Expelling 4 Myths of High-Growth Companies

This post details a proposed session that Kauffman researchers would like to bring to SXSW Interactive 2016. Read below to learn more, and head to PanelPicker to vote if you’d like to see this session at the festival! Learn more about our other session proposals.

Do you think most of the fast-growing companies in the United States are venture-backed tech companies based in Silicon Valley? Think again.

Based on research by the Kauffman Foundation — using Inc. magazine’s 500|5000 list — we find that the fastest-growing companies and entrepreneurs often do not match the stereotypical profile we see portrayed around startups.

In fact, only about 1 percent of these fast-growing companies are in Silicon Valley, only half of which are in the high-tech industry. Less than one in ten of the fastest-growing companies were venture-backed, while most were funded through bootstrapping, loans, and help from friends and family.

Think guidance by top entrepreneurial mentors is out of reach? In smaller communities, such as in Kansas City, there are fewer degrees of separation between the entrepreneur and potential mentors.

In this proposed session at SXSW Interactive 2016, the Kauffman Foundation would like to expel four myths of entrepreneurial growth:

  1. Venture capital is a pre-requisite for entrepreneurial success.
  2. Entrepreneurs need to be based in Silicon Valley to achieve high-growth success.
  3. The fastest growing companies are tech-based.
  4. Companies need to expand nationally or internally to achieve high-growth success.

Let’s explore these myths with insights from our research — led by the Kauffman Foundation’s Director of Research Yas Motoyama.

To study these four assumptions — which we later found out to be myths — we took two main approaches:

  1. We partnered with Inc. magazine to analyze their data and, in addition, survey the entrepreneurs on their list of fastest-growing companies in America. We surveyed 479 of those entrepreneurs nationally.
  2. We did in-depth interviews with 22 Inc. high-growth entrepreneurs in the Kansas City area. We chose Kansas City as a first ground of study, though we later expanded to interviews in other areas (to be released).

Let’s discuss two of the four myths — and how to learn more.

Myth: Venture capital is a pre-requisite for growth

In studying 479 high-growth companies among the Inc. 500|5000 list of fastest-growing companies in America, we have found that less than 7 percent of high-growth firms have received venture capital.

Myth: Companies need to expand nationally or internally to achieve high-growth

While we often assume that most high-growth companies have expanded nationally or internationally — the Googles (or should I say, Alphabets) and Microsofts of the world – we find that this is not always the case. Fourteen percent of Kansas City companies interviewed operated exclusively in Kansas City, while 23 percent also operated in nearby regions such as Denver and Dallas — in other words, 37 percent were operating exclusively at the local or regional level.

Entrepreneurship is essential for economic development, economic mobility, and thriving cities. The United States benefits from all kinds of entrepreneurship and cannot survive on just high-growth tech firms out of the West Coast.

In fact, our research shows the stereotypical entrepreneurship culture often portrayed in the media isn’t so typical after all.

Want to learn more? Vote for our Session!

We plan to present these and other insights about entrepreneurial myths at SXSW Interactive 2016. But to make it there, we need your vote.

Vote for this session to hear our four myths of entrepreneurship and research insights at SXSW Interactive 2016.

All you have to do is click on the “thumbs up.”


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