In the U.S., less than 250 companies founded in any given year ever reach $100 million in revenues. The majority of new firms don’t even come close. What do those who make it have in common? In a report for the Ewing Marion Kauffman Foundation, Paul Kedrosky identified some interesting answers.
Using data from Capital IQ and Bloomberg, Kedrosky tracked trends among all $100-million companies from 1980 to the 2013.
He found that $100-million firms share the following characteristics:
- They are most likely to go public due to their scale, shareholder needs and the cost of being listed
- Most of their job and revenue production occurs post-IPO
- Their cost of capital is lower than small companies, so it is easier for them to grow.
Though many of the firms that reach $100 million in revenue are in the information technology sector, consumer and industrials represent the largest cohort. According to Kedrosky, the Southeast U.S. produces the most $100-million companies of any region followed by the Pacific region.
Despite changes in the economy, the rate at which $100-million companies are created in the U.S. has remained consistent. This stability is vital to the U.S. economy as these companies produce more than 90% of the returns for the venture capital industry and are a important job creators.
To read Paul Kedrosky’s full report, please click here.
Contributed by Caroline Pringle.
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