Like the other three Texas cities in this year's top 8, Houston offers entrepreneurs a business climate with light local regulations and licensing requirements.
But what they really appreciate about Houston is how affordable it is to get business space there. It's the U.S.'s fourth most populous city, but its real estate prices don't reflect that. Office space that goes for about $300 a square foot in Houston would cost more than twice as much in New York City.
That means business owners can operate bigger shops, and patrons have more money to spend. Marcus Davis started The Breakfast Klub, a breakfast-themed restaurant, in 2001 and notices the extra cash in his customers' wallets.
"That check goes a lot further down here than it does up north," Davis said.
But it doesn't feel like a large city either. Customers are receptive when business owners try to connect with them, said Bolivar Johnson, who has run the Clinical Care Pharmacy with his wife for nearly a decade.
"The people are more friendly," Johnson said. "In big cities, they'll ignore you."
Thinking about starting a business? These 10 states saw more startup activity than anywhere else nationwide, according to the Kauffman Index of Entrepreneurial Activity.