Business Startup AR

Yielding a Crop of High-Growth Companies

In a new weekly series, Matthew A. Waller, Dean of the Sam M. Walton College of Business, examines the state of business in Arkansas. Catch him each week exclusively on Arkansas Money & Politics. 

The Brookings Institution published a study early last month that analyzed the Inc. 5000 data on high-growth companies. I was particularly interested in this report because I want to better understand what Arkansas needs to increase its number of high-growth companies. Turns out, the ground in our state is fertile.

I went into the study thinking that if we want lots of high-growth companies then we need lots of high-tech companies. Well, that is partially correct according to the empirical study. It is correct in that entrepreneurs tend to build companies in ecosystems with an abundance of technology companies and where a substantial number of people are employed in tech companies. Where I was wrong, however, is that the preponderance of high-growth companies do not need to be high tech. In fact, just 29 percent of high-growth companies are in high-tech industries.

The study used a statistical method known as “ordinary least squares regression,” a useful and powerful analytics tool that all Walton College of Business students learn (or learned if they graduated in the past 15 years). One way you use this method is by trying to figure out which variables predict another variable of interest. The variable of interest in this study was the number of companies on the Inc. 5000 list by region between 2011 and 2017 per one million. (It is calculated on a per-million-people basis so that the size of the region becomes irrelevant in the analysis.) Then other variables are included to see which ones are important for explaining how many companies are on the Inc. 5000 list.

The study found four main factors positively associated with high-growth company density (in no particular order):

  1. significant percentage of the population from age 35 to 44
  2. high percentage of the workforce is college-educated
  3. significant number of people employed in high tech
  4. high business formation rates overall, whether they are high tech or not

So, we need to foster technology commercialization to increase the percentage of people employed in high-tech companies, we need to encourage startups, we need to increase the college graduation rate within the state, and we need to import college-educated workers to Arkansas.  Chancellor Steinmetz is strategically leading us to increase the graduation rate at the University of Arkansas and we are already seeing positive results.

Regarding the finding that a significant percentage of the population needs to be in the range of 35 to 44, we must also take into account that other studies show that the probability of the success of a startup increases with the age of the entrepreneur. Other studies have also shown that work experience with large corporations increases the probability of success, an idea that does not seem to be the conventional wisdom.

CaseStack is one high-growth company in Arkansas that illustrates this concept well. Dan Sanker had years of experience working for Procter & Gamble, Nabisco, and Deloitte before founding CaseStack in 1999 and moving it from California to Arkansas in 2007. There’s a convergence going on with consumer package goods, retail, and supply chain, and CaseStack is positioned in the middle of that convergence. In short, CaseStack collaborates with retailers to make the supply chain more efficient for consumer package goods companies.

“As the long tail becomes more important to retailers, the model that we have makes more and more sense,” Sanker told me. “Collaboration between retailers, supply chain companies, and CPG companies becomes even more relevant.”

Sanker has a growth-oriented mindset that has helped Case Stack successfully evolve with the changing times into a $200 million company with offices in Europe, Asia, and all across the United States.

“You never really stop scaling,” he said. “Every morning you wake up and have some new epiphany on how to scale the business and some new challenge about how what you thought would work yesterday might not actually work tomorrow. That’s what makes it all exciting. This industry wasn’t like that a decade ago. Now, it’s incredible the amount of change and how you have to deal with that.”

Most recently, CaseStack has started a new division called SupplyPike, a technology platform for supply chain collaboration.

Zweig Group, a consulting, publishing, media, events, and training company for the architecture, engineering and environmental consulting industry (AE industry), is another Arkansas-based growth company that I communicate with frequently. Mark Zweig, the founder and CEO, also teaches in the Walton College, so he has multiple perspectives on the need to increase the percentage of college graduates in the Arkansas workforce. As an employer and as an educator, Zweig told me the best way the Walton College can help businesses in the state is to continue turning out quality students who make good employees in small companies.

“That’s what we need,” He said. “We need to supply talent. That’s one of the best things about being here in Arkansas, frankly, is the university, because it provides us with a supply of talent. … Good talent is what we need. That means people who work hard, they’ve got skills that we need today, they got their head screwed on straight, and they’re coachable and trainable.”

The Brookings Institution study also indicates we need a higher percentage of our population employed in high-tech companies (not necessarily high-growth, high-tech companies). Some studies have shown that the startups that are the most likely to succeed are ones started with technology commercialization assistance from universities. So, this is a great place to start in Arkansas.

Alex Lostetter received his Ph.D. at the University of Arkansas, where he studied power electronics packaging. He then became CEO and majority owner of APEI, which started as consulting firm. He spun out technology developed from his dissertation and wrote several proposals for the Small Business Innovation Research (SBIR) program. Between 2002 and 2015, Arkansas-based companies were awarded about 250 SBIRs, and 62 of those were awarded to APEI. In 2015, they were acquired by Cree and renamed Wolfspeed, which focuses on energy conversion.

There is a lot of technology at the University of Arkansas that has yet to be commercialized.  Based on the Brookings Institution study, I’d say it’s another reason why Arkansas has a huge opportunity for developing more and more high-growth companies.  The University of Arkansas has an organization known as Technology Ventures, which commercializes the research of faculty and scientists.  Stacy L. Leeds, who serves as the University of Arkansas’ interim vice chancellor for economic development, has initiated efforts to facilitate technology commercialization at the University.

High rates of business formation is the last variable listed above based on the Brookings Institution study.  University of Arkansas students count more wins at state and national business plan competitions than any other university – 22 national wins, 54 awards at the Arkansas Governor’s Cup, and 3 wins at the Donald W. Reynolds Tri-State. Since 2002, students have won more than $2.8 million in prize money and raised $60 million to build their businesses. The greatest success stories, however, are the 40 startup companies and organizations founded by the program’s alumni.

At the University of Arkansas, the Walton College has the Arkansas Small Business and Technology Development Center, which has helped Northwest Arkansas clients start more than 70 businesses, create more than 300 local jobs and obtain $25 million capital infusion over the past three years.


Matthew Waller

Matthew A. Waller is the Dean of the Sam M. Walton College of Business, Sam M. Walton Leadership Chair, and Professor of Supply Chain Management.  As Dean he leads the Walton College, which has over 6,000 undergraduates and about 500 graduate students.  He has been an active entrepreneur most of his life.  He was co-founder of a software company which had over 100 employees as well as a consulting firm.  He is an inventor on the following patent: Waller, M.A. and Dulaney, E.F. System, Method and Article of Manufacture to Optimize Inventory and Merchandising Shelf Space Utilization, Patent No. US 6,341,269 B1. Date of Patent: January 22, 2002. His opinion pieces have appeared in Wall Street Journal and Financial Times.  Dr. Waller is an SEC Academic Leadership Fellow.  He is coauthor of The Definitive Guide to Inventory Management: Principles and Strategies for the Efficient Flow of Inventory across the Supply Chain, published by Pearson Education. He received a B.S.B.A. summa cum laude from the University of Missouri, and a M.S. and Ph.D. from The Pennsylvania State University. He is the former Co-Editor-In-Chief of Journal of Business Logistics.  Matt is coauthoring a book with Kirk Thompson, Chairman of J.B. Hunt Transport Services, Inc. about strategy and how J.B. Hunt Transport Services, Inc. applied various business strategies. 

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