When the going gets tough, the tough show up on the Inc. 500. A look at our exclusive ranking of America's fastest-growing private companies
Let's cast our minds back to 1997. The dot-com bubble was a shimmering, rainbow-hued orb just beginning to inflate with the breath of a million imaginations. GDP was up 3.9 percent. Unemployment was low, and pockets were ȷingly. Surely, busıness is infinitely tougher in 2009.
David Giuliani isn't having any of it. In 1997, Giuliani topped the Inc. 500 as co-founder of Optiva, maker of the Sonicare, the first toothbrush to clean with sound waves. Now Giuliani is back with a new venture, Clarisonic, which deploys those same waves to shake bacteria and pollutants out of skin. Clarisonic racked up $40 million in sales last year; it is No. 60 on this year's list, with three-year growth of 2,197.1 percent.
Posed the predictable then-versus-now question, Giuliani declines to discuss the recession. Instead, he talks about his decision to manufacture near Clarisonic's headquarters in Bellevue, Washington, rather than overseas. He exhorts U.S. companies to recommit themselves to innovation. (Clarisonic reinvests 3 percent to 6 percent of sales in research and development.) And he raves about social networking, which has rendered the Sonicare marketing playbook -- heavy on tools like infomercials -- largely obsolete. "There's a woman on the Web who does these two-minute evaluations of products," says Giuliani. "She did one for Clarisonic, and within two days, she had over 100,000 hits. Where could you have seen that 12 years ago? This is the company doing nothing and the market doing everything. The market is energetic. The market is alive."
Of course, entrepreneurs habitually view their glasses as half full, with the water still running and another glass standing by to collect the overflow. The 2009 Inc. 500 honorees have good reason to be ebullient, with aggregate revenue of $18.4 billion, compared with last year's $13.7 billion. (Median growth, however, is down from 1,046 percent to 880.5 percent -- and that's without accounting for the worst effects of the recession.) The total employee count of 57,310 is up by almost 6,000 over the 2008 count.
Our survey of the Inc. 500 CEOs confirms that these companies have been a bright spot in the employment picture. Although 30 percent of the respondents have endured layoffs in the past 12 months, 96 percent have hired staff. More than two-thirds of them expressed optimism about the economy. Perhaps that attitude reflects a narrower but understandable confidence in their success.
Which is fine. Economic recovery requires not only consumers optimistic enough to spend but also businesses optimistic enough to invest in their own growth and innovation. Granted, some CEOs on this year's list characterized product and market diversification as risk-management strategies rather than tools for growth. But others look relentlessly forward. When asked about trimming product development in lean times, Giuliani sounds bemused. "But that would be dangerous," he says. "You're talking about the future of this company."
Looking across the 2009 Inc. 500, you see the future of the economy. In health care, businesses are moving forward on cancer and stem-cell research (Nexcelom Bioscience), clinical trials (DSG), and medication management (MedVantx and Millennium Pharmacy Systems). More than 25 percent of the companies in the energy sector focus on solar and other alternative sources. (Source Technologies derives renewable power from plant effluents, landfill gas, and dairy, swine, and chicken waste.) Advertising firms that expect clients to pay only when customers act (by clicking on an ad or, better yet, buying something) are on the rise. So are software developers specializing in Web-based products. Fewer than a third of retailers have even a single brick-and-mortar store. The number of companies providing technical services to the various branches of the federal government continues to rise.
Some things never change, though. As always, companies that make baby products, pet products, and salty snacks are amply represented on the list. But even among those perennials, there exists a drive to keep moving, creating, preparing for coming demand. Take, for example, SwaddleDesigns, which makes baby blankets and layette products. Like Clarisonic, the company is based in the Seattle area, manufactures locally, and has owners who equate innovation with oxygen. Lynette and Jeff Damir (CEO and president, respectively) launched their biggest product push ever in 2008, tripling their lines from four to 12. They spent more than $300,000 to develop, source, and test a wearable blanket with a zipper that opens from the top as well as the bottom (on which they have filed for the company's second patent) and raised more than $1 million from investors to help fund growth. Even after several retail clients slouched into bankruptcy, SwaddleDesigns has continued to enhance and refine its new lines. "We were at a trade show in New York in mid-October, and people were saying that it was the worst show for children's clothes since right after 9/11," says Jeff Damir. "We could have said, 'OK, let's just ride it out. Let's not spend anymore.' But we were getting good feedback. We believe when the economy kicks back into gear, we'll be much stronger for this investment.
"Doing anything else is treading water," he concludes. "And treading water makes you tired."
IMAGE: From Left: Roger Ressmeyer/Corbis (2); Mohammad Berno/Corbis
LEIGH BUCHANAN is an editor at large for Inc. magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture. @LeighEBuchanan