2014 INC 5000 List Shows Staggering Growth and a Lack of Large Companies
A Significant Jump in Revenue Growth
Each year since 2007, Inc. has posted an updated list of the top 5000 high-growth, private companies it tracks. This year Inc. added several thousand new companies to its list and reported a spike in growth amongst its top ranked companies.
Companies at the top of Inc.’s list are those demonstrating the most revenue growth. This year the average revenue growth of the top 50 jumped to 15,086%, up from 11,072% in 2013. That is the greatest jump the list has reported since 2009, and marks a 3x increase from the average in 2009.
Lack of Large Companies
In the last 5 years, only one company of the top 50 has reported revenue over $1 billion. Additionally, 2014 was the first time since 2009 that Inc. did not feature a single company with revenue over $1 billion in the entirety of its list. Despite the spike in growth, this fact highlights an interesting trend in the overall landscape of private companies: bigger companies have tended to produce less revenue than smaller companies, and they grow more slowly. It is a seeming paradoxical insight that also questions the focus generally placed on larger private companies such as Cargill, Koch Industries, and Mars Inc., which average $85 billion in revenue, 65,000 employees and stringent investor protocols.
While $1B+ companies have not traditionally been high growth companies on Inc.’s index, an average of 35 are included per year. Those included rarely rank in the top quartile of growth; generally they hovered in the bottom half. According to this dataset, the sweet spot for growth is $12M-$17M, significantly smaller than the average mid-cap company ($1b-$5b, usually considered the hotspot for growth), and much closer to start- up range.
Of the lists Inc. produced in the last 5 years, its 2011 and 2012 lists featured the greatest number of $1b+ companies. These years also had the greatest number of “big corporations”, with a swell in companies consisting of 100,000+ employees. However, 2013 brought a significant shift in the number of companies with 100,000+ people, reducing the count from 23 to just three. Additionally, in 2013 the average growth of the top 50 jumped from eight thousand percent to just over eleven thousand percent.
Smaller is better
These trends of smaller companies hitting steeper growth margins hint at a story: small companies, defined as companies with lesser revenues and smaller employee counts, are not only increasing in prevalence but also hitting staggering growth margins. While small companies might have taken a hit during the post-crisis years of 2010-2012, they exhibited strong growth in 2013. And 2014 seems to be the year of the small company, with none of the top growth companies having more than 1000 employees or $1 billion in revenue. Although with each passing day another headline is posted in the major business journals about the propinquity of start-ups and the looming bubble they are creating, this database seems to insinuate that there is no stopping them.