New Report Labels Boston a Better Hub for Startups Than San Francisco Quality of life and community connections matter more than the quantity of new companies in a given city, according to the study.

When it comes to solving 21st-century challenges, an influx of coders in hoodies to a given city doesn't cut it. While Silicon Valley may be the default region associated with startups, the landscape is becoming increasingly cutthroat. Meanwhile, it often seems like two disparate communities with conflicting interests -- there's tech, and then there's everything else.

This disconnect knocked the Bay Area down to the number-two slot in a ranking of cities most conducive to startup growth in "Innovation That Matters," the second annual report by the U.S. Chamber of Commerce Foundation, incubator 1776 and FreeEnterprise.com. Instead, Boston earned the highest placement in the index.

"Boston entrepreneurs actually reported much better connections to their community overall," said Donna Harris, co-founder and co-CEO of 1776, during a telephone press conference highlighting the report's key findings.

"While the San Francisco Bay Area is the clear leader in total startup activity, its lack of a cohesive community and declining quality of life for residents helped move Boston to the top spot," the report said.

Related: 6 Global Alternative Cities to Silicon Valley to Start Your Company

Startups rarely succeed in a vacuum. Cities that foster mutual respect and collaboration among existing corporations, universities and other civic institutions create the ideal conditions for a thriving startup sector. Being able to openly share ideas and navigate regulations are key, as are a high concentration of talent and capital, according to the report.

Given the various parameters, world-class American cities were not the only metropolises the Chamber Foundation and 1776 featured. "Economically challenged" cities such as Baltimore and Pittsburgh ranked eighth and 18th, respectively, thanks to their highly connected communities and growing populations of young people.

Each city has its strengths as well as challenges yet to overcome. For example, while Denver has the highest quality of life for entrepreneurs among the 25 cities studied, it ranks 23rd for its attractiveness to international talent.

Curiously, Raleigh-Durham, N.C., also made the list, coming in at third. Whether the ongoing North Carolina "bathroom bill" controversy will drive away startups going forward is yet to be seen, but Harris acknowledges the possibility. "As startup ecosystems are emerging all over the country, entrepreneurs increasingly have choice of where they put their businesses," she said during the conference.

Related: 5 Cities You Wouldn't Expect to Have a Thriving Startup Scene

Going further, entrepreneurs may gravitate toward geographical areas where particular industries have thrived for decades, but past leadership in a given field does not always translate to a city producing successful digital companies in that space. For example, while Atlanta has long been known for its dominance in electrical power, the city is less welcoming to startups in the energy sector more broadly.

"Eventually, entrepreneurs will move on from the on-demand delivery of things to solving harder problems," Harris said. Here are the 25 cities best positioned to address those challenges in 2016.

1. Boston
2. Bay Area
3. Denver
4. Raleigh-Durham
5. San Diego
6. Austin
7. Los Angeles
8. Philadelphia
9. Washington, D.C.
10. New York
11. Seattle
12. Chicago
13. Portland
14. Pittsburgh
15. Nashville
16. Minneapolis
17. Salt Lake City
18. Baltimore
19. Dallas
20. Houston
21. Atlanta
22. Miami
23. Phoenix
24. Kansas City
25. New Orleans