Each year, 552,000 employer firms open in the U.S. and a fairly stable percentage grow rapidly to become companies that ‘matter.’ According to a new paper from Kauffman Foundation senior fellow Paul Kedrosky, anywhere from 125 to 250 U.S. companies per year reach $100 million in revenues—the first of three criteria that he uses to determine if they matter. In addition to being scalable, the firms must be able to generate jobs quickly and broadly and they must be disproportionate creators of wealth (through profits and salaries as well as through equity). So where do most of these firms emerge?
For a single state, yes, California. But taking a broader look at regions provides a bit of a surprise. Since 1980, the southeastern states—Georgia, Florida, Kentucky, Louisiana—combine to make the most productive region with the Pacific region (that includes California) coming in second.
"Companies unable to reach $100 million in revenues are still relevant to the economy," Kedrosky says. "But the $100-million firms meet an entirely different threshold that gives cities, states and countries an even greater economic advantage."
The largest contributors, in percentage terms, do not come from the information technology sector, but instead are from the consumer discretionary and industrial sectors. But don’t expect that—or even the most productive regions—to remain constant for long.
"Looking forward, we will most likely see even more changes regarding the locations and sectors of these companies that matter," said Kedrosky. "With the prevalence of lean startups, accelerators and fractional entrepreneurship, and the declining cost of company creation, entrepreneurship is less expensive and more widely available to prospective entrepreneurs."
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