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How -- and where -- to create a company that matters

Christina Hernandez Sherwood, eMed Editor, MedCity News

Despite an economy in flux, the pace at which the United States produces $100 million companies has been stable over the past two decades, according to a new Kauffman paper. But the locations and sectors in which those companies are created are changing.

In The Constant: Companies that Matter, Kauffman senior fellow Paul Kedrosky explores the rate and founding locations of U.S. companies that “matter” from 1980 to today. He uses three criteria to define companies that matter:

  1. They must be scalable, quickly reaching $100 million or more in revenues.
  2. They must be able to generate jobs quickly and broadly.
  3. They must be disproportionate creators of wealth, both directly through profits and salaries and indirectly through equity.

About 125 to 250 U.S. companies per year are founded and reach $100 million in revenues. In percentage terms, the largest contributors are from the consumer discretionary and industrials sectors. But taking into account sectoral contributions to the U.S. GDP, the IT sector produces more $100 million companies than expected. The southeast is the most productive region in terms of $100 million company production, with the Pacific region in second place.

The U.S. averages 20 technology companies founded each year that reach $100 million in revenues, 17 of which are in seven states: California, Florida, Illinois, Massachusetts, New York, North Carolina and Texas. Of these 17, four are usually in California.

Weekly Wisdom from Kauffman is a regular feature on eMed highlighting insightful research from the Kauffman Foundation. Do you have a favorite Kauffman research insight that could help life science entrepreneurs? Send it to mailto:emededitor@kauffman.org.

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