Provo-Orem Overdrive
Utah County Tops Inc. 500 Companies Per Capita List Again
By Mikal Belicove
A chief purveyor of news pertaining to private companies, Inc. magazine, recently released its 26th annual Inc. 500 list (as part of the inaugural expansion to Inc. 5,000), spotlighting America's 500 fastest-growing private companies and declaring Provo-Orem the city "with the most Inc. 500 companies per million residents" for the 2nd year in a row. Even more marked is the two-to-one advantage Provo-Orem holds over its closest runner-up, Washington, D.C.
According to the magazine, the Inc. 5,000 is "the most comprehensive look at the most important segment of the economy -- America's independent-minded entrepreneurs"; the 2007 list measures revenue growth from 2003 through 2006. To qualify, companies had to be U.S.-based and privately held, independent (not subsidiaries or divisions of other companies) as of December 31, 2006, and had to have reaped at least $200,000 in revenue in 2003 and $2 million in 2006.
Utah is home to nine companies on the Inc. 500 list, six of which reside in Utah Valley's metropolitan statistical area (MSA). Comprising Provo-Orem's representation on the ranks are the following companies (see the nearby sidebar for company-specific information): Heritage Web Solutions(#22); Doba(#23); Firstline Security(#280); Costume Craze (#415); Logoworks (#472); and D&H (#491). Two of these companies--Heritage Web Solutions (www.heritagewebdesign.com) and Doba (www.doba.com)--have grown over 3,000 percent since 2003 and are among the 25 fastest-growing privately held companies in the United States. This fact, combined with Provo-Orem's status as home base for the greatest proportion of fast-growing private companies to residents, confirms that the mid-size metropolis boasts a booming economy rooted in fertile capital ground.
A Closer Look at the Hotbed's Fertile Soil
The Utah Valley's solid track record begs the question: Which key factors are the greatest contributors to the area's flourishing independent business success? Richard Nelson, president and CEO of the Utah Technology Council (UTC) and chairman and CEO of the national Council of Regional Information Technology Associations (CRITA), partially credits the quality of the workforce along with the financial backing that the state is able to provide.
Case in point: The Utah Fund of Funds, a $100 million statewide economic development program aimed at providing Utah entrepreneurs with access to alternative or non-traditional capital. "We have figured out how to put snow in the mountains when Mother Nature won't cooperate," sates the Fund's website. "Similarly, Utah has some great entrepreneurs, but without capital they cannot build great companies. Utah has figured out how to attract capital for its entrepreneurs, and that is the Utah Fund of Funds."
Nelson explains, "The primary out-of-state VCs participating in the Utah Fund of Funds are noting that Utah (and Utah Valley), outside the base of Silicon Valley, constitutes the top technology community they're reaching out to right now. We're achieving critical mass. The Fund of Funds has attracted 160 new venture funds, and 15 of them have now been formally funded. For a number of reasons, the business climate has become a 'perfect storm' in an extremely positive way."
John Richards, managing director of the Rollins Center for eBusiness at BYU, suggests that part of the answer to the question of success lies in the locale's allure--most notably because it serves as the gathering place for the majority of Mormon constituents, who tend to dig deep roots in their communities.
"Like any population," Richards says, "there will be talented and smart people among the populace. There is an unusual cultural tie to the [Provo-Orem] area, though, that transcends wealth and other alluring aspects that would normally draw out a certain percentage of these talented and smart people to other regions.
"This cultural tie is rooted in the LDS Church and the apparent 'Mormon Mecca' that Utah County is for relocating and home-growing smart and talented people. The presence of BYU, a magnetic melting pot of the LDS population in the U.S., and the LDS culture's natural entrepreneurship--combined with this unusual desire to remain in the area--create this perfect storm."
Fundamentals for Continued Success
Although Provo-Orem's track record for the past several years is sound (the region was ranked #1 in 2006, #3 in 2005, #2 in 2004, and #1 in 2003), forward-thinking business owners ponder what they need to do in order to maintain the high standards of success in today's market. Certainly Utah has its share of local and nearby attractions: the mountains, easy access to many hot tourism milieus, a robust job market, and a superlative housing market to boot. (On the latter note, consider these recent statistics: In late July, the Associated Press reported on a recent federal study that showed a burgeoning housing market in Provo-Orem--one of the few places in the country to host double-digit growth rates, and second in the nation in house price appreciation from 2006 to 2007.)
Other, variant factors, however, must be accounted for. "Having just enough cheap lower-level labor force, managerial talent, and economic opportunity so as not to derail the magnetism of the area for this higher-than-normal attraction of cream-of-the-crop entrepreneurs is crucial," says BYU's Richards. "If the pain of Utah County's lack of certain other entrepreneurial elements--such as a lack of seasoned management and software development talent--begins to outweigh the magnetic attraction, then sustaining such a ranking may prove much more difficult."
From a more fiscal point of view, the UTC's Nelson says, "I think it will take additional funding, and it will require the follow-on funding from the Fund of Funds. We'll also need further development of work among the angel groups to encourage additional angel investment."
So, all things considered, Utah County's current growth may be placing its future success at risk: As the region expands both fiscally and entrepreneurially, lower-level labor diminishes on account of the increased cost of living, posing a potential threat to the stability of the region's business ventures. However, the draw of the LDS community, combined with the current financial backing and prospective investment expansion, may be sufficient to sustain long-term growth in Utah County.
That support, however, doesn't come string-free. Certainly one must account for the economic concerns of a flourishing business community in the midst of an intimate religious culture--in particular, the magnitude of family life in a society where a vigilant work ethic is not the driving force of daily life. That factor isn't necessarily negative, asserts Richards, though it's something to be aware of. "As any successful person eventually learns, it's not the long hours that bring success--it's the output, whether by working long hours or just working smarter in less time. We have to be careful about over-generalizing in all these matters."
Nelson advises a direct approach to continue the success. "It will take a collaborative effort on behalf of the governor and his organization to identify the gaps in our workforce and recruit very specifically to fill these particular needs," he says. "As a state, we'll be needing to recruit around these needs to attract the right people to fuel these new companies."
So, Provo-Orem's sustained economic vitality entails a handful of prerequisites whose fulfillment will only become evident as time unfolds. One notion, though, is clear: The Utah Valley has paved a solid stretch of ground in new ventures. The primary task now is to reinforce the strong foundation on which future success will be built.
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