St. Louis is the fastest-growing city for startup activity among the nation’s 40 largest metro areas.

Brian Feldt, Senior Reporter for the St. Louis Business Journal, shares highlights from a report on startup cities, including St. Louis. Following is his article, reprinted with permission:

The St. Louis metro-area climbed 10 spots — from No. 36 in 2016 to No. 26 this year — in the Kauffman Foundation’s latest ranking of cities’ startup activity.

The upward shift makes St. Louis the fastest growing city for startup activity among the nation’s 40 largest metro areas.

The index is based on three measurements: rate of new entrepreneurs, or the percentage of adults becoming entrepreneurs in a given month; opportunity share of new entrepreneurs, or the percentage of new entrepreneurs driven to start a new business primarily by “opportunity” as opposed to “necessity”; and startup density, the rate at which businesses with employees are created in the economy.

St. Louis has grown in each category over the past three years, with the rate of new entrepreneurs rising from 0.16 percent in 2015 to 0.23 percent this year; opportunity share rising from 66.5 percent in 2015 to 77 percent this year; and startup density climbing from 73.5 startups per 1,000 firms to 96.7 startups per 1,000 firms.

Nationwide, the startup activity index rose slightly after two years in a row of sharp increases.

“In the two decades between the late 1990s and today, the lowest levels of the Startup Activity Index occurred just three years ago,” the report said. “The recovery of startup activity in the United States since then has been driven mostly by more people entering entrepreneurship and more people entering out of choice rather than necessity. Moreover, we are finally seeing an increase in the number of startups with employees—although those remain precariously below pre-recession levels.”

Miami, Austin and Los Angeles were the top three cities in the ranking. Nashville and Baltimore saw the biggest ranking drop (Nashville going from No. 16 in 2016 to No. 29 this year, and Baltimore dipping from No. 22 to No. 35).

On a state level, Missouri ranked No. 10 overall, a slight drop from last year’s No. 9. California had the most startup activity, the report showed, with Massachusetts and Tennessee being the fastest growing (both climbing six spots in this year’s ranking).

The rate of entrepreneurship in America slowed in 2016, but the ethnic diversity of startup owners nationwide continues to increase.

Brian Feldt covers technology, venture capital, startups, real estate and sports business for the St. Louis Business Journal.