Science in the Triangle

Startup companies make for good storytelling. Entrepreneurial lore is filled with tales involving a couple of college dropouts, a garage, and a Big Idea. Some of them fail, and some of them morph into industry giants.

But along the way from startup to giant, those companies go through a second stage of growth, during which they add employees and revenue but are still growing fairly quickly. It’s these second-stage companies that are the unsung heroes of North Carolina’s economy, according to Penny Lewandowski of the Edward Lowe Foundation. In 2008, the last year for which figures are available, 9.7 percent of the resident companies in the state were second stage, but they accounted for almost 35 percent of the state’s jobs.

Penny Lewandowski, director of entrepreneurship development, Edward Lowe Foundation.

The same trend is true in other regions of the country, says Lewandowski, where second stage companies account for a disproportionate number of jobs. (Readers interested in researching trends in company size and job creation can consult the web site youreconomy.org, another initiative of the foundation.)

“These companies are carrying the heavy load of job creation,” Lewandowski says.

Lewandowski, the foundation’s director of entrepreneurship development, came to the Triangle a few weeks ago for the North Carolina Companies to Watch (CTW) awards presentation. The CTW program, sponsored by CED in partnership with the Edward Lowe Foundation, honors privately held second stage companies, those with 10-99 employees and between $1 million and $50 million in revenue. The winners demonstrated exceptional revenue and/or job growth, innovation in marketing or use of technology, and community involvement.

In all, 25 firms were named North Carolina Companies to Watch in the first annual competition. (The complete list appears at the end of this article.)

443 new jobs in a down economy

It’s important to recognize second stage companies, Lewandowski says, because local economies grow through expansion of existing companies rather than the relocation of other companies to a region. “Grow your own” seems to work better than recruitment as an economic engine, in her observation.

As Lewandowski pointed out in her remarks at the awards ceremony, in the four years ending in 2009, the winning companies alone have generated $334 million in revenue and added 443 employees. And that’s in a down economy.

Joan Siefert Rose, president of CED.

Joan Siefert Rose, president of CED, which assists entrepreneurs in the Research Triangle and throughout the state, worked with the foundation to bring Companies to Watch to North Carolina. “We thought it was a great fit and an extension of CED’s work,” she says. That’s in part because many of the startups helped by CED have now successfully transitioned to being second stage companies. “They’ve created jobs and value” for the state, she says, echoing Lewandowski’s observation.

Winners a snapshot of N.C.’s “innovation economy”

In addition, the 25 winners “paint the picture of what the state’s entrepreneurial scene looks like,” Rose says. The winning companies are diverse, representing manufacturing, gaming, software as a service, health sciences and online retailers, a mix that accurately profiles what Rose calls the “innovation economy” in North Carolina.

The winners also included a mortgage firm that doubled its revenue and “a staffing firm that changed their business model, leading to more customers in 2009 than the prior three years combined,” according to Lewandowski. Other winning companies broke new ground in water treatment and solar photovoltaics.

Companies to Watch is a recognition program created by the Edward Lowe Foundation, which supports second stage entrepreneurial companies through a variety of programs, mostly aimed at entrepreneurial support organizations (ESOs) like CED. “Second stage companies have different needs from startups,” Lewandowski says, “and we help ESOs understand how to serve them.”

Winners and their families at the Companies to Watch awards banquet. Left photo: Roland Johnson, CEO of Piedmont Pharmaceuticals, with his wife and mother. Middle photo: Jean Orelian, CEO of SciMetrika, with his wife Valerie and a friend. Right photo: April Mills of Dickson Hughes talks with Isaak Kunkel, vice president of engineering for winner Digitalsmiths. Photos courtesy CED.

Nominations for 190 companies were received for North Carolina’s competition. The winners were:

• 3tailer

• Affinergy Inc.

• BlueStripe Software, Inc.

• Bronto Software

• Clinipace Worldwide

• Consolidated Asset Recovery Systems, Inc.

• DataChambers, LLC

• Digitalsmiths

• Entex Technologies Inc.

• goodmortgage.com

• Inlet Technologies

• Kyma Technologies, Inc.

• Liquidia Technologies, Inc.

• Piedmont Pharmaceuticals, LLC

• PocketGear, Inc.

• SciMetrika, LLC

• Semprius, Inc.

• ShareFile

• ShopBot Tools, Inc.

• The Select Group

• Themis Group, Inc.

• TheraSim, Inc.

• TransEnterix, Inc.

• Tranzyme Pharma

• Yap

Watch CED’s web site for announcements about next year’s competition.