Jan 22 2014, 9:16am CST | by Forbes
Of the 100 companies listed on our annual America’s Most Promising List, around a third were forged in the doom and gloom years of the global financial crisis. How did these companies achieve extraordinary growth when others were in freefall? Here some of the CEOs tell us how they turned starting out in a bleak economy to their advantage.
“Scarcity of capital is like draught season in the Serengeti,” says Jed Yueh, CEO of Delphix, which develops database software that helps reducing processing time and storage requirements. The company has raised $45.5 million from Greylock Partners, Lightspeed Venture Partners and others. “As conditions improved, companies that survived benefitted from having fewer competitors. Or in our case, it’s one of the reasons we still don’t have any direct competitors,” he says.
“It was a time when guests were buckling their belts, paying closer attention to their budgets and seeking more value from restaurant options. This was how the fast casual movement was born,” says Scott Crane, founder of Smashburger, our No. 6 ranked company which did $228 million in revenue last year.
“Real estate was more affordable during this time, so we were able to take advantage of better economics and key locations we would not have been able to access to prior to the recession given the newness of our brand and lack of a national/regional presence,” he says.
A key advantage was that everything was cheaper in 2007 and 2008. “We were able to acquire smaller companies for very favorable multiples since there was less competition bidding for these businesses. Moreover, their limited access to capital stunted their growth allowing us to gain leverage very quickly once they were part of XL Marketing,” said David A. Steinberg, CEO of Zeta Interactive, which was previously XL Marketing.
“As businesses were shutting down and liquidating, we took advantage and purchased all of our office furniture and equipment at dirt cheap prices,” said David Allerby, CEO of 24Hr HomeCare, a rapidly expanding in-home elderly care business.
It also forced companies to do more with less. “Not having access to capital forced us to say no to many of the ideas we thought were great at the time. Likewise, our attention to detail and focus on measurable results have enabled us to grow and maintain a competitive advantage in the marketplace,” said Doron Reuveni, founder and CEO of uTest, our No. 7 ranked company which tests for bugs in clients’ software using a pool of 100,000 part-time testers across the globe. The company will rebrand as Applause this year.
Brian Williams, the CEO of OneSource Virtual, our No. 24 ranked company, which helps companies outsource backroom jobs like accounting agreed that not having access to venture capital injected a sense of discipline early on. “In 2008 access to money for a startup was very limited. This forced the OneSource Virtual executive team to be disciplined with every dollar we spent, as well as disciplined with every decision we made,” he says.
“Not having access to capital forced us to say no to many of the ideas we thought were great at the time. Likewise, our attention to detail and focus on measurable results have enabled us to grow and maintain a competitive advantage in the marketplace,” he added.
“Raising too much capital too soon can impair a company’s operating efficiency as hard decisions about capital allocation are not made. We’ve been fastidious about how we deploy our capital from Day 1 and have always focused on building a strong core,” said, Omar Tawakol CEO of BlueKai, our No.13 ranked company which reported revenue of $64 million for 2013.
“We succeeded because we bet the farm on a high growth market, specifically Apple's new iPhone and App Store,” says Jeff Smith, CEO of Smule which we ranked No. 29. Smule reported revenue of $21 million last year. The company makes music creation apps for mobile phones and tablets.
“At the same time we were launching Smule in ’08, I recall my stock broker telling me to sell all of my Apple stock because it was a luxury brand and as a result they would be the first to get hit by the great recession. Good thing I didn’t listen to him,” he adds.
Source: Forbes Business
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