. . . or not. Doug Otto, CEO of Deckers Outdoor Corp. (#52), bootstrapped his $57-million venture from $2,000 he borrowed from his parents more than 20 years ago. CEO John Schnatter founded restaurant chain Papa John's International (#51) on $1,000 in savings during his college days. International Gaming Management was staked by a couple of guys with six gambling machines.
Indian-born Rama Rao came to the United States as a graduate student with $100 in his pocket 10 years ago. With the help of a $1-million Small Business Innovation Research grant, he founded Excel Technology (#6), a manufacturer of solid-state laser products and systems, and now has a personal wealth of more than $6 million.
In addition to Rao, several other founders of this year's Inc. 100 companies are foreign-born. MRV Communications (#59), which makes high-tech connectors, was founded by Israeli-born Noam Lotan with two of his professors from the Israeli Technicon. CrossComm was founded by Polish-born Tadeusz Witkowicz, who moved to the United States when he was 16 (and who has halved his company's research-and-development costs by establishing a Polish subsidiary that employs otherwise out-of-work local engineers). Salim Bhatia, CEO of BroadBand Technologies (#9), is an Indian who was born and raised in Kenya.
Watch your back. You would think that as these companies rise from the farm leagues to the AAA level, they would start staying up nights, worrying about the major leaguers. No way. Most CEOs say they're less afraid of IBM and other dinosaurs than they are of the members of the Inc. 100 list -- of 1999.
CEO Enzo Torresi of NetFrame Systems (#28) describes the process of growing a start-up into a wildly successful public company like his as a transformation from predator to prey. Whereas Torresi once attacked the technological and marketing barriers of competitors, now NetFrame is beginning to build its own. "My biggest fear is not Digital or Hewlett-Packard. Those companies have so much to protect that they are slaves to their own religion," says Torresi. "What we fear is the guy without luggage -- without religion. Without anything to lose."
THE INC. 100 AT A GLANCE
Male CEOs 98
Female CEOs 2
CEOs who founded the company 62
CEOs who had founded other companies previously 13
Average company sales in 1993 $62,779,050
Average company sales in 1989 $3,439,360
Average number of employees in 1993 441
Average number of employees in 1989 69
Number of companies with venture backing 56
Seed Capital Raised
Average seed capital raised: $2,288,000
Percentage of
companies Average amount
Source using source* raised per source
Bank loan 8% $561,000
Personal savings 38% $336,000
Friends and family 20% $570,000
Venture capital 26% $4,936,000
Government grants 2% $522,000
Angels 4% $1,938,000
Other 8% $4,164,000
*Total is greater than 100% because of multiple responses.
How The IPO Money Was Used
Average IPO money raised: $73,257,000
Percentage of Average
Use companies* amount used
Capital equipment 23% $7,625,000
Acquisitions 13% $13,548,000
Growth by other means 14% $8,203,000
Investor buyouts 13% $11,145,000
Sales and marketing 13% $11,023,000
Still in bank 33% $32,487,000
Cash to owners 7% $10,513,000
Cash to employees 0% 0
Other 31% $14,685,000
*Total is greater than 100% because of multiple responses.
INVESTING IN GROWTH: HOW THE INC. 100 STOCKS PERFORMED
They say an army travels on its stomach. That maxim might also apply to the 15th annual Inc. 100 trek down to Wall Street. An investor willing to put his money where his mouth is could have chosen from among 10 fast-growing companies dealing in provisioning and serving food. And a wise decision it would have been. Of the 10 stocks that more than doubled, no fewer than 3 were food marketers -- packager Monterey Pasta (up 183%), and restaurateurs Boston Chicken (up 119%) and Papa John's International (up 117%). It should be noted that the same investor could have hedged his or her bet and still made a profit by buying into the list's two companies that treat heart disease.
In our make-believe exercise, our researchers determine the price that the common stock of each Inc. 100 company was selling at 52 weeks back (or fewer, if the issue came out as an initial offering during the period). Then we "buy" 100 shares, "sell" them a year later, and tote the monetary gain or loss for each. On that basis, the stocks of 56 corporations advanced, those of 42 declined, and those of 2 broke even. The median performance was a gain of 13%.
No doubt fueled by a flow of new money from individual investors who, disheartened by the low yields of fixed-income securities, turned to equities in 1993, the group collectively gained 22.1%. That was about on par with small-capitalization stocks in general, as represented by the NASDAQ Industrial Average. The increment was substantially ahead of mid-capitalization companies as reflected by the Standard and Poor's Industrials and outstripped the blue-chip Dow Jones Industrials as well. (See table.)
