The South Yorkshire city was behind only the Canadian cities of Quebec and Winnipeg in the worldwide list compiled by software firm Sellics.
The ranking system was based on 22 factors relating to the online venture infrastructure, as well as the cost of both living and launching a business.
Also on the list was Leeds in at sixth place nationally and 12th internationally.
The news comes just 24 hours after Silicon Valley firm Bossa Nova revealed it would base its UK headquarters in Sheffield.
“It’s never been easier to start an online business, with new technologies giving us simple marketplace tools, and third-party seller opportunities enabling almost anyone to set up shop,” said Franz Jordan, CEO of Sellics.
“However, most digital businesses concentrate around big cities, whereas this study shows that smaller cities where the cost of living is cheaper offer entrepreneurs a much more affordable entry into online business.
“For example, someone in New York would have to save for over a year to amass the nearly $64,000 needed to launch an online venture, compared to 5 months in Detroit to save just over $31,000 – half the capital and almost half the time.”
Other UK cities to fare well were Liverpool and Glasgow.