Best Places To Get Rich
Betsy Schiffman

Want to do business? Move to Madison, Wis. Want to get rich? Move to Palo Alto.

Madison has been anointed the Best Place For Business in the U.S. in 2004 by Forbes magazine. Its favorable ratings in--among other things--income and job growth, low cost of doing business, available labor pool, quality of life and a university that has spawned a lot of biotech companies make it a fine city in which to live and prosper.

One of the truly great things about the United States is that, with enough intelligence and determination, people can get rich almost anywhere. Whether it's from owning chains of dry-cleaners in Queens, car dealerships in Chicago or oil wells in West Texas, for hundreds of years fortunes have been made in every state in the Union. There are some places, however, where the chances of creating wealth are much greater than others.

That is the reason, after all, why so many people who hope to strike it rich move to places like Manhattan or Palo Alto. It's not because the cost of living is so low or the quality of life as a struggling entrepreneur is so high. Whether they want to start a software or a soft-drink company, entrepreneurs know they have to go where the money is.

So where should they go?

In order to identify the best places to get rich, we looked at five criteria: the number of investments made by local venture capital firms, the number of active venture capital firms in the area, education level of the workforce, proximity to a major university or research center, and, in the belief that like follows like, the number of local billionaires in the area.

First, we followed the money--which led us to narrow down our list to the 42 places with the most active venture capital firms. Many of the firms that made the most-active list invested in over 25 companies during the course of the year, and one--New Enterprise Associates--invested in 73 private companies. In total, about $18.2 billion in venture capital was invested last year, according to PricewaterhouseCoopers' quarterly-venture capital study, the MoneyTree Survey. That money doesn't go travel far, either, acording to the study's director of research.

"In general, venture capitalists tend to invest in companies nearby. If a VC is based in Colorado, he's probably going to invest in companies based in Colorado," says Austin, Tex.-based Kirk Walden, National Director of Venture Capital Research of PricewaterhouseCoopers.

Austin Ventures, for example, was one of the ten most active venture capital firms last year, according to PricewaterhouseCoopers. It invested in 42 companies over the course of 2003, but its portfolio is largely filled with Austin-based companies, including such software businesses as Active Power (nasdaq: ACPW - news - people ), Motive, Tivoli--which is a subsidiary of IBM (nyse: IBM - news - people )--Vignette (nasdaq: VIGN - news - people ) and WaveSet Technologies, which was recently acquired by Sun Microsystems (nasdaq: SUNW - news - people ). Although venture capital is scattered and concentrated in various regions of the country (mainly in Silicon Valley, New England, New York and Texas), each region tends to invest within the region.

Getting capital is just the beginning of the story, however. Entrepreneurs also need to have smart people around them to help execute a business plan. In order to determine which of the venture capital hubs have the most educated local workforce, we averaged in the education rankings taken from the Forbes list of the Best Places For Business--which measures the number of PhDs per 100,000 residents.

We also looked at the proximity of a city to a major university or research center. It was not surprising that the majority of the places we selected were near schools like Harvard, M.I.T. or Stanford, or Massachusetts's famous technology corridor Route 128. These schools and facilities serve as incubators for many of the biggest ideas in areas like software development and biotech. It's no coincidence that Stanford has always been an important part of the Palo Alto business community.

Finally, a quick glance at the annual Forbes list of the 400 Richest Americans reveals that some billionaires live in places like Omaha, Neb. or Bentonville, Ark., the bulk live near places like Boston, Seattle or San Francisco. Some billionaires may not be interested in seeking out new opportunities, but many of them devote considerable energy to detecting new ideas and talented people that they can back financially. There are also many financial advisors and investors who live in these regions that, while not billionaires yet, are looking for the next Microsoft (nasdaq: MSFT - news - people ) or Google that will one day help them be.

The drawback to places like Palo Alto, however, is that they are expensive, competitive and often send the ambitious billionaire-in-embryo back home with his or her tail between their legs. The cost of starting up in these cut-throat environments where lots of talented people are chasing the same dollars is high. The cost of labor is high. Overhead is high. Taxes are high. Moreover, living expenses, because so many people are willing to pay whatever it takes, are also steep.

The following list looks at only the top 10 places but, unsurprisingly, there are many others where a person can find their fortune. Metro areas such as Seattle, Baltimore, northern Virginia/Washington D.C. and Austin come very close but failed in the end to make the cut--but only just.

If you're looking to become a millionaire, the many attractions of Madison seem obvious. If you're looking to become a billionaire, however, living in Manhattan or Menlo Park may seem a small price to pay.