Washington home to the most fast-growing firms in the U.S.


A new study shows that the Washington-Arlington region produced more high-growth firms in the past decade than any other city in the United States. (Joshua Roberts/Bloomberg)
September 12, 2012

Between traffic on the Beltway and gridlock in Congress, Washington isn’t exactly known for doing things quickly. But evidently, no one explained that to the area’s ambitious entrepreneurs.

New data show that the Washington metro region has actually produced more fast-growing firms than any other city over the past decade, a surprising superlative for the nation’s capital, which is routinely criticized for slowing business growth through taxes and regulations and rarely included in conversations concerning the country’s premier locations for start-ups.

But that’s what happens, one researcher explained, when so many of the region’s businesses sell to a customer — Uncle Sam — whose spending habits have grown exponentially over that period.

“There are probably a few reasons the region tops the list, but most roads lead back to the federal government,” Dane Stangler, director of research and policy at the Kauffman Foundation, said in an interview. “Despite all the talk about downsizing and shrinking, the fact is the government expanded under Bush, then again under Clinton, then again under Bush, and now again under Obama, and that creates more opportunities for companies in and around Washington.”

The Kauffman Foundation conducted the study using the 1982 to 2011 Inc. 500 lists, which annually rank the fastest growing private firms in the United States based on percentage revenue growth over the previous four years. During the 2000s, the Washington-Arlington region placed 385 firms on the lists, easily besting Boston-Cambridge-Quincey (208) and San Francisco-Oakland-Fremont (198).

The region also boasted the highest concentration of fast-growing businesses, placing 70 firms on the list per every million people in the population, and the highest number of founders of Inc. 500 companies, 106, over the course of the decade.

Stangler noted that nearly half of the Washington firms that made the cut provided products or services to the federal government, many of them benefitting from increases in defense spending and funding for the National Institutes of Health.

“But not all of this is parasitic off the government,” he said. “We also see a lot of life-sciences and bio-med companies in the region, and those industries are doing well.”

The Washington-Arlington region included areas of three states and the District; however, its top ranking is largely the result of successes in northern Virginia, which placed three counties — Fairfax, Falls Church and Arlington — among the top five nationally in terms of density of fast-growing businesses.

The study comes as debate heats up over which type of company is responsible for creating the most jobs and, therefore, should be favored in economic policies as elected officials try to hasten the recovery. Over the past few years, more economists have started arguing that young businesses with high-growth potential create more employment opportunities than small businesses in general; however, most politicians on the campaign trail continue to tout the latter as the greatest supplier of new jobs in the United States.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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