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The Constant: Companies That Matter

The Constant: Companies That Matter

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There are few constants in entrepreneurship—perhaps none. That is why when something appears to be even semi-stable across meaningful periods, it is usually worth further investigation.

This short paper investigates just such an apparent constant. Specifically, it is often claimed that there only are fifteen to twenty information technology companies created per year in the United States that turn out to “matter,” where matter is defined as the company (relatively) promptly going from founding to $100 million in revenues. Further, and of real consequence to cities and regional economies, is that most such companies founded in any given year are thought to be in California. This paper tries to find out if the preceding is true.
There are few constants in entrepreneurship—perhaps none. That is why when something appears to be even semi-stable across meaningful periods, it is usually worth further investigation.

This short paper investigates just such an apparent constant. Specifically, it is often claimed that there only are fifteen to twenty information technology companies created per year in the United States that turn out to “matter,” where matter is defined as the company (relatively) promptly going from founding to $100 million in revenues. Further, and of real consequence to cities and regional economies, is that most such companies founded in any given year are thought to be in California. This paper tries to find out if the preceding is true.

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Categories:Types, Research
Published by: The Ewing Marion Kauffman Foundation on May 09, 2013
Copyright:Attribution Non-commercial

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THE CONSTANT: COMPANIES THAT MATTERPaul Kedrosky
Ewing Marion Kauffman FoundationMay 2013
 
 THE CONSTANT: COMPANIES THAT MATTERPaul Kedrosky
Ewing Marion Kauffman FoundationMay 2013
© 2013 by the Ewing Marion Kauffman Foundation. All rights reserved.
 
THE CONSTANT: COMPANIES THAT MATTER
INTRODUCTION
There are few constants in entrepreneurship—perhaps none. That is why whensomething appears to be even semi-stable across meaningful periods, it isusually worth further investigation.This short paper investigates just such an apparent constant. Specifically, it isoften claimed that there only are fifteen to twenty information technologycompanies created per year in the United States that turn out to “matter,” wherematter is defined as the company (relatively) promptly going from founding to$100 million in revenues. Further, and of real consequence to cities and regionaleconomies, is that most such companies founded in any given year are thoughtto be in California. This paper tries to find out if the preceding is true.
MEASURING MATTER
There likely are almost as many ways to define companies that matter as thereare companies, but most such methods are idiosyncratic, indefensible, or both. At the most basic level, if companies satisfy the desires of their entrepreneur founders then they are important, even if not in and of themselves individuallysignificant with respect to employment and wealth creation in a modern economylike that of the United States. Nevertheless, to proceed, we need to thinkcoherently about the idea of mattering, and why, in turn, the $100 million criterionis a useful one.Leaving aside an entrepreneur’s self-interest, as described above, many inregional economic development will say a company matters because it is “here”as opposed to somewhere else. They are not wrong, of course, because jobsalways have been viewed intensely regionally, but this only is a slightly morerarefied version of the earlier definition. Yes, such companies matter, but their mere existence does not directly make them a force in the broader U.S.economy. It is parochial and hyper-regional to imply otherwise, no matter what aregional economic development official might tell his or her own city’s electedofficials, or their electorate.The list goes on and on. Many might point to a company being acquired by alarger, high-profile firm as making it important, or that a company appeared on aprominent list of companies, whether regional, national, or international. These allare valid criteria in their own way, but they are incomplete. For our purposes,companies that matter must meet (at least) the following three criteria:
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They must be scalable
. They must, in other words, be able to grow to atleast $100 million in revenues, and ideally, much larger.

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