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Only 200 Startups Per Year End Up Mattering and Most of them Aren't in Tech

74 points by smit 13y ago

_sentient 13y ago
It's an interesting article, but this title is ridiculous. The notion that a startup doesn't "matter" unless it does $100M+ in yearly revenue is just plain wrong.
- wfrick 13y ago
  The "matter" framing is borrowed from the paper, which has a nuanced defense of the criteria http://www.kauffman.org/uploadedFiles/DownLoadableResources/companies-that-matter.pdf http://www.kauffman.org/uploadedFiles/DownLoadableResources/...
mikeryan 13y ago
Hmm Summly may not make a massive dent in the US economy. But it mattered to some folks. There' may be hundreds if not thousands of tech startups which don't "matter" because they end up as failing, an acqui-hire or minor exit. But in sum each of those startups have created jobs, paid taxes and added something to the economy.
napoleond 13y ago
It's actually kind of surprising to me that as many as 200 companies founded in any year will go on to reach $100 million in annual revenue. I suppose it shouldn't be--I wonder how many new companies are founded each year?
josefresco 13y ago
$100 million in revenue looks awesome until you see $101 million in costs or losses. What about profitability?
- kcorbitt 13y ago
  This is a great point. Even if absolute revenue is lower, companies that deal mostly with information, rather than physical stuff, tend to have much, much higher return on investment when compared with capital-intensive alternatives like manufacturing or retail. This may matter to VCs a great deal.
calinet6 13y ago
"One more bit of data from this study for Boston folks: when Kedrosky looked at the incidence of high growth IT firms by state, taking into account GDP and other factors, Massachusetts came out ahead. In other words, it was the state that had more than would be expected based on its population and economy." Awesome. Go Boston.
- intellegacy 13y ago
  Boston is an underrated startup scene. I've only been getting involved recently and it's amazing how many quality tech businesses don't make it to HN, especially ones out of MIT or ones started by older professionals (often with phds, etc) They don't make it to techcrunch but they have really, really smart people working for them and are tackling wicked hahd problems. BTW tried to follow you on twitter but blocked? haha. no offense taken just wondering why
  - calinet6 13y ago
    Very sorry about that! I probably misread it as a spam bot (no offense either, I get like 4-5 per week and it's hard to parse them). I've unblocked and followed you, and I'll read more carefully next time :)
    - intellegacy 13y ago
      No worries! I block spam accounts too, haha. I saw an account that had tweets that sounded a bit off. After reading them carefully, I realized they were most likely fake 'real' tweets. Incredible what the spammers are doing these days.
espadagroup 13y ago
I'd be interested to know how many companies were started in each of those sectors and be able to see the "success" rate rather than just the absolute numbers.
freyr 13y ago
"...where matter is defined as the company (relatively) promptly going from founding to $100 million in revenues." If I can found a company that provides financial security to myself and one or more employees, that matters... at least to me. $100 million in revenues is great, but it doesn't necessarily matter to me.
- mcintyre1994 13y ago
  I think they should at least use profits. It's not everything - Instagram sure mattered, but it's a lot more robust than revenues. A hypothetical company that doubles your money could probably meet that revenue limit, but they wouldn't really matter long term.
tedsuo 13y ago
I wonder how many of these new companies come from large companies that are just rearranging themselves? So that first year's revenue is based on pre-existing revenue or assets?
paul 13y ago
It would be nice to see the list of 200 companies. A lot of detail gets lost in those graphs.
- fpp 13y ago
  Fully with you - without that it's just charts (with hard-to-tell-apart colors). Particularly as this is based on Inc.'s 500 list(s) - had a look at something similar a few years ago based on these lists - according to their data the fastest growing companies at that time (4-5 years ago) where all Human Resources / Head-hunter start-ups.
  - minimax 13y ago
    It's not based on the Inc 500. It says it's based on data from Bloomberg and Capital IQ, which is probably why he isn't releasing it. I tried Googling around for a free stock screener that would let you filter by revenue and founding year but I couldn't find anything. It wouldn't get you the private companies but it would probably be a representative sample of the whole group.
acjohnson55 13y ago
I think there's a bit too much obsession with astronomical growth. There's got to be something to be said for a company that produces dependable profit, living within its means. Not every enterprise needs to be massive.
sharemywin 13y ago
My definition of a company thta matters: Assuming aboout 3-5x earnings for a sale price for most small companies. If I wanted to retire on about $70,000/yr and the market returns about 6% I'd need $1.2 million in earnings assuming 10% profit that's about $12 million in revenue for 4 years which is $3 million in sales.
pionar 13y ago
"Yes, the American Southeast, the powerhouse of economic growth, apparently. At least by this measure." Well, duh. It shouldn't be that astounding. The Southeast has for a long time been a "powerhouse of economic growth", because, as much as we don't like to admit it, the US is still a highly manufacturing-reliant economy. And where is the biggest manufacturing region (especially in new development)? The Southeast.
- mindcrime 13y ago
  Good point. It's interesting to note that there's a specific named region of the overall southeast, known as the "I-85 Corridor"[1] where a lot of economic activity is centered. That said, there's a lot more to the Southeast than manufacturing. NC, at least, has a vibrant tech-startup scene, particularly in the Triangle (Raleigh / Durham / Chapel Hill) region. And, as the Wikipedia page notes, Charlotte is quite the banking / finance hub these days. This area also largely overlaps with what is known as the Piedmont Atlantic Megaregion[2] which is acknowledged as an emerging area of substantial economic growth. IOW, "this ain't your father's Southeast". [1]: http://en.wikipedia.org/wiki/I-85_Corridor http://en.wikipedia.org/wiki/I-85_Corridor [2]: http://en.wikipedia.org/wiki/Piedmont_Atlantic_MegaRegion http://en.wikipedia.org/wiki/Piedmont_Atlantic_MegaRegion
wtvanhest 13y ago
A lot of "tech" companies are in those two sectors. Amazon is consumer discretionary for example. I don't have a list of holdings per sector in front of me right now, but a bunch of stuff you wouldn't expect is in consumer discretionary. Most industrial companies have technical competitive advantages.
orangethirty 13y ago
I currently work with a company that is simply blowing up. A startup in the automotive industry. It uses software to provide its main product/service, but I wouldn't call it a tech company. Last year it made a couple of millions in profits. The current year is going to be at least 5X that thanks to some new systems I'm putting in place. Did I mention its privately owned, and in the middle of nowhere? Did I also mentioned it is owned by someone who does not know much about computers? At this rate, it will corner the market it caters to in one or two years. All while running under the radar.
alizaki 13y ago
A lot more tech companies are started now than maybe, 3 years ago. Also, it takes companies time to reach $100M in revenue.
kpennell 13y ago
Please post the list if you find it, thanks!

74 points by smit 13y ago

It's an interesting article, but this title is ridiculous. The notion that a startup doesn't "matter" unless it does $100M+ in yearly revenue is just plain wrong.

wfrick 13y ago
The "matter" framing is borrowed from the paper, which has a nuanced defense of the criteria http://www.kauffman.org/uploadedFiles/DownLoadableResources/companies-that-matter.pdf http://www.kauffman.org/uploadedFiles/DownLoadableResources/...

mikeryan 13y ago

Hmm Summly may not make a massive dent in the US economy. But it mattered to some folks. There' may be hundreds if not thousands of tech startups which don't "matter" because they end up as failing, an acqui-hire or minor exit. But in sum each of those startups have created jobs, paid taxes and added something to the economy.

napoleond 13y ago

It's actually kind of surprising to me that as many as 200 companies founded in any year will go on to reach $100 million in annual revenue. I suppose it shouldn't be--I wonder how many new companies are founded each year?

josefresco 13y ago

$100 million in revenue looks awesome until you see $101 million in costs or losses. What about profitability?

kcorbitt 13y ago
This is a great point. Even if absolute revenue is lower, companies that deal mostly with information, rather than physical stuff, tend to have much, much higher return on investment when compared with capital-intensive alternatives like manufacturing or retail. This may matter to VCs a great deal.

calinet6 13y ago

"One more bit of data from this study for Boston folks: when Kedrosky looked at the incidence of high growth IT firms by state, taking into account GDP and other factors, Massachusetts came out ahead. In other words, it was the state that had more than would be expected based on its population and economy." Awesome. Go Boston.

intellegacy 13y ago
Boston is an underrated startup scene. I've only been getting involved recently and it's amazing how many quality tech businesses don't make it to HN, especially ones out of MIT or ones started by older professionals (often with phds, etc) They don't make it to techcrunch but they have really, really smart people working for them and are tackling wicked hahd problems. BTW tried to follow you on twitter but blocked? haha. no offense taken just wondering why
- calinet6 13y ago
  Very sorry about that! I probably misread it as a spam bot (no offense either, I get like 4-5 per week and it's hard to parse them). I've unblocked and followed you, and I'll read more carefully next time :)
  - intellegacy 13y ago
    No worries! I block spam accounts too, haha. I saw an account that had tweets that sounded a bit off. After reading them carefully, I realized they were most likely fake 'real' tweets. Incredible what the spammers are doing these days.

espadagroup 13y ago

I'd be interested to know how many companies were started in each of those sectors and be able to see the "success" rate rather than just the absolute numbers.

freyr 13y ago

"...where matter is defined as the company (relatively) promptly going from founding to $100 million in revenues." If I can found a company that provides financial security to myself and one or more employees, that matters... at least to me. $100 million in revenues is great, but it doesn't necessarily matter to me.

mcintyre1994 13y ago
I think they should at least use profits. It's not everything - Instagram sure mattered, but it's a lot more robust than revenues. A hypothetical company that doubles your money could probably meet that revenue limit, but they wouldn't really matter long term.

tedsuo 13y ago

I wonder how many of these new companies come from large companies that are just rearranging themselves? So that first year's revenue is based on pre-existing revenue or assets?

paul 13y ago

It would be nice to see the list of 200 companies. A lot of detail gets lost in those graphs.

fpp 13y ago
Fully with you - without that it's just charts (with hard-to-tell-apart colors). Particularly as this is based on Inc.'s 500 list(s) - had a look at something similar a few years ago based on these lists - according to their data the fastest growing companies at that time (4-5 years ago) where all Human Resources / Head-hunter start-ups.
- minimax 13y ago
  It's not based on the Inc 500. It says it's based on data from Bloomberg and Capital IQ, which is probably why he isn't releasing it. I tried Googling around for a free stock screener that would let you filter by revenue and founding year but I couldn't find anything. It wouldn't get you the private companies but it would probably be a representative sample of the whole group.

acjohnson55 13y ago

I think there's a bit too much obsession with astronomical growth. There's got to be something to be said for a company that produces dependable profit, living within its means. Not every enterprise needs to be massive.

sharemywin 13y ago

My definition of a company thta matters: Assuming aboout 3-5x earnings for a sale price for most small companies. If I wanted to retire on about $70,000/yr and the market returns about 6% I'd need $1.2 million in earnings assuming 10% profit that's about $12 million in revenue for 4 years which is $3 million in sales.

pionar 13y ago

"Yes, the American Southeast, the powerhouse of economic growth, apparently. At least by this measure." Well, duh. It shouldn't be that astounding. The Southeast has for a long time been a "powerhouse of economic growth", because, as much as we don't like to admit it, the US is still a highly manufacturing-reliant economy. And where is the biggest manufacturing region (especially in new development)? The Southeast.

mindcrime 13y ago
Good point. It's interesting to note that there's a specific named region of the overall southeast, known as the "I-85 Corridor"[1] where a lot of economic activity is centered. That said, there's a lot more to the Southeast than manufacturing. NC, at least, has a vibrant tech-startup scene, particularly in the Triangle (Raleigh / Durham / Chapel Hill) region. And, as the Wikipedia page notes, Charlotte is quite the banking / finance hub these days. This area also largely overlaps with what is known as the Piedmont Atlantic Megaregion[2] which is acknowledged as an emerging area of substantial economic growth. IOW, "this ain't your father's Southeast". [1]: http://en.wikipedia.org/wiki/I-85_Corridor http://en.wikipedia.org/wiki/I-85_Corridor [2]: http://en.wikipedia.org/wiki/Piedmont_Atlantic_MegaRegion http://en.wikipedia.org/wiki/Piedmont_Atlantic_MegaRegion

wtvanhest 13y ago

A lot of "tech" companies are in those two sectors. Amazon is consumer discretionary for example. I don't have a list of holdings per sector in front of me right now, but a bunch of stuff you wouldn't expect is in consumer discretionary. Most industrial companies have technical competitive advantages.

orangethirty 13y ago

I currently work with a company that is simply blowing up. A startup in the automotive industry. It uses software to provide its main product/service, but I wouldn't call it a tech company. Last year it made a couple of millions in profits. The current year is going to be at least 5X that thanks to some new systems I'm putting in place. Did I mention its privately owned, and in the middle of nowhere? Did I also mentioned it is owned by someone who does not know much about computers? At this rate, it will corner the market it caters to in one or two years. All while running under the radar.

alizaki 13y ago

A lot more tech companies are started now than maybe, 3 years ago. Also, it takes companies time to reach $100M in revenue.

kpennell 13y ago

Please post the list if you find it, thanks!