The downbeat feeling engendered by economic statistics lately has many of us wondering whether any businesses are growing and creating jobs.
Quite a few are, and Inc. magazine found them, releasing its 2010 Inc. 500 list of the fastest-growing privately held companies Tuesday.
The annual list is ranked by growth in revenue from 2006 through 2009. But the kind of rapid growth rates posted by these companies typically means they hire a lot of personnel, too.
Unfortunately for Philadelphia, the region placed only six firms among the 500. That’s down from nine in 2009, and distressingly consistent with previous versions of this list.
NextDocs Corp., of King of Prussia, is the Philadelphia-area’s fastest-growing firm, ranking No. 52 on the Inc. 500. In many ways, it is representative of the kind of enterprise this region tends to spawn.
Founded in 2006, NextDocs is a software company that helps health-care firms manage documents to meet regulatory-compliance requirements. Given that Philadelphia bubbles with activity in the health-care field, NextDocs’ products are like the proverbial mousetrap, trying to solve the recurring challenge of mountains of paperwork.
To chief executive officer Zikria Syed, Philadelphia is the perfect place for a company such as his. More than 40 of NextDocs’ 60 employees are in its King of Prussia offices, where it performs research, product development, and support functions.
“We believe in innovation, and the best way to do it is right here,” where the company is near many of its customers, he said.
Syed, 43, came to the United States from Pakistan to attend Drexel University, where he earned a master’s degree in computer science. He stuck around the Philadelphia area, working for what was once called Shared Medical Systems Inc. and later Microsoft Corp., both in Malvern.
Then he set off on his own, cofounding Broadpeak L.L.C., a maker of clinical-trial management software, in 2003. It was acquired by DataLabs, of Irvine, Calif., in November 2005.
The next year, Syed and Matt Walz started NextDocs. Revenue rose to $6 million in 2009, up 4,342 percent from $134,749 in 2006.
After NextDocs, another area firm doesn’t show on the Inc. 500 list until No. 205 - Aromatic Fusion Inc., a Bensalem company that focuses on scented plastic materials and had $4 million in 2009 revenues.
Even when I look at the magazine’s broader list of the 5,000 fastest-growing firms, I get the sense this region is underperforming. The Philadelphia area is home to 132 Inc. 5000 firms, or 2.6 percent of the total. According to the magazine, that makes Philadelphia the ninth-hottest metro area, sandwiched between Houston (with 116 firms) and San Francisco (with 156 firms).
I’m sorry, but a cheer of “We’re No. 9” doesn’t sound quite as sweet as “I love New York.” Our neighbor to the north lays claim to 401 of the 5,000 fastest-growing companies and is the hottest of the hot metro areas.
So what could account for this region’s weakness? Before you say “taxes,” consider the methodology the magazine uses for its list.
First of all, companies apply to appear on this list, supplying their revenue information, which the magazine verifies by having an accountant or lawyer attest to the accuracy. Could it be that Philadelphia firms tend to keep things closer to the vest than those in other areas?
An entrepreneurial expert at Temple University that I contacted mused that lack of funding could be one reason behind Philadelphia’s apparent underperformance compared with other regions.
“We simply can’t compete with other entrepreneurial hubs like Silicon Valley and Boston in terms of venture funding,” Jaine Lucas, executive director of the Innovation and Entrepreneurship Institute at Temple’s Fox School of Business, said in an e-mail.
Even if the region’s “entrepreneurial ecosystem” has gotten more robust in recent years, it’s likely that the other hotbeds have stayed in front, producing rockets that glow brighter than those launched here.
Each year, the Inc. 500 list shows how far start-up companies have come. It also confirms how far Philadelphia has to go.