Inc. Magazine is known mainly for its prestigious “Inc. 500” list of fastest-growing private companies in the United States. As I reported for R’Biz last month, the Richmond region contributed only one company – Logical Innovations, a software development firm — to that list. But it turns out that Inc. compiles an even bigger list, an “Inc. 5000,” that dips even deeper into the entrepreneurial economy.
Ah, hah, I thought. Perhaps the Richmond area’s successful companies were buried a layer or two under the elite strata of the top 500. If only I searched the larger database, I reasoned, the region’s rising stars would be unveiled. Alas, searching the Inc. 5000 list proved to be even more demoralizing. Out of the 5,000 fastest-growing private companies in the United States, 244 companies are from Virginia — nearly one out of 20. But the vast majority are from Northern Virginia; only 12 are located in Richmond.
In a metropolitan area of about one million people and a country of 300 million people, the odds are that at least one company out of 300 would be found here. In actuality, the ratio is less than one out of 400. If the Inc. 5000 list can be trusted as an accurate reflection of economic reality, the Richmond region is entrepreneur poor. We have a severe shortage of the fast-growth companies that drive regional economic development through job and wealth creation.
While Richmond has been successful at recruiting corporate headquarters and professional firms, we’re doing a lousy job of creating the next generation of businesses, jobs and technologies. No wonder the Milken Institute ranked the region 102 out of the 200 largest Metropolitan Statistical Areas for the growth of its technology sector. (See “Richmond Falling Short in Tech Cred.”)
As the Richmond region has experienced repeatedly, large corporations come — and they go. It’s great when we recruit a new manufacturer or, even better, a corporate headquarters. But there is no assurance that they will stay. In the past year alone, Albemarle Corp., a specialty chemicals manufacturer, has relocated its corporate headquarters to Baton Rouge, La. Far more damaging to the local economy, Wachovia Securities moved to St. Louis, taking hundreds of highly compensated employees with it.
As Robert Reich argued in his book, “Supercapitalism,” corporations today have no regional loyalties. They invest their capital wherever they can maximize their profits, whether that’s in Virginia, or Louisiana… or China. Maximizing profit for shareholders is the reason why corporations exist. If senior executives don’t maximize profit, they will either be relieved of their command or investors will shun their stock.
By contrast, citizens are invested in their communities, and they want to see their communities prosper. The citizens of Richmond need to create the social and economic conditions – a deep pool of human capital, and institutions supportive of entrepreneurs — that encourage the formation of innovative, fast-growth companies. Even successful fast-growth companies can grow up to become Fortune 500 companies and move out of town. But in the two or three decades it takes to reach that stage, the fast-growth companies are creating jobs, wealth for investors, opportunities for vendors and partners, and economic prosperity generally.
Our business, political and civic leaders appear to be very engaged in community issues. But, whatever priorities they may have, supporting entrepreneurial growthis not one they take terribly seriously. Perhaps more depressing evidence like that of the Inc. 5000 will induce the big shots to change. Instead of jetting off to places like Jacksonville, Fla., for inspiration, maybe they should take a bus up to Northern Virginia to see where that region’s entrepreneurs come from.
(This post was adapted from an article first published in R’Biz.)
