The capital was rated favourably by judges for its “speedy internet connections, reasonable office rent and host of university graduates to employ”.
It was enough to secure first place in a top 20 list compiled by Expert Market.
Glasgow was the next top rated Scottish city, finishing 10th overall.
London, although home to more tech firm than any other UK city, was marked down by its soaring cost of living.
Analysis of local authorities found Bristol and Edinburgh both have a more promising start-up community than London which ranked third, and Liverpool and Brighton then came in 4th and 5th respectively.
“Entrepreneurship is reaching all corners of the country” said Adelle Kehoe, head of research at Expert Market.
“It is great to see places like Edinburgh being championed as business hubs and this hopefully gives budding business owners a few more options for where to base their start-up.
“As costs in London continue to soar, naturally we will see other cities come to the fore and with fast internet, good office spaces, connections to the city and access to talented staff it’s clear to see why Edinburgh has been the city of choice for thousands of start-up businesses in the last year.”
To create the index of the top cities for enterprise across the entire UK, researchers gathered data from a
range of official sources released over the last 12 months.
It included 10 different data points - including business survival rates, transport links to other UK cities, number of graduates and commercial rent prices.
Last year, Edinburgh was named the best city in Europe to locate a tech business by readers of European Business Magazine, an honour dubbed “not surprising” by city chiefs.
The capital’s technology sector has been going from strength to strength in recent years, buoyed by the phenomenal success of companies such as Skyscanner and FanDuel.