston a top 10 innovation ecosystem, generate $2 billion in venture capital annually, and create 10,000 new tech jobs a year by 2022.

Last October, Houston Exponential announced it had collected $25 million for its first venture capital fund. Making financial commitments to the fund were Insperity, Chevron, Shell, Quanta Services, Westlake Chemical, The Plank Cos., PROS, H-E-B, and Camden Property Trust.

"Factor in the demand being satisfied by a number of new incubators and accelerators, plus the four-mile Innovation Corridor running through the heart of the city and anchored by The Ion, and we're seeing momentum on a scale like never before," Davenport says.

In Houston's Midtown, Rice University is transforming the historic Sears building into The Ion, which will serve as an innovation hub designed to cultivate collaboration among startups, corporations, universities, and other elements of the local business community. It's the first development in Houston's evolving innovation district.

"The Midtown innovation district is an embodiment of our shared community vision to give professionals and families a means of seizing opportunity as Houston continues to grow as a leading city in technology," says Matt Thibodeaux, executive director of Midtown Houston.

Here is Business Facilities' 2019 list of the top 10 places for economic growth potential among large U.S. metros:

  1. Atlanta
  2. San Antonio
  3. Phoenix
  4. Houston
  5. Orlando, Florida
  6. Austin
  7. Raleigh-Durham, North Carolina
  8. Las Vegas
  9. Albuquerque, New Mexico
  10. Kansas City, Missouri

Here is Business Facilities' 2019 list of the 10 places with the best startup ecosystems in the country:

  1. Austin
  2. Denver
  3. New York City
  4. Houston
  5. San Jose, California
  6. Orlando, Florida
  7. Nashville, Tennessee
  8. Atlanta
  9. Raleigh-Durham, North Carolina
  10. Salt Lake City
"The Houston of today looks like the United States of tomorrow," says Susan Davenport, senior vice president of economic development at the Greater Houston Partnership. Photo by Zview/Getty Images

Houston deemed one of the top 'Cities of the Future' in North America

Bragging rights

Watch out, world. Here comes Houston.

Houston ranks fifth on a new 2019-20 list of the 10 North American Cities of the Future produced by the fDi Intelligence division of the Financial Times. New York grabbed the No. 1 spot, followed by San Francisco, Toronto, and Montreal. Following Houston were Chicago; Boston; Los Angeles; Palo Alto, California; and Seattle.

The ranking is based on data in five categories:

  • Economic potential
  • Business friendliness
  • Human capital and lifestyle
  • Cost effectiveness
  • Connectivity

Susan Davenport, senior vice president of economic development at the Greater Houston Partnership, says Houston's "ethnically and culturally diverse population" coupled with its "robust and globally connected economy" help form a solid foundation for the city's future.

The North American Cities of the Future ranking is certainly not the only such accolade that Houston has garnered. Hailing Houston as "the American city of the future," Resonance Consultancy, a consulting firm, ranks Houston the 11th best large city in the U.S.

"Positive rankings and recognition like this help us continue to attract the best and brightest minds both domestically and around the world," Davenport says. "Houston has long been a place that solves the world's most complicated problems — from putting humans on the moon to pioneering open-heart surgery. But we make a conscious choice to measure ourselves not on past accomplishments but on what we do next."

Davenport cites Houston's vibrant startup scene, 21 Fortune 500 companies, and burgeoning innovation corridor, along with the presence of the world's largest medical complex, as helping position the city for economic growth.

She also mentions the fact that nearly one-fourth of local residents are foreign-born and that more than 145 languages are spoken. In April 2019, personal finance website WalletHub named Houston the most diverse city in the U.S.

"In short, the Houston of today looks like the United States of tomorrow," Davenport says.

In a March 2019 report, the Center for Houston's Future noted that Houston's economic growth — namely in the construction, healthcare and IT sectors — depends heavily on the continued influx of immigrants. Immigrants already make up nearly one-third of the region's workforce, the report says.

Between 2016 and 2036, almost 60 percent of all jobs added in the region will be filled by foreign-born workers, the report indicates.

Also on the international front, more than 5,000 Houston companies do business abroad, Davenport says, and more than 500 foreign-owned companies have invested in Houston in the past decade.

As Houston looks toward the future, business leaders will continue to diversify the economy through such sectors as life sciences, advanced manufacturing, and technology, according to Davenport. In addition, business leaders will keep driving the transition from traditional fossil fuels to "new energy" sources (like wind and solar), she says.

"Houston's future is a bright one," Davenport says. "Our young and well-educated workforce, coupled with targeted infrastructure investments, will help us become a hub for innovation in the years ahead."

Business Facilities magazine agrees with that assessment. In July 2018, it ranked Houston the No. 1 metro area for economic growth potential, stressing that the region's economy has expanded beyond Big Oil and that it's brimming with "innovation, technology, and entrepreneurship."

"Houston has a distinctly favorable business climate. The region benefits from a skilled workforce, world-class infrastructure and transportation system, and a pro-business environment that stimulates rather than stifles business growth," the magazine says.

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Houston doctor aims to revolutionize hearing aid industry with tiny implant

small but mighty

“What is the future of hearing aids?” That’s the question that led to a potential revolution.

“The current hearing aid market and technology is old, and there are little incremental improvements, but really no significant, radical new ideas, and I like to challenge the status quo,” says Dr. Ron Moses, an ENT specialist and surgeon at Houston Methodist.

Moses is the creator of NanoEar, which he calls “the world’s smallest hearing aid.” NanoEar is an implantable device that combines the invisibility of a micro-sized tympanostomy tube with more power—and a superior hearing experience—than the best behind-the-ear hearing aid.

“You put the NanoEar inside of the eardrum in an in-office procedure that takes literally five minutes,” Moses says.

As Moses explains, because of how the human cochlea is formed, its nerves break down over time. It’s simply an inevitability that if we live long enough, we will need hearing aids.

“The question is, ‘Are we going to all be satisfied with what exists?’” he asks.

Moses says that currently, only about 20 percent of patients who need hearing aids have them. That’s because of the combination of the stigma, the expense, and the hassle and discomfort associated with the hearing aids currently available on the market. That leaves 80 percent untapped among a population of 466 million people with hearing impairment, and more to come as our population ages. In a nearly $7 billion global market, that additional 80 percent could mean big money.

Moses initially patented a version of the invention in 2000, but says that it took finding the right team to incorporate as NanoEar. That took place in 2016, when he joined forces with cofounders Michael Moore and Willem Vermaat, now the company’s president and CFO, respectively. Moore is a mechanical engineer, while Vermaat is a “financial guru;” both are repeat entrepreneurs in the biotech space.

Today, NanoEar has nine active patents. The company’s technical advisors include “the genius behind developing the brains in this device,” Chris Salthouse; NASA battery engineer Will West; Dutch physicist and audiologist Joris Dirckx; and Daniel Spitz, a third-generation master watchmaker and the original guitarist for the famed metal band Anthrax.

The NanoEar concept has done proof-of-concept testing on both cadavers at the University of Antwerp and on chinchillas, which are excellent models for human hearing, at Tulane University. As part of the TMC Innovation Institute program in 2017, the NanoEar team met with FDA advisors, who told them that they might be eligible for an expedited pathway to approval.

Thus far, NanoEar has raised about $900,000 to get its nine patents and perform its proof-of-concept experiments. The next step is to build the prototype, but completing it will take $2.75 million of seed funding.

Despite the potential for making global change, Moses has said it’s been challenging to raise funds for his innovation.

“We're hoping to find that group of people or person who may want to hear their children or grandchildren better. They may want to join with others and bring a team of investors to offset that risk, to move this forward, because we already have a world-class team ready to go,” he says.

To that end, NanoEar has partnered with Austin-based Capital Factory to help with their raise. “I have reached out to their entire network and am getting a lot of interest, a lot of interest,” says Moses. “But in the end, of course, we need the money.”

It will likely, quite literally, be a sound investment in the future of how we all hear the next generation.

Forbes and Fortune spotlight Houston innovators and more news to know

Trending news

Editor's note: It's time to look back at the top trending innovation news in April. Forbes and Fortune magazines put the spotlight on Houston, plus a Houston startup makes its rodeo debut and a state-of-the-art facility opens in the Energy Corridor. Here are the five most-read InnovationMap stories for the first half of April 2025.

1. Google teams up with Rice University to launch AI-focused accelerator

The new Rice Nexus is partnering with Google Public Sector and Non Sibi Ventures to support high-potential AI-focused startups. Image via Rice University.

Google Public Sector is teaming up with Rice University to drive early-stage artificial intelligence innovation and commercialization via the new Rice AI Venture Accelerator, or RAVA.

RAVA will use Google Cloud technology and work with venture capital firm Non Sibi Ventures to connect high-potential AI-focused startups with public and private sector organizations. The incubator will be led by Rice Nexus, which launched earlier this year in the Ion District as an AI-focused "innovation factory.” Continue reading.

2. State-of-the-art innovation hub opens in Houston Energy Corridor

Schneider Electric's new Energy Innovation Center can simulate various real-world scenarios in refineries, combined-cycle power plants, ethylene plants and other facilities. Getty Images

French multinational company Schneider Electric has opened a new 10,500-square-foot, state-of-the-art Energy Innovation Center in Houston. The new facility is located in Houston’s Energy Corridor and is designed to “foster increased collaboration and technological advancements across the entire value chain,” according to a release. The new Houston location joins Schneider's existing innovation hubs in Paris, Singapore and Bangalore.

The venue will serve as a training center for process control engineers, production superintendents, manufacturing managers, technical leads and plant operations personnel. It can simulate various real-world scenarios in refineries, combined-cycle power plants, ethylene plants, recovery boilers and chemical reactors. Continue reading.

3. 18 Houstonians land on Forbes world's billionaires list for 2025

Tilman Fertitta is the richest Houstonian, according to Forbes. Courtesy photo

The world’s richest people are wealthier now than they've ever been, and more billionaires have made it onto the 2025 World's Billionaires List than ever before, according to Forbes. This year, 18 Houston-based billionaires are among the richest people in the world, with hospitality honcho Tilman Fertitta leading as the richest Houstonian.

Fertitta, 67, ranked No. 220 overall with an estimated net worth of $11.3 billion, which steadily increased from his 2024 net worth of $9.4 billion. Continue reading.

4. 8 Houston companies earn spots among Fortune's most innovative for 2025

Health care companies dominated Fortune's America’s Most Innovative Companies report for 2025, with Houston’s top-rated company on the list falling into that sector. Photo via Getty Images

Eight Houston companies have been named to Fortune’s third annual list of America’s Most Innovative Companies, joining another 16 from the state of Texas. The group of 300 companies nationwide was rated based on production innovation, process innovation, and innovation culture, according to Fortune. In partnership with Statista, the magazine considered IP portfolios, employee, expert and customer opinions; and many other factors.

While many of the top-rated companies fell into the tech sector, Fortune reports that health care companies made up the largest portion of the 2025 list. Sixty-three honorees fell into the health care category, including Houston’s top-rated company, Houston Methodist. Continue reading.

5. Houston startup unveils its innovative leather alternative at the rodeo

Rheom Materials presented its bio-based alternative, Shorai, a 93 percent bio-based leather, at the rodeo and plans to scale it up this year. Photos courtesy Rheom Materials

Last month’s Houston Livestock Show and Rodeo stirred up another rootin’ tootin’ time for Houstonians and beyond. But before the annual event galloped into the sunset, there were quite a few memorable innovations on display, with one notably coming from Rheom Materials.

The Houston-based pioneer of next-generation materials presented its scalable, bio-based alternative known as Shorai, a 93 percent bio-based leather, through two custom, western-inspired outfits that showed off cowboy flair through a sustainable lens. Continue reading.

Houston VC funding surged in Q1 2025 to highest level in years, report says

by the numbers

First-quarter funding for Houston-area startups just hit its highest level since 2022, according to the latest PitchBook-NVCA Venture Monitor. But fundraising in subsequent quarters might not be as robust thanks to ongoing economic turmoil, the report warns.

In the first quarter of 2025, Houston-area startups raised $544.2 million in venture capital from investors, PitchBook-NVCA data shows. That compares with $263.5 million in Q1 2024 and $344.5 million in Q1 2023. For the first quarter of 2022, local startups nabbed $745.5 million in venture capital.

The Houston-area total for first-quarter VC funding this year fell well short of the sum for the Austin area (more than $3.3 billion) and Dallas-Fort Worth ($696.8 million), according to PitchBook-NVCA data.

While first-quarter 2025 funding for Houston-area startups got a boost, the number of VC deals declined versus the first quarters of 2024, 2023 and 2022. The PitchBook-NVCA Monitor reported 37 local VC deals in this year’s first quarter, compared with 45 during the same period in 2024, 53 in 2023, and 57 in 2022.

The PitchBook-NVCA report indicates fundraising figures for the Houston area, the Austin area, Dallas-Fort Worth and other markets might shrink in upcoming quarters.

“Should the latest iteration of tariffs stand, we expect significant pressure on fundraising and dealmaking in the near term as investors sit on the sidelines and wait for signs of market stabilization,” the report says.

Due to new trade tariffs and policy shifts, the chances of an upcoming rebound in the VC market have likely faded, says Nizar Tarhuni, executive vice president of research and market intelligence at PitchBook.

“These impacts amplify economic uncertainty and could further disrupt the private markets by complicating investment decisions, supply chains, exit windows, and portfolio strategies,” Tarhuni says. “While this may eventually lead to new domestic investment and create opportunities, the overall environment is facing volatility, hesitation, and structural change.”

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