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Rising From the Corporate MOSH PIT posted on May 10, 2007

In a sea of local businesses, 10 companies have successfully surfed the crowd to rapid growth

What are we thinking attributing bizSanDiego’s Fast Growth 2007 top 10 to a mob of wild concertgoers? Why not, I say? After all, bizSanDiego isn’t your run-of-the-mill business publication and our Fast Growth 2007 isn’t your ordinary ranking of “which companies have the largest revenue increase.” To make our list, companies were judged in three areas: revenue growth, employee growth and traction in their markets. Because growth isn’t only about profit.

Story by Jon Hindman interviews by Jon Hindman & John Lincoln illustrations by Frank Mendeola

And, we certainly did not discriminate. Take Five Point Capital and 3 Blind Mice Window Coverings, which now have the noteworthy distinction of appearing in two issues in a five-month period. First Five Point Capital co-CEOs Dave Gilbert and Dan Feder, and 3 Blind Mice CEO Scot Dietz were recognized in the January issue of bizSanDiego as young and successful entrepreneurs to watch, and now the two companies made the top 10. Nothing we could do about it. What can we say, but congratulations! And, of course, congratulations to all the top 10 companies who made the list because of their fortitude, focus, vision and good corporate values.

Within this feature, while the top 10 are highlighted, we are also recognizing the entire list of top 20 finalists, an impressive array of companies from all over the county and from many different industries. Without further delay, let’s kick off Fast Growth 2007 with the top 10, starting with ESET, which wasn’t exactly a runaway No. 1. It didn’t have the largest percentage of revenue growth over the last three years and didn’t have the most impressive growth in its market, but it was one of the top companies in regard to employee growth, and was very well rounded overall.

ESET About a month ago, Anton Zajac sent an email to bizSanDiego saying that he was surprised ESET had not yet been covered in the magazine. Hopefully Zajac, who is the president and CEO of ESET, didn’t lose any sleep over this, but if he did, he can now rest well knowing that the company has not only gotten some ink, but also has the noteworthy distinction of being bizSanDiego’s fastest-growing company for 2007.

ESET, based downtown, is a global provider of security software for corporate clients and consumers, and Zajac says that by nature of being in that industry, alone, has helped its recent success.

“The very rapid spread of internet and high-speed connectivity has led to an increased requirement for top-notch computer threat protection,” he says. By the numbers, ESET has had consistently fast growth over the past few years. From 2003 to 2004, it posted an impressive 221% revenue growth by increasing its revenue from $1.9 million to $6.1 million. For 2005, triple-digit growth occurred for a second straight year (138%) when the company reported $14.5 million in revenue, and for 2006, you guessed it, triple-digit growth once again (133%) as it hit $33.8 million.

Those revenue numbers helped catapult ESET to the No. 1 position, though its impressive employee growth and market traction also played a large part in making sure that it would garner the top spot on this year’s Fast Growth list. And that’s just how Zajac likes it.

While reaching financial goals is important, Zajac says that revenue has “never been the impetus of our efforts. Financial numbers are the key tool to support growth of what really matters—the human capital.” ESET has been in business since 1992, and keeping its employees happy has been a top priority. Even as more and more new hires flow through ESET’s doors (the company now has 50 employees, up from 24 in 2005), the company strives to provide healthcare and 401K benefits that are above the local standard.

According to Zajac, maintaining a positive corporate culture and enthusiasm among employees is an important aspect of any growing company, and ESET looks to continue to put its people first.

Even talented, happy people can’t necessarily ensure triple-digit revenue growth forever, but the immediate future is shaping up nicely. “Based on our Q1 figures, we are in for 200 to 300% growth in 2007,” says Zajac, who plans to push the envelope by asking questions like “How could we achieve 400% growth?” and “What is the next big idea?” If all goes well, expect ESET to be a competitor for the Fast Growth 2008 top spot.

Independent Financial Group By nature, Independent Financial Group (IFG), a full-service, national independent financial service broker-dealer firm, is in the business of making people money by offering services and support to financial advisors. But surprisingly, the Sorrento Valley company doesn’t just crunch numbers and worry about the bottom line. Sure, the company was stoked to have a monstrous 1,677.8% growth from 2003 to 2004, but all impressions point to company founders who are just about as satisfied with the 41% growth posted from 2005, when revenue was $16.6 million, to 2006, when it hit $23.4 million.

Scott Heising is one of three partners who are equals and call themselves managing directors, in addition to having specific titles. Heising’s role is as chief financial officer. The other partners are David Fischer, chief marketing officer, and Joe Miller, CEO.

And right off the bat, in addition to stressing that he and his partners share the business successes and failures evenly, Heising also states, “Achieving great financial numbers is not the focus of our business.”

So what is the focus?
Simply put, it is on the employees and the quality of service. When the focus is on those two things, the financial numbers will most often be in alignment.

Asked about how IFG became a Fast Growth company, Heising answers, “It’s the people in the office, who all have tremendous industry experience and provide a very hands-on approach to service. We also have a great reputation, which is important, and that all comes down to the level of service we provide.”

In three years, IFG has nearly doubled the number of employees (Heising is adamant that employees are never referred to as head count because that is “degrading”). In 2004, the company had 97; now it has more than 190. And while it’s more difficult to keep a corporate culture intact when so many people are added in a short timeframe, Heising says, “We have a very open environment, and it’s very family oriented. That’s kind of a cliché, but we really care about everybody in the company. It sounds like common sense, but it’s not always the case with companies.”

Currently, 25,000 clients nationwide rely on IFG’s advisors, and in a saturated market, gaining an edge up on much of the competition has come in the form of going back to the basics.

Heising says the company’s business approach is merely “picking up the phone” and “delivering what you promise.” Sounds simple enough.

Digitaria Put 10 candles on a cake and wish Digitaria a happy anniversary. Clearly it’s a banner year for the downtown company, which was founded in 1997, but if it keeps on keepin’ on like it has over the past few years, there will be much more to celebrate than a decade in business.

Not young by many standards now, Digitaria, a web development and strategy company, has built up a beefy list of clients, including CBS, Fox, Gateway, Hasbro, Qualcomm and LG just to name a few. It also has eaten up two of its competitors in the past year to strengthen its suite of products and services. The first, Console, had $1.5 million in revenue and 10 employees at the time of acquisition. The second, 212 Interactive, had about $1 million in revenue and 10 employees at time of acquisition.

Sometimes acquisitions can hinder or stall a company’s growth, but in the case of Digitaria, they seemed to add a kick of adrenaline. From yearend 2004 to yearend 2005, the company’s revenue grew a modest 13%. But for 2006, the company reached the $6.5 million mark. That equated to a 160% increase, one of the highest 2005 to 2006 revenue gains among all the Fast Growth 2007 entries. According to Digitaria’s CEO Daniel Khabie, growth will continue, but probably not to the tune of triple digits.

“In general, our goal moving forward is to achieve a 30 to 40% year over year growth,” says Khabie.” Although I think it is possible to achieve triple-digit growth, it is our goal to be focused and work with the right clients so that we can truly impact their business through the use of digital marketing and technology.”

To reach these goals and continue to achieve healthy growth, Khabie points out that there are five contributing factors.

The first, he says, “Hire talented employees and let them do what they do best.” Second, the KISS theory: Keep it simple, stupid. Third: Stay focused. Fourth, he says, “Create a working environment that breeds innovation and individualism.” Fifth: Have passion for your products and/or services. Keeping true to those five factors doesn’t ensure year over year progression, as sometimes the rapidly changing market can play a part in how much success a company has. But there are ways to avoid regression.

“Although the market can suggest that you should go in another direction, you have to stick with the plan at hand,” says Khabie. “If the plan does not allow for significant growth and profitability, you have to begin asking the right questions to the right people to understand the shift in the marketplace.”

Network Insight With a plethora of wireless technology companies in San Diego, it’s not astonishing that one would make the top five, and the mar-ket potential is there for Sorrento Valley–based Network Insight to be a mainstay on bizSanDiego’s near-future Fast Growth listings.

According to CEO Christopher Pond, there’s a lot of anticipation surrounding his company, which delivers highly specialized professional services, managed services and consulting services to wireless carriers and large commercial networks.

“The technology and what it enables is very exciting.
These new technologies are enabling what was once considered ‘futuristic’ scenarios, such as ubiquitous communication from any media—email over your TV, HDTV over your notebook computer. This means people are no longer bound by someone else’s schedule or limited by their geo--graphic location.”

The future may be wide open for growth, but even now, Network Insight has little to complain about. After posting consecutive years of double-digit gains from ’03 to ’04 and ’04 to ’05, the company’s revenue escalated from $3.7 million in ’05 to $8.2 million in ’06, or about 122%. Over the past three years, the number of employees has increased, as well, from 26 to 40. Pond might anticipate the wireless market to take off like a rocket, but he knows that he must have qualified people to pilot, service and even repair the ship.

“Hiring the right people is the number one reason any company succeeds or fails,” he says. “It is more about fit and a common purpose than necessarily what their résumé says.

Our key criteria are fit, intelligence and drive. We believe if we have those, we have a winner.”

With the considerable market opportunities, the right people in place and other factors such as dedication to customer service and excellent internal communication, Pond expects the company to hit high double-digit, possibly even triple-digit growth for 2007.

“All the signs so far point to explosive growth in this industry,” Pond predicts. “Just as significant are our internal resources. Keeping engineers and other team members up to speed on the latest technologies and attracting new talent that complements our existing group will be imperative.” To take advantage of the industry’s potential, Pond adds, Network Insight will continue to be an innovator, and advises other tech companies pushing for great success to do the same.

“Year over year growth will slow as your company grows, but I do not believe you ever stop pushing the envelope or scale back on searching out new market opportunities. Look at all the companies out there that are considered ‘great’ companies, and I believe you will see constant innovation, and reshaping of who they are. That is how they became and stay great.”

Five Point Capital Add Fast Growth 2007 to a growing list of awards and accolades for Five Point Capital, which, in case you missed the write-up on the company in the January issue of bizSanDiego, was founded by USC grads Dan Feder and Dave Gilbert in Los Angeles eight years ago before quickly realizing that San Diego was the place to be.

In 2006, the Sorrento Valley company, which provides equipment leases for small to medium-size businesses nationwide, was ranked No. 82 on the Inc. 500 and received a vendor partnership award from U.S. Bancorp. In 2005, the company was a Financial Pacific Leasing Top 5 Producer and a Pacific Capital Bank No. 1 Producer. And these awards just scratch the service. Dan Feder and Dave Gilbert act as co-CEOs for Five Point Capital, and both recognize that investing back into the company is one of the core necessities of a fast-growing business.

Says Feder, “Without investing in research, marketing, training and the infrastructure, we know the company would not have the ability to grow. Every time we invest, it pays back in the future.” Investing in employees, in particular, is a no-brainer.

“Dan and I recognize that we don’t have the in-depth knowledge in all aspects of the business,” Gilbert adds. “We make sure to get the right people to help us learn and facilitate change. The culture has grown such that training and coaching individuals to look for solutions and have a team focus is now our guiding force.”

Right now, the Five Point Capital team that is powering the company is 147 strong, way up from 35 in 2004. And Feder and Gilbert must have an eye for talented, trainable people, because revenue has been increasing at a steadily high rate. Revenue was $7.7 million in 2004, compared to $4.2 million in 2003. In ’05, reported revenue was $16.13 million, and last year it jumped again to $32 million, just shy of 100%.

Now the question is, this kind of growth can’t continue forever, right? “Who says rapid growth can’t last forever?” Feder fires back. “Our mindset is never to stop or you will die. Dave and I have the philosophy to adapt, change and develop new strategies to keep the growth going. Of course, that is not to say that we won’t be smart about making sure we keep our cost structure in line to make it through the peaks and valleys that naturally happen, but we never concede.”

Rady School of Management AT UC SAN DIEGO Way out of left field, the last Fast Growth application you’d expect is an educational institution. Not that growth can’t happen, but double and triple digits don’t seem likely. Rady School of Manage-ment in La Jolla proved that notion wrong. Dead wrong.

Of course, Rady has only been around since 2003, not that its achievement is any less legitimate than any of the other companies on this year’s list. In 2003, Rady’s revenue was a modest $1.6 million. After two consecutive years of about 115% growth, its revenue was up above $7 million. And from 2005 to 2006, it posted about a 48% revenue growth, pulling in $10.7 million. Possibly even more surprising than its revenue numbers since it was founded, is the fact that employee numbers have increased pretty dramatically, as well. The first year in business, Rady had 15 employees; today that number has more than quadrupled to 62.

Rady offers a full-time MBA program, a FlexMBA program for working professionals and executive development courses. And its high-caliber faculty members are helping woo bright students, mostly from the life science and technology industries.

Bob Sullivan, the founding dean of Rady, says that beckoning a top-notch faculty is a direct correlation to the institution’s early success. “The faculty we have recruited have turned down offers from Wharden School and Harvard, and they’ve left the faculty at MIT and Dartmouth to join us. We have faculty who are truly extraordinary and made a conscious decision to be here. Our goal was to hire five this year; we’ve had over 500 applications.” Unlike most for-profit companies with goals of continued growth, Rady actually does plan to set limits. For example, it plans to allow an enrollment of no more than 1,000 students per year.

But for the near future, however, growth is forthcoming, as the institution is about to move into a new facility called Otterson Hall. “The first growth will start after we move into our new building,” says Sullivan, “because right now we don’t have the space. And next March, we will open an evening executive degree program for working professionals. We will again target high-technology industries and life science industries, and that will be a growth area for us.” For Rady, the goal isn’t to be the biggest, it’s to be the best, Sullivan adds.

Advecor, Inc. Don’t hang up on Advecor. The Mira Mesa–based company is a full-service direct-marketing solutions provider that predominantly services the health club industry. And, says Advecor’s CFO and VP Greg May, the company is all about giving clients a maximum return on investment.

“If the return on investment is not there at a higher rate of return than what the competition offers, then they don’t come back,” says May, who, like other top 10 Fast Growth 2007 companies, expresses the importance of customer service. “Our clients can find advertising and marketing anywhere. They continue to use us because we do continue to outperform the competition,” he adds.

Direct marketing is perceived as an annoyance, yet it must work. Someone, somewhere is buying products or services generated by a piece of mail or an automated call. Advecor’s early success proves it.

Since it was founded in 2003, the company has enjoyed triple-digit growth in two of the three years, starting with 246% from ’03 to ’04. Revenue dropped below the century mark from ’04 to ’05, at 89%, but then from ’05 to ’06 it reported $10.6 million in revenue, up from $5.3 million the prior year, for a percentage growth of about 104%.

“It’s pretty hectic,” says May about the company’s fervor. “We’re doubling every year, and it’s just insanity. But at the same time it’s exciting because we’re able to grow but still maintain a high level of service and get better at what we do every day. Also, as an 800 provider we are able to quantify everything we do because every call goes through our databases, and this allows us to see what is and is not working. It’s exciting to know that what you’re doing is working.”

In addition to its accelerated revenue growth, Advecor has tripled its number of employees from seven the first year of business to 21 currently. May expects that it will attract a number of national clients in the near future and keep increasing revenue and employees, because “every business in the country needs marketing and advertising.” And he continues, “It is completely conceivable for this type of growth to go on for a long time, just as long as we can stay awake.” So, for all of you Fast Growth 2008 hopefuls, daily Starbuck’s espressos might be in order.

3 Blind MICE Window Coverings Developing an ethical business has paid off for Scot Dietz, CEO of 3 Blind Mice Window Coverings in Miramar, especially considering the industry he’s in. As he stated in the January issue of bizSanDiego, “There were a lot of people doing the business, but they weren’t doing it well. They weren’t doing it with integrity, and they weren’t doing it with honesty. There were a lot of companies selling solely on price, and [sales people] were taking deposit checks and never returning again. No pun intended, but there’s a lot of shady people in our industry.”

Since founding the company in 2003, Dietz has been committed to buck that industry trend, and doing so has opened up avenues of growth for his young company.

Not only has the company been recognized for its approach to selling and installing blinds, shutters, drapery, motorization, window film and solar screens—in 2005 it was the Better Business Bureau’s Torch Award Winner for Marketplace Ethics—but good corporate practices have obviously equaled success. Why else would the company land in the Fast Growth 2007 top 10? But here’s the real kicker: Its early growth, not as much recent growth, is what secured the company’s position. Because bizSanDiego gave a 30% weight to the last three years of revenue growth (you can learn more about the methodology of the Fast Growth 2007 on page 30), 3 Blind Mice had a big advantage. From ‘03 to ‘04, alone, the company’s revenue increased from $300,000 to $2.8 million, which equates to 833%. Wow! From ‘05 to ‘06, on the other hand, growth was very modest at 8.7%, as revenue increased from $4.6 million to $5 million.

Dietz explains the drop in percentage growth. “Last year we had more sales people making less money, and this year we’re really focusing on less people making more money and still producing the same amount of sales. This period has helped me learn to manage expenses and move toward controlled growth, opposed to uncontrolled growth.”

Currently, Dietz says that his corporate culture (14 employees strong) is extremely family-oriented, and while growth is important, he’s concerned that growing too fast could potentially hurt the company in the long run.

“I considered franchising throughout the United States, but then I took a closer look at the situation and asked myself, ‘is this really what I want?’ Sure we could make a lot more money doing that, but we would rather have an extremely healthy $10 million company than an explosive, out-of-control $50 million company.”

Althea Technologies Over the years, San Diego’s emerging biotech community has been extremely research and development focused, something that may or may not change in the future. But R&D is always something that will be necessary, and Althea Technologies is taking advantage.

Sorrento Valley–based Althea, which provides manufacturing and development services that support researchers worldwide advance novel therapies and efforts to apply new genomic information, has been in business since 1998. Being in San Diego’s biotech hub has helped business, but other factors have also contributed greatly to its success. The first is simply timing.

“We recognized in 2003 the emerging needs in bio--logical manufacturing for early-stage clinical trial development and decided to jump in. The timing was perfect, because starting in 2003, billions of dollars were being poured into biotech from pharma for early-stage development,” says Magda Marquet, co-president and co-CEO of Althea.

But, Marquet and her husband François Ferré, the company’s other co-president and co-CEO, say there were plenty of other factors that led to its Fast Growth status.

“What we needed next was a great team that understood the needs of clients at that stage,” says Ferré. “We put together a fantastic team that truly put the customer first, which is essential for these types of services requiring a lot of hand holdings.”

But what the company does probably is not much different than what other Fast Growth companies do. Marquet and Ferré are certain that they share many commonalities with the local Fast Growth elite.

“We suspect that Fast Growth companies share a culture that can be defined as customer-centric,” says Marquet. “At all levels of the corporate structure, the customer comes first. At Althea, we are all truly focusing on the customer.”

Its approach to business has led to consistent double-digit growth, about 15% from ’03 to ’04, nearly 30% from ’04 to ’05 and then had a huge boost to the tune of 87% from ’05 to ’06, as revenue increased from $13.9 million to $26 million. And since ’03, the number of Althea employees has risen from 38 to 110.

This growth will likely continue in the immediate future, because, says Marquet, “With our current expansion in manufacturing capabilities, we will be able to provide services for phase three clinical development and commercialization of pharmaceutical products.” So with lots of excitement, what’s the most exciting thing right now? Ferré jokes, “Being finalists in your awards.”

Quality Built Business was progressing pretty steadily for Rancho Bernardo–based Quality Built, a provider of quality assurance services for the homebuilding industry. Since it was founded in 1994, more than 2,000 builders, including 17 of the 20 largest builders in the nation, have counted on the company to reduce construction risk through its patent-pending technologies.

More recently, however, there has been a boom in business, which the company explains is due to the fact that consumers and insurance companies have high expectations about construction quality. Increasingly, more emphasis has been placed on implementing quality assurance programs into the homebuilding process. Also, the company was at the forefront of creating a business that didn’t exist before the ’90s.

“We’re in an industry that really hasn’t experienced much innovation over the last 75 years,” explains Stan Luhr, CEO of Quality Built. “We were able to bring new technology and infuse computerized software and hardware to an industry that has largely ignored it.”

That hardware and software is no longer being ignored, and that’s led to tremendous revenue gains. In ’03 the company reported $2.9 million in revenue. By ’06, its revenue skyrocketed nearly tenfold to $23.5 million. Its largest jump in the past few years was from ’04 to ’05, when revenue increased by 158%, from $5.6 million to $14.5 million. During the same three-year period, employee growth has been accelerated, too, from 57 to 173. Quality Built was a late bloomer of sorts, partly because of the overall success of the homebuilding industry during the past five years. In coming years, however, the industry is predicted to slow down, which Luhr admits will likely end its impressive run. Don’t think for a second that the company won’t keep forging ahead, though.

“Change is a daily occurrence here, and if we stick our heads in the sand and don’t embrace change, then it will overcome us and leave us behind,” says Luhr, who adds, “I think we’ll see a 10 to 15% growth this next fiscal year. And we’ll continue to grow, but not nearly at the pace we grew this year.” Plus, the pioneering company is now faced with much more competition, making growth prospects more difficult to come by than in prior years. “There are about 25 or 30 similar companies sprouting up around the country, basically, emulating what we’re doing.”

The good news is, as the competition escalates, Quality Built won’t be able to sit back on its haunches.

Fast Growth 2007 Methodology

For our first annual Fast Growth, we wanted to make sure that the business community at large could participate. Also, we set out to separate ourselves from other revenue-only based lists for fastest-growing companies. So, with the help of CBIZ Mayer Hoffman McCann, here’s how the finalists were selected:
Because revenue is an important factor, revenue growth was the main qualifier to narrow down the top 20. From there, revenue percentages earned 50% of the weight, 30% for the revenue growth since 2003 and 20% for the last year of reported revenue growth (2005-2006). Employee growth comprised an additional 25% of the weight, in which we calculated growth percentages from 2005 until the present. The last 25% was set aside for market opportunities, taking into account growth potential, M&A activity, expansion into new markets and major clients serviced.

The top ten are impressive, but so are the runners up. Here are the some of the close calls:

11. The Active Network
Revenue 2005: $64 CEO: Dave Alberga
Location: Sorrento Valley
Description: Services technology and marketing solutions for athletic event organizers, community organizations and consumer brands.
http://www.theactivenetwork.com

12. NuVasive
Revenue 2005: $94
Revenue 2006: $61.8
CEO: Alex Lukianov
Location: La Jolla
Description: Markets products for the surgical treatment of spine disorders.
http://www.nuvasive.com

13. Diamond Environmental Services
Revenue 2005: $12.9
Revenue 2006: $16.22
CEO: Eric de Jong
Location: San Marcos
Description: Company that offers portable, long-term and permanent restrooms, as well as RV septic grease trap and non-hazardous wastewater pumping services.
http://www.diamondprovides.com

14. SkillStorm
Revenue 2005: $26.45
Revenue 2006: $32.8
CEO: Hany Girgis
Location: Sorrento Valley
Description: Provides technical services and solutions in the areas of information technology, engineering, intelligence solutions, global telecomm-unications and logistics.
http://www.sgis.com

15. Sfeir Architecture
Revenue 2005: $0.75
Revenue 2006: $1.25
CEO: Joseph Sfeir
Location: Mission Valley
Description: Provides architecture for the health care industry.
http://www.sfeirarch.com

16. Security Business Bank
Revenue 2005: $7.26
Revenue 2006: $10.7
CEO: Paul F. Rodeno
Location: Downtown San Diego
Description: Provides financial services designed for businesses and their owners.
http://www.securitybusinessbank.com

Revenue 2005: $914.7
Revenue 2006: $1,025
CEO: Doug Hutcheson
Location: Sorrento Valley
Description: Provides mobile wireless services.
http://www.leapwireless.com

18. 3E Company
Revenue 2005: $33.6
Revenue 2006: $40.8
CEO: Robert S. Christie
Location: Carlsbad
Description: Provides chemical, regulatory and compliance information services.
Http://www.3ecompany.com

19. SkinSational Skin and Body Spa
Revenue 2005: $0.6
Revenue 2006: $0.95
CEO: Joyce Carboni
Location: Carlsbad
Description: Private day spa for nurturing mind, body and spirit.
http://www.skinsationalspa.com

T-20. Hamilton Meats & Provisions
Revenue 2005: $15
Revenue 2006: $20
CEO: Mick Hamilton
Location: San Diego
Description: Distributes all-natural meats, seafood and poultry to restaurants and hotels in Southern California.
http://www.hamiltonmeat.com

T-20. L7 Creative Communications
Revenue 2005: $2.4
Revenue 2006: $3.2
CEO: Tom Gallego
Location: Poway
Description: Provides advertising services for new and emerging companies.
http://www.l7creative.com