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Confidence Survey ResultsInc. 500|5000 2010

INC. 5000

Thriving Amid the Turmoil

The past decade has seen a national tragedy, two wars, and a financial meltdown. And yet through optimism and creativity, entrepreneurs were still able to look with hope to the future.
Years of Living Dangerously: It took some truly remarkable entrepreneurs to launch companies during a decade of economic and political upheaval.

What is it about years ending in zero that prompts us to look both forward and back. We'll start with back. Vinyl-bound volumes of Inc. from 1990 to 2000 stretch across my desk. Year 2000 is a real doorstopper, obese with ads from tech companies and luxury manufacturers courting readers still blissfully unaware that the track they are climbing is part of a roller coaster. On that year's Inc. 500, the No. 1 company, Parson Group, provided financial, mergers and acquisitions, and risk management consulting to blue-chippers. Perusing the rest of the list, one could imagine the following composite company:

InfiniSoft Solutions International: a provider of custom software, systems integration, consulting, and IT staffing services. Customers are large companies whose CIOs work in those game-show-style glass booths where all the money blows around. The CEO is 40-ish, married, American-born. He attributes his success to persistence, learning from mistakes, and surrounding himself with great people.

Now let's try the same exercise for the present day. A composite Inc. 500 company in 2010 might look like this:

QuoolBeans Mission Systems: a provider of interactive, creative, digital brand-optimization programs; intelligence and national security services; and predeployment troop training. Customers are the Department of Defense and companies of all sizes whose marketing directors have titles such as Communications Ninja and Chief Buzz Officer. The CEO is 40-ish, married, and far more likely than in 2000 to be a woman and born outside the U.S. He (or she) attributes his (or her) success to persistence, learning from mistakes, and surrounding himself (or herself) with great people.

It makes sense that more than 20 percent of Inc. 500 companies this year are either marketing firms or government contractors. The late '90s were about laying corporate infrastructure to support new forms of work and commerce. The past decade has been about connecting and protecting: fulfilling the needs of gadgetheads and jarheads. Beyond those categories, other company clusters speak to our alternating states of giddiness and dread. There are game-changing media businesses, like the maverick Internet radio company Pandora. (Fun!) But also a bunch of debt-consolidation and debt-recovery services. (Shiver!) There are cool fashion companies like ModCloth and Stella & Dot. (Here's my credit card!) But also a crush of cybersecurity and identity-theft-protection firms. (No, wait! Take cash instead!)

Viewed through the rosy lens of late-'90s progress, the 2000 Inc. 500 did not appear to operate under a cloud of unusual risk, although many of those businesses soon suffered from declining IT budgets and growing outsourcing. One can't help feeling more guarded today, watchful of how recent events will play out for this year's oil and real estate businesses, for example. (Real estate is already starting to adapt, with a number of Inc. 500 honorees specializing in rental properties, as well as senior and student housing.) There are also signs of stability. There's a reason for the crowding in the government services category: The government, especially the federal government, is still an excellent customer. Note, too, how many of those businesses were founded by disabled veterans, who know a thing or two about surviving treacherous environments.

Most entrepreneurs, of course, view risk as their caffeination of choice. But there's risk and then there's recklessness, and companies on a fast-growth path must be especially careful not to wander off the designated walkway. In May, Northern Capital Insurance, the No. 1 company on the 2009 Inc. 500, with a three-year growth rate of 19,812 percent, was liquidated after the Florida Office of Insurance Regulation determined it to be overexposed in hurricane-prone areas and that it had failed to secure sufficient reinsurance. The company's collapse, which left 62,000 policyholders in the lurch, occurred without a single catastrophic storm battering Florida's south coast since 2006.

More encouraging are the companies sprouting in industries such as health (32, compared with 15 in 2000), energy (16, compared with three in 2000), and education (six, compared with one in 2000). These sectors represent teeth-grindingly tough issues, on which entrepreneurial zeal and fresh thinking are sorely needed. Despite 2000's notoriety as the height of the dot-com boom, very few e-commerce companies qualified for that year's 500. (Most had not been in business long enough; some had already gone private.) The 2010 list, by contrast, is testament both to our acculturation to online buying and to Web-based models that work. As the list shows, consumers now cheerfully shop the Internet for products as diverse as baby clothes and diamonds. But vendors of spare parts for products such as major appliances, scooters, and automobiles are also thriving.

As for the future, most social networking, mobile technology, and green-everything companies are too young to have made the list in 2010. Look for them in years to come. One thing we can guarantee: The CEOs will attribute their success to persistence, learning from mistakes, and surrounding themselves with great people.

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IMAGE: Getty
Last updated: Aug 24, 2010

LEIGH BUCHANAN | Staff Writer | Editor-at-large, Inc. Magazine

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.




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