"Triple triple double double double."
That's the formula CEO Todd Olson followed to drive Pendo, the cloud-based software platform he co-founded in 2013, to $20.9 million in sales in just five years. Olson learned it from a VC who told him that category leaders--the kinds of companies that go public--triple revenue in the first two years after hitting $1 million, and then double it in each of the next three. "I can tell you that second triple was incredibly challenging," says Olson, who pulled it off by restructuring Pendo's team and rethinking his product marketing.
Now Olson, a serial entrepreneur with two prior companies under his belt--one failed, one acquired--has landed Pendo on the 2019 Inc. 500. It debuts at No. 73, with 4,267 percent three-year growth, and Olson wants to keep coming back. "People ask me, as CEO, what do you lose sleep over?" he says. "Growing slow."
Inc.'s annual ranking of the country's 500 fastest-growing private companies is like one of those cameras that capture light in motion. The 2019 class, which represents some of the most dynamic sectors of the economy, has in the past three years attained a median growth rate of 1,701.4 percent. In service to society's most cherished metric, it has created 52,000 jobs.
So, all these businesses have achieved. Yet most have not fully arrived. The Inc. 500 is not a list of America's biggest or most profitable companies. Rather, it is a list of the most promising. The excitement lies in seeing what they will do next. Some will mature into large, public enterprises. Some will transform industries. Some will march steadily forward, improving the lives of ever more customers and employees. Their laurels are for wearing in celebration, not resting on.
One thing the large majority will do is keep growing. Just 9 percent of CEOs on the larger Inc. 5000 list report themselves content with the status quo. Eighty percent are still pounding away after larger and larger top lines, even as their expanding size makes large percentage gains harder. They are exploring multiple routes to growth, with the majority favoring the new--either customers (46 percent) or products (19 percent)--over more of the same.
It's not that all these CEOs crave momentum to bust their way to lucrative exits. Historically, more than half of Inc. 500 companies remain in private hands four to 10 years after making the list, according to research conducted by the Kauffman Foundation in 2012. Even in this frenetic IPO year, with the likes of Beyond Meat, Slack, and Uber making headlines by going public, the percentage of honorees who see themselves hurtling toward those same markets is low--just 4 percent for the Inc. 5000 overall. Still, the recent run of high-profile startup IPOs--as well as ongoing robust M&A activity--creates a kind of contact high, as founders mentally map their paths to billion-dollar revenue.
Olson calls going public a "very promising" option if both Pendo and the markets continue their current performance. But, like many Inc. 500 CEOs, he dismisses talk of exit strategies as a distraction from what matters: how the company will exploit fresh opportunities tomorrow and next week and next year. Pendo is pursuing three new growth engines: European expansion (the company, based in Raleigh, North Carolina, just opened a London office); more enterprise sales, which translate to larger deals; and a product targeting a fresh market. "The way we continue growing, even as the numbers get bigger," says Olson, "is never getting comfortable or complacent with where we are."
To relentlessly focus on the future, Inc. 500 founders must first envision it. Chris Spanos, for example, foresees an era when robotic cars delivering pizza on Super Bowl Sunday will run off the road, and drones bearing packages fall from the sky. As transportation relies more on software and less on humans, Spanos's company, Urgently (No. 12; 11,633 percent), will be there to address inevitable glitches--whether that means rescuing driverless vehicles from flower beds or retrieving dropped Amazon orders and speeding them on their way. For now, the $30.3 million company, based in Vienna, Virginia, orchestrates more traditional roadside assistance to flesh-and-blood drivers through an app, integrating with services from companies like BMW, Volvo, and Uber. Automakers including Porsche and Jaguar are among its investors.
Urgently's continued growth depends on new partners, new services for existing partners, and the ceaseless feeding of the flywheel that, in his book Good to Great, management guru Jim Collins famously proposed as a metaphor for naturally occurring momentum. Here's how that works: Urgently has developed a network of more than 9,000 towing and 80,000 roadside-assistance companies. The better those small businesses perform, the more dispatches Urgently sends them. Other providers see their peers' businesses growing and want to sign on. That gives Urgently a larger, more attractive resource with which to tempt corporate partners. And those new partners, in turn, create additional revenue for the roadside providers. "Everyone wins the more momentum we get, and the flywheel spins faster," says Spanos, the company's CEO and co-founder.
Innovation remains, perhaps, the purest driver of fast growth. New products stoke customers' curiosity, then enthusiasm, and then the expectation of more new products. That's where things can get challenging.
"The way you keep up triple-digit growth, even at nine-plus figures of revenue, is to have a core business that is growing 80 percent and a bunch of new business lines that are growing at 2,000 percent," says Stuart Landesberg, co-founder and CEO of Grove Collaborative (No. 87; 3,665 percent), a $104.1 million company in San Francisco.
Subscription-based Grove sells natural home and personal care products, roughly half of which it creates. Recent introductions include tree-free paper products made from bamboo and sugarcane and a reusable glass dispenser for laundry detergent. To ensure new products keep swelling that top line, Landesberg has cordoned off innovation, which he calls the company's North Star, into a silo operating free from quarterly pressures. "We're not like the giant CPG businesses," he says, "where innovation means making the hole in the toothpaste tube 10 percent bigger."
Jessica Legge and Kimberly Lexow have been talking recently about the public markets' appetite for Beyond Meat and, potentially, Impossible Foods. Those companies' next-big-thing-ness "perks up the ears of people like us in the food business," says Legge, co-founder with Lexow of $6.9 million Sifted (No. 188; 2,099 percent), which provides lunch programs prepared by its own chefs for corporate clients. The Atlanta-based company has plenty of runway to grow: It is in just six markets and is eyeing another 24. "I think there's an opportunity to increase our services to these amazing offices we enter every day," says Legge. "What else can we take off the plate of the office administrator? Are there other food offerings they need?"
But the blinking yellow light of others' failures, at now-defunct venture-backed competitors SpoonRocket, Munchery, and Maple, keeps the founders' enthusiasm in check. They are bootstrapping Sifted, and have insisted on profitability from day one. "In the event we did decide to raise money, we would be throwing gas on the fire instead of burning through cash while trying to figure out a sustainable model," says Legge.
Sean Flood also reads some high-flying startups' trajectories as a cautionary tale. His company, $8.4 million Gotcha (No. 277; 1,572 percent), based in Charleston, South Carolina, provides electric-bike, -scooter, and -vehicle rideshares through an app. It is an industry bestrode by colossi: Scooter makers Bird and Lime have hit multibillion-dollar valuations, and Uber and Lyft are getting into bike- and scooter-sharing. "The challenge has been not getting caught up in the fray of this high-growth space," says Flood. "It is really easy to look at the unicorns and say, 'I'm going to do what they do and be worth a billion dollars.' I think there is huge risk to that." (Justifying his caution: Lyft and Uber initially struggled in the public markets, while Bird, Inc.'s 2018 Company of the Year, reportedly has seen revenue slip amid high losses, according to a July article in tech publication the Information. Bird founder Travis VanderZanden disputed the report on Twitter and said the reported losses were a one-time write off; the company declined to comment further on that story to Inc.)
Flood and his wife, Jacklyn, launched Gotcha in 2009 as a provider of free rides for college students. Colleges and businesses, which could wrap ads around Gotcha's cars, paid the bills. The business grew slowly, and then pivoted in 2015. It still goes only where it is wanted, securing a university or municipal partner before entering a market. That ask-permission-not-forgiveness approach diverges from the confrontational stance of the rideshare giants, and "that has resonated really well with the market, which had a visceral reaction to the way others pushed it on them," says Flood, who signed Gotcha's 100th partner in June.
Not every founder expects--or particularly wants--to build a billion-dollar company. Madeline Haydon, a Vietnamese immigrant who founded $19.1 million Green Grass Foods, which does business as Nutpods (No. 13; 11,623 percent), required speed out of the gate to create an unassailable market lead for her Nutpods nondairy coffee creamer. "We wanted to get out there fast and tell an earnest story about what we do and be able to fill orders," says Haydon. "Especially with food, when you are successful you can have fast followers and knockoffs."
Haydon ticks off multiple opportunities for the Bellevue, Washington, company's growth. Among them are the expansion of existing channels (Nutpods has just 30 percent penetration in conventional groceries); new channels (mass market, shopping clubs, food service); and new regions (Canada, Mexico, overseas). And, of course, there will be new products. But Haydon's not champing to become a "platform brand"--the dairy-substitute equivalent of Beyond Meat. Rather, she just wants her creamer to achieve household-staple status. "We have been growing fast. But at any time that could get compromised," says Haydon. "It's important not to get too big for your britches."
At some point, even the most aggressive entrepreneurs must accept the realities of scale.
Consider Arrive Logistics, a tech-enabled shipping-services broker based in Austin. Arrive lands at a respectable No. 413 on the list with 1,107 percent growth. But it might have ranked even higher had it not started from a substantial base of $30.5 million in 2015--its mere second year in existence. By last year, CEO and co-founder Matt Pyatt had heavily invested in its workforce, generating 2018 revenue of $369 million.
So how does Pyatt intend to keep up triple-digit annual growth? He doesn't. "As we near $1 billion in revenue for 2020, we plan to settle into a more sustainable growth rate between 20 and 50 percent," says Pyatt, who thinks Arrive can maintain that pace for five years.
So, congratulate Arrive and its 499 fellow honorees on their remarkable achievements. Then: Stay tuned.