Reality Check from the Inc. 5000


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.)

Share this article


(comments below)


(comments below)


8 responses to “Reality Check from the Inc. 5000”

  1. Anonymous Avatar

    The sad truth about Richmond is that its status as a innovation center is limited.
    Sure, plenty of creative R&D is done here, but that tends to be at big, marquee company labs such as DuPont. The Biotech Park hasn't really taken off and is nowhere close to, say, North Carolina's Research Triangle Park which got started back in the 1950s and boasts of such prime movers as IBM, Cisco, Glaxo-B-W, Merck and Pfizer. Richmond's Park is a Johnny-Come-Lately and doesn't have any truly big names, except for Philip Morris which, given their repressive history in laboratories, is actually quite a negative in the global research community.
    Wachovia Securities came, but despite all the hoopala in the local press, Richmond wasn't enough of a draw to keep it here. Given its rather bungled merger with A.G. Edwards, it might have well have stayed here anyway.
    The problem with Richmond is that despite its pretensions, it does not have the academic base to be a world-class draw. U of RIchmond doesn't do much research and VCU has so blemished itself of late that it will take years before it cleans up its reputation and that will happen only after Trani leaves next year.
    The saddest part of all of this is that Richmond is still basically a tobacco town. The fact that they did so much to grab Philip Morris says it all. And PM isn't likely to leave — not many other towns would want it.

    Peter Galuszka

  2. Larry Gross Avatar
    Larry Gross

    I think knowing the answer as to why a company located in one place rather than other places….

    i.e. NoVa rather than Richmond or Roanoke….

    knowing that answer… is key to any citified economic development strategies…

    otherwise… we’re turning a steering wheel and shifting gears on equipment that does not really connect to the fighting gear…

  3. Larry Gross Avatar
    Larry Gross

    more FYI fodder:

    2008 Best Performing Cities – 200 Largest


    The Milken Institute/Greenstreet Real Estate Partners Best Performing Cities Index ranks U.S. metropolitan areas by how well they are creating and sustaining jobs and economic growth.

    NoVa is 41
    Lynchburg is 71
    Richmond is 102

    The rating criteria are:

    5-yr Job Growth
    1-yr Job Growth
    5-yr Wages & Salaries Growth
    1-yr Wages & Salaries Growth
    Job Growth
    5-yr Relative HT GDP Growth
    1-yr Relative HT GDP Growth
    High-Tech GDP LQ
    # of HT GDP LQs Over 1

  4. Anonymous Avatar

    I read an article a couple of days ago about Tata, the Indian manufacturer of cars and many other things. Apparently, they have proven a concept to power cell towers with fuel cells. This will dramatically increase productivity for the rural poor of India, and more importantly put India on the map as a producer of key technologies; not just a producer of cheap human resources.

    India’s government has been working side by side with private sector firms to build out infrastructure to support growth. The public and private sector seem to be in alignment with one another.

    To me, alignment is the key. We are so far out of alignment when it comes to the needs of smaller, regional companies. Many of our federal policies are geared toward assisting multinational corporations no longer headquartered in the US. My sixth grade son came home last year and shared what he had learned in school that day,”the best way to get out of recession is to go to war.” I instructed my son to challenge his teacher on that one. Halliburton is now based in Dubai….for tax reasons. Does nobody else see this as a horrible alignment issue. Most of my Republican friends always bemoan the ills of the federal entitlement programs, but at least those dollars stay here. Who in the world really knows where our trillions of hard earned dollars are ending up as a result of this war, not to mention the oil companies. I think I will vomit if I hear another person explain that gas prices change due to simple supply and demand- as if oil was a natural market.

    OK, that’s enough ranting for me now.

  5. Larry Gross Avatar
    Larry Gross

    I thought there was a certain irony to the banner at the R’s national convention that said: “Country First” when clearly their motto is “business first”.

    Otherwise – they’d be as assertive about protecting this country’s citizen’s “interests” as they are about protecting our “world interests” which is little more than money-speak for “business interests”.

    It is not protectionism to insure that a country’s citizens are protected from predatory business policies.

    Our workers in this country have been ill-served as compared to other country’s workers.

    and I agree with the premise that the US protects BIG business interests…because if we really and truly believed that small business was important – we’d be addressing the issue of health care for small businesses’s workers.

    “Country First” indeed.

  6. Anonymous Avatar

    The first commenter clearly has some biases I think need to be addressed. So here it goes:

    i) it is okay to hate VCU and Dr Trani, but please it clear what your opinions are versus fact. NoVa is rather innovative but does not have much of an academic base. GMU isn’t much of a research college compared to other va colleges. Richmond does not have a DC to piggie back off. yes i said it. it think NoVa=cheaper alternative to DC city limits in the Washington-Alexandria-Arlington MSA

    ii) relating to VCU again, comparing Biotech park and Research triangle is unfair. Triangle had about a 40 year head start! plus Biotech park is more about helping companies start up

    iii) just because you hate Altria doesn’t make Richmond a tobacco town. the tobacco industry is a very small fraction of the Richmond economy.

  7. Anonymous Avatar

    Anonymous 12.27 p.m.,
    Some reponses to your comments:

    You can’t separate NOVA from the Greater DC area and the Greater DC area does have an academic base that goes far beyond George Mason. Even better, it has some key national research institutions such as NIH, biotech in Maryland and in NOVA, plenty of Beltway Bandit consultants, some of which do actually handle significant research, DARPA and other defense agencies, etc. You seem to want to separate NOVA from DC and then compare it to Richmond which denies the federal government and is a bet absurd.

    (2) In your next statement, you contradict yourself. You complain that Richmond doesn’t have DC to piggyback from as NOVA does. True, but then, neither does the Research Triangle in NC. most of Bay Area and San Diego in California, Route 128 around Boston, parts of Austin, Pittsburgh, etc. ALl are signiicant research areas.

    (3) Altria is one of the largest employers in Richmond. It is simply wrong to say it doesn’t contribute much to the local economy.

    Peter Galuszka

  8. Anonymous Avatar

    (I) i won’t disagree with you on point 3, but this still doesn’t make richmond “tobacco town”

    (II) i was confused about the usage of terms. if NoVa=DC–(which spans at least 3 states) then yes, I probably contradicted myself; I should have been comparing richmond to DC not NoVa(which is an over glorified subregion of DC to the residents of virginia). but that is besides the point a little bit.

    what i was really getting at is that richmond doesn’t have any powerhouse that stimulates the economy, while DC/NoVA does–the federal government. so do all the other places you mentioned.

    also, do you realize you are comparing a region that spans over 3 states and has over 5 mill people to region of a little over 1 mill.
    it would be shameful if dc(notice i didn’t say nova) didn’t have as much universities, businesses and research as it does. just thought i should point it out.

    by isolating nova i was trying to make a fairer comparison for richmond.

Leave a Reply