London Ontario’s tech scene is thriving with successful digital agencies. These agencies not only churn out great creative work for their clients, but have a considerable impact on the city itself. London benefits from the job creation and local opportunity created with the dozens of firms rocking out in London.
I came across a description that I think fits both Arcane and many of my local contemporaries’ companies, and one that could be a rallying cry around how the young London tech scene could effectively define itself. The term is ‘Gazelle Company’ Gazelles? Gazelles? Some years back, David Birch of the research company Cognetics conferred that name on fast-growing companies, thereby distinguishing them from the “mice” on Main Street and the “elephants” on the Fortune 500.
These are companies that can “run fast and jump high.” A Gazelle Company is a high-growth company increasing revenues by at least 20% annually for four years or more, starting from a revenue base of at least $1 million. What if we removed the revenue base requirement and looked at those companies growing 20% year over year consistently for at least 4 years? On this basis it would mean each local London company that has doubled revenues over a four-year period. I think that there are a ton of digital agencies who like Arcane, fit into this category.
We are not the start-up – we are the scale up. The start-ups represent the yet to be realized dream, but the scale ups represent true economic power. Small businesses are said to account for two-thirds of new jobs created but this is a generic statement. The vast number of small businesses don’t fit into one bucket. The truth is that the so-called gazelles account for much of this job creation. “Wanted: More Small, Fast-Growing Firms” was the title of a recent article by the University of South Carolina’s Business and Economic Review which called out for this distinction recently.
The reality is that there are small businesses, everyday Main Street companies that start small and stay small. There are hot rocket-ship companies that start small and get bigger fast. A city that wants a lot of new jobs requires the latter – the fast-growing entrepreneurial businesses known as “gazelles.” In the midst of startup frenzy and fostering innovation culture, I think that we have missed the point where the excitement of the rubber hits the economic reality of the road.
Cities are built with people. People who live and work happily in the city that they call home. The happy people (especially those who could live many places) that are working and spending money in a city the more momentum that is built for like minded companies and entrepreneurs to start something similar. London has been the fortunate beneficiary of local grads from the excellent institutions of higher education in town who have decided to stay put here and start businesses that continue to grow and provide employment for the next generation of grads and beyond.
Gazelles need not be brand new companies. Some take off like rockets almost from birth, but many have a development phase followed by faster growth. They don’t need to be national or international either. In any given year the top-performing 1 percent of companies account for some 40 percent of jobs. Within that category, fast-growing “gazelle” companies (3 to 5 years old) make up less than 1 percent of all businesses, yet account for approximately 10 percent of net new jobs. The “average” company in the top 1 percent generates an astounding 88 net new jobs annually, compared to the two to three net new jobs generated by the average firm in the economy as a whole.
The London Gazelles have fostered quite a cluster in the digital space here in town. What does the herd require and what should the herd bond together to try and achieve? Let’s ensure that the gazelles are not getting lumped in with the so called elephants. Elephants are the institutions. We need elephants. They employ thousands of people, but often create very few new jobs. On the other end of the spectrum the lowly “mouse” companies. These have little to no potential for generating new jobs. The “mice” are essentially the single location pizza parlor celebrating it’s 15 anniversary or the self employed person.
Let’s spend a bit of time considering how to make the London digital gazelle great. We seem to be a comfortable place for them to prosper.
Written by Eric Vardon