Rose Levy, 212-319-3451 x641, email@example.com, Goldin Solutions
Barbara Pruitt, 816-932-1288, firstname.lastname@example.org, Kauffman Foundation
Contrary to some rhetoric, the IT sector does not represent as large a share of these $100-million firms
(KANSAS CITY, Mo.), May 9, 2013 – The pace at which the United States produces $100-million companies has been stable over the last 20 years despite changes in the economy. However, according to a new Kauffman paper released today, the locations and sectors in which those companies are created are changing.
In the paper, "The Constant: Companies that Matter," Kauffman Foundation Senior Fellow Paul Kedrosky explores the rate and founding locations of companies in the United States that "matter" from 1980 to present.
Kedrosky uses three criteria to define companies that matter: They must be scalable, quickly reaching $100 million or more in revenues; they must be able to generate jobs quickly and broadly; and, they must be disproportionate creators of wealth, both directly through profits and salaries and indirectly through equity.
"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."
Anywhere from 125 to 250 companies per year (out of roughly 552,000 new employer firms) are founded in the United States that reach $100 million in revenues. The largest contributors, in percentage terms, are from the consumer discretionary and industrials sectors. Taking into account sectoral contribution to U.S. GDP, the information technology sector produces more $100-million companies than might be expected.
Geographically, the most productive region in terms of $100-million company production is the U.S. southeast (Georgia, Florida, Kentucky, Louisiana) with the Pacific region (California, Oregon, Washington, Hawaii) coming in second. Following closely behind are the Mid-Atlantic and Central regions. Most regions are balanced with regard to sector, except for the Pacific region, which produces only slightly fewer $100-million information technology companies than the rest of the country combined, most of which are in California.
The United States averages 20 technology companies founded per year that reach $100 million in revenues, 17 of which are in 7 states: California, Florida, Illinois, Massachusetts, New York, North Carolina and Texas. Of these 17, 4 are usually in California. However, in the 1990s, California's share of $100-million technology companies was around 35 percent. That share has declined to around 20 percent in recent years.
"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."