Catalysts in a startup ecosystem include leaders (like exited founders who act as the “Tap Root” from which a lot of things grow — you’ll see us often highlight these important people), but they can also include other momentum accelerants, whether in growth or outcomes or expertise or otherwise. These factors tend to mimic what Malcolm Gladwell would call “small area variation” in his various writings on the Tipping Point, since they are concentrated and not equally present everywhere.
We talk a lot about our excitement for the Southeast in terms of “heart” reasons (grew up here, raising families here, etc) but also “head” reasons. Among those reasons is the broader trend of economic growth and ease of creating and growing a business.
Here are a few growth factors in our region, from 30,000 feet to 300 feet:
22% of US GDP (and growing)
2nd fastest US GDP growth in 2023 (faster than CA and 2x Northeast)
5 of the top-10 best states for business
10 of the top-15 fastest growing large cities
9 of the top-15 fastest growing tech talent hubs
A question that we got before the holiday was: “OK, fine. I do read that the region is growing. But are there really more high-growth companies than in the past? My bet is most of the growing is Boomers coming to retire, not build venture-grade startups.”
(I’ll keep it anonymous, but profile is Northeast-based, highly successful exec.)
Out on the porch, we took a cannon ball into data land and started playing around with Inc. 5000 data. The tagline for the 2024 version is “Meet the Companies Building the Future” and many startups celebrate and showcase their addition to this list, once they qualify (ranked by percentage revenue growth, with this edition needing $100K in revenue in 2020, and at least $2M in revenue in 2023). We also got our hands on the full data going back to 2014 and then started to dig into facts and trends.
Before I dive into the data, it should be noted that this is not an academic study and is not sponsored by anyone other than our curious little brains. I should also note that Inc. 5000 will recognize high-growth companies that are not typically venture-backed, like consulting and services firms, whose data ARE included in this analysis for now. When we have another holiday maybe we’ll try to isolate for tech/healthcare only.
TREND #1 (Regions) — The Southeast has led the way in terms of percentage share growth of Inc. 5000 companies as well as raw count growth over the last decade.
Interesting… but an extension of the bullets above — you’ve already heard of this.
TREND #2 (States) — Florida, Tennessee, and Georgia are the primary drivers of Inc. 5000 growth in the Southeast, and Texas and Arizona in the Southwest.
Also interesting, but you probably know this, too. Lots of people moved to Florida and Texas for reasons we know and created companies there or took their companies with them. But perhaps a little more interesting because the 2024 Inc. 5000 qualifications require that a company has >$100K in revenue in 2000 and >$2M in 2023.
TREND #3 (Metros)— Digging waayyyy deeper, the list of the top metro areas for high companies looks to have undergone a dramatic shift over the last decade.
Finally, the most interesting thing! (Perhaps we’ll outsource to Gemini next time).
We see big shifts in the Inc. 5000 data at the metro level, especially when you weight by population (high-growth-companies-per-million-people). Why density? Because we believe more concentrated high-growth activity is good, since it becomes easier and more likely for growth-minded people, companies, and groups to know and help each other. And some might say that the vibes are just… better.
As part of our little adventure here, we came across an old study by The Brookings Institution in 2018 that ranked the top-25 metropolitan areas in terms of the density of Inc. 5000 companies, weighted by population, from 2011-2017. Their research was part of a series on the impact of private company growth on the American economy.
The data from 2011-2017 highlights Boulder, CO; Provo, UT; Washington, DC; Huntsville, AL; and Austin, TX as the top-5 metros in their rankings. A key finding was that each of these metros ranked HIGHER than San Francisco, Boston, or San Jose, alongside the idea that entrepreneurship is a “fundamentally local phenomenon” that small area variation can have an outsize impact on overall economic growth.
Out of curiosity, we took this data and re-ranked ecosystems based on 2024 data:
Note: Brookings didn’t include New York, Los Angeles, Chicago, or Miami in their 2011-2017 density study because they were too big. We’ve taken data from 2014 as an approximation of their old ranking and marked those entries with an asterisk.
At Front Porch, we see these trends as another type of Catalyst for the next generation of breakout startup ecosystems. Evidence that growth is happening locally can build the belief that you can join up or create it yourself, and as high-growth companies continue to grow far beyond Inc. 5000 territory, they can create outcomes that transform an ecosystem as founders and founding teams reinvest locally.
Seems like more than just retirements, right…? Let us know what you think!