America's Most Promising Young Companies
Forbes makes you meet the plucky upstarts that are shaking up everything from software to bread dough.business Updated: Sep 17, 2009 16:08 IST
Meet the plucky upstarts that are shaking up everything from software to bread dough.
Three engineers with a dream and an algorithm started a company that could change the world--but they are in Tennessee, not Silicon Valley, and they care about manufacturing, not social media.
This is just the shiniest gem we turned up in our hunt for America's most promising young companies. Which of these 20 sprouts will bloom into the next Microsoft? General Electric? Google? And what, exactly, makes their fortunes burn so bright?
The answers aren't just the province of professional investors and the employees lucky enough to get in on the ground floor; indeed, they run to the very churning, molten center of our economy--and our society.
That's why Forbes went hunting for small, dynamic companies with the kind of growth prospects that make venture capitalists salivate. The kind of companies that, with enough focus, sweat, courage and capital, have the potential to roil their competitive landscapes. The kind of companies worthy of a place on Forbes' new list of America's Most Promising Companies.
Our collection of inspiring entrepreneurs operates in a broad array of industries--from software and water purification equipment to hypoallergenic pillows and packaged cut fruit. All but one launched previous enterprises; 18 have snared outside investment capital for their current ventures; seven have bagged patents. To qualify, companies had to have been founded within the last 10 years and have $25 million or less in annual sales (pre-revenue companies were allowed).
Other lists of small or privately held companies tend to be ranked according to a single metric: annual revenue or percentage change in revenue over a given period. Yet everyone knows that a cursory glance at the top line is a far cry from what it takes to evaluate the potential of any young company.
To sharpen our search, we teamed with The Venture Alliance, an advisory to early-stage companies, in Irvine, Calif. TVA has devised a rating system for young companies: Prospects were scored on a host of characteristics, among them the size of the markets they serve, the strength of their intellectual property, the extent to which founders put their own capital at risk, the experience of their management teams and their record in hitting product-development benchmarks promised to equity investors.
We collected the data via a detailed survey that took candidates nearly two hours to complete. Entrepreneurs who had raised outside capital gave business plans to TVA for further vetting; the rest completed an even more exhaustive survey. (Both surveys have subtle double-checks built in, to make sure the companies' storylines track.)
Our partner also brought in software experts and engineers to evaluate product plans (all signed nondisclosure agreements), and Forbes reporters interviewed the finalists. The 20 highest scorers appear to have a better shot at raising capital--and thus are considered more promising than their peers.
Technology companies--many in the software arena--played a starring role in our inaugural list. Not that they all hailed from Silicon Valley: No. 1-ranked Vextec set up shop in leafy Brentwood, Tenn.
Founded by the engineering trio Loren Nasser (age 49), Robert Tryon (50) and Animesh Dey (40), Vextec wields complex algorithms that predict, with scary accuracy, how and when components will fail--even before they're built. That crunching power hastens the design of everything from engine parts to medical devices, in turn slashing research-and-development expenses and even opening doors for small contract manufacturers hungry for lucrative replacement-parts contracts.
The threesome has also managed to create a profitable enterprise without diluting their ownership stakes or going deep into debt--other marks of a promising company. In 2000, Vextec snagged a $100,000 Small Business Innovation Research grant from the U.S. Air Force to model the performance of an array of turbine engine components made from titanium aluminide. Since then the company has raised nearly $20 million, mostly through similar grants awarded by various federal agencies. Nasser, Tryon and Dey still own 100% of the company, now with 28 employees. Vextec posted $3 million in sales in 2008 and has been profitable since its first year in business.
For further details on the rest of our new list--including company backgrounds, self-recorded videos from each of the founders and a breakdown of the characteristics that make each company so promising--check out Forbes.com/promising.