September 18, 2013 at 8:10 AM

For decades, Inc. magazine spotlighted the 500 fastest growing U.S. private companies. In 2007, Inc. expanded the list to 5000 companies, providing a broader look at growth (and offering the magazine more opportunities to sell conference seats and recognition plaques!).

Ventureprise Vibe recently recognized the five Charlotte USA Inc. 500companies and noted that our formation of these fast growing private companies lags national results. Today, we consider what can be learned from the 53 area companies that made the 2013 top 5000 list.

The United States averaged 15.9 “top 5000” companies per million people per year during 2011-2013. Charlotte USA (16 counties) with 17.2 was better than the national average. North Carolina, however, lagged at 13.2 and South Carolina was especially weak at 8.6. The results for the two states are even more troubling when you consider that the Carolinas’ population growth exceeds the national average. Why is it that people find the Carolinas attractive but all of that talent is not creating fast-growing companies?

The Charlotte area’s performance exceeds the national average by 8%. Since Inc. began the 5000 ranking in 2007, we have averaged 47 companies annually (and regularly surpassed the national average). The location of those companies makes clear an important fact: our top performing entrepreneurs want to be at the center of the region.

Mecklenburg County has 36% of the area’s population but is home to a whopping 70% of the area top 5000 companies. The other North Carolina counties account for 50% of the population and only 26% of the fast-growing firms. And, the four South Carolina counties in Charlotte USA lag badly with 14% of the population but only 4% of the top firms.

Why don’t fast-growing firms emerge in South Carolina? Three of the counties are largely rural. But, the fourth, York, is the second largest county in Charlotte USA (following Mecklenburg) and it lags behind the smaller counties of Cabarrus and Iredell. We don’t have the answer, but it is a question that our colleagues in the Sandlapper state must consider.

The concentration of fast-growing firms at the center of the region is evident, but there are other observations that our policy leaders might consider.

First, the concentration is even more pronounced when we consider Inc.’s fastest growing firms (top 500). Mecklenburg was home to 80% of those over a long period (2000-2013).

Second, the counties that perform best are all adjacent to Mecklenburg. And, most of the action in those counties occurs within about five miles of the Mecklenburg line (in Mooresville, Concord, Harrisburg, and Indian Trail).

Third, the adjacent counties have very different results. Iredell with only 6% of the region’s population produces over 9% of the top 5000 companies. Is it NASCAR, life on Lake Norman, or the nationally recognized Mooresville schools that attract top entrepreneurs?

Gaston County is home to 8% of the region’s population but barely registers in the top 5000 listings. It averages less than one company annually since the ranking inception in 2007 and has produced zero in the last three years. Why does Gaston attract so many residents while generating very few fast growing firms?

One final observation. The concentration of fast-growing entrepreneurs in the center of the Charlotte region appears to be accelerating. Mecklenburg is the location for 81% of top 5000 firms in 2011-2013, up from 63% in 2007-2010.

The urban location of top 5000 firms is true in Charlotte, in the Carolinas, and throughout the country. This ought to stimulate thinking among policy makers about reasonable expectations for rural county development objectives.

The Inc. rankings are not a perfect window into entrepreneurial success. Some fast-growing firms prefer a lower profile and do not participate. Others are acquired or go public and are no longer eligible. And, the ranking is done on revenue growth which favors companies with the minimal revenue to be eligible. Despite the flaws, the rankings are an excellent view of what drives entrepreneurial growth in Charlotte and, importantly, how we compare to the rest of the country.

We haven’t quite exhausted the learning from the Inc. rankings. Our final comments in a few days will offer insight into the types of companies that grow rapidly including the specific profile of Charlotte USA fast growing businesses.

- Paul Wetenhall

Paul Wetenhall has served as president of Ventureprise, Inc. since returning to the Carolinas in 2008. He has been involved in every aspect of entrepreneurship and innovation since leaving a corporate career in the 1980s to co-found a software venture that commercialized technology from Xerox PARC. His perspective includes experiences as CEO, corporate director (public, private, and non-profit), entrepreneur coach, university lecturer, and leader of efforts to build regional entrepreneurial ecosystems.

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