Click to Print

Smokin'

The companies in Entrepreneur and PriceWaterhouseCoopers' 11th Annual Hot 100 couldn't be any hotter.
June 1, 2005
URL: http://www.entrepreneur.com/article/77840

Editor's note: To view the listing, stats on our Hot 100 entrepreneurs, and the methodology, visit our Hot 100 Center. Looking for our online exclusive on 10 ways to grow your business? Click here.

Are America's businesses finally loosening their purse strings after several years of cautious spending? If our 11th Annual Hot 100 listing is any indication, the answer is yes: Companies that provide services to businesses were by far the biggest category in our annual listing of America's fastest-growing new entrepreneurial companies.

What are our Hot 100 businesses' customers spending their money on? Within nontech services to businesses, advertising and marketing was an especially strong category, accounting for 11 companies (three of which provide internet marketing services). Business consulting was a surprisingly prevalent category as well, accounting for eight companies. More predictably, six companies came from the security sector, covering areas from facility security to biosecurity to tech security.

The technology category, which has been fairly strong for the past few years, continued in the same vein, growing from 15 companies last year to 20 this year. But the home-improvement industry, which has been sizzling hot in our listing for the past few years, declined from 19 companies last year to 13 this year.

This year's Hot 100 companies boast $1.5 billion in total sales, a substantial increase from the $795.3 million for last year's companies. They also raised over 10 times as much startup capital as last year's group, making the leap from $62.1 million to an astounding $631.1 million. Our 2005 companies were more likely to have obtained that startup financing from family, friends and private investors than from sources such as credit cards. Continuing a trend from last year, this year's Hot 100 companies have increased many of the benefits they provide to their employees.

These benefits plans prove that our Hot 100 entrepreneurs put their money where their mouths are when it comes to treating employees well. Rewarding your staff is a success secret many of our Hot 100 entrepreneurs swear by. (We've highlighted more of their advice within the listings.) Learn from the wisdom of these fast-growth entrepreneurs, and maybe you, too, will make our Hot 100 list one day.

Huron Consulting and Fortinet

#1 Huron Consulting Group

Looking out the window of his Chicago office in early 2002, Gary Holdren spied the name Huron on a street sign. He was looking for a name for his new financial and operational consulting services business and thinking, "let's not get too complicated; let's make it real easy," recalls Holdren, 55--and thus Huron Consulting Group was born.

Holdren, a former Arthur Andersen employee, launched Huron with his former colleagues in tow during the post-Enron scandal days of 2002. It was a challenging summer, even after securing over $100 million in equity commitment: "The phones were not ringing," Holdren says. "We were making a lot of calls but not getting a lot of business."

Just before Labor Day 2002, however, Huron scored its first big coup--the contract to consult for the United Airlines bankruptcy. Using their previous contacts with United Airlines' management and proving they had the experience it took to provide the service, Holdren and his team sealed the deal.

The United deal boosted Huron's profile with the media and the consulting community alike. "From that point on, things started clicking for us, and people started having confidence in us," says Holdren. "Large clients started calling us, and we [began to] grow faster than anticipated."

Fast is an understatement: Huron went from $35 million in 2002 revenue to projected 2005 revenue between $183 million and $187 million. Watching the company grow from 213 employees at startup to over 600 employees today, Holdren can remember when they were hiring almost an employee a day. The key to facilitating that astounding growth, he says, was hiring the best people in his HR and training departments. "We were always hiring overqualified people for the size of our organization," he says. "Our [head of HR] was world-class at designing training processes and programs, and [implemented systems] for our 500-person company just as good as those I'd seen for 80,000-person organizations."

It's the employees, in fact, whom Holdren continually credits with Huron's astronomical rise. "[We were] blessed. At the right place and at the right time, someone gave us [our first] break, the market conditions changed--you just add it all up," says Holdren. "But had all those things been there and had we not had good people, we wouldn't have succeeded." --Nichole L. Torres

#5 Fortinet Inc.

While viruses and spyware can mean disaster for the common computer user, they can signify unlimited profits and potential for tech companies that have made network security their specialty, like Sunnyvale, California-based Fortinet Inc. Fortinet's innovative products, such as the FortiGate series of ASIC-accelerated anti-virus firewalls, have won the company awards and have secured Fortinet's place on this year's Hot 100 list.

But profits and accolades don't come without hard work and risk. Brothers Ken and Michael Xie, 42 and 36, respectively, founded Fortinet in 2000 knowing the key to success in their competitive market was having superior products. Devoting two years to R&D, their goal was to produce a technology that would be effective in both securing network content and allowing consumers to use the internet safely and without delays. Once they launched their initial FortiGate products in May 2002, they concentrated on building channel networks, securing financing and expanding product lines.

Fortinet has grown rapidly, due in part to the $93 million in venture capital it's received along the way. With 2005 projected sales of $100 million, the company has become a global village of 550 employees with offices in Asia, Canada and Europe as well as the United States. And while fast growth has its challenges, such as staffing adequately to keep up with demand and constantly advancing their technology, the Xies haven't skipped a beat. The strength of the team has proved invaluable, as has Ken's previous experience as founder and CEO of NetScreen, which internet infrastructure solutions provider Juniper Networks bought for $4 billion in 2004. What contributed to Fortinet's success? "Hiring a strong group of talented employees who brought and applied direct industry experience and relationships," says Ken.

Fortinet has made itself right at home in the fast lane. A 2003 IDC study found that Fortinet held 29.5 percent of the unified threat management security market and was growing strong. And Ken says going public is in the company's future. Meanwhile, the brothers remain focused on innovation in the areas of web content filtering, spyware and anti-spam technology. Says Ken, "Going forward, the internet is changing so fast that we have to stay very close to the customer and all the new technology." --Sara Wilson

Reprise Media and Exhale

#30 Reprise Media

From their New York City loft location, Peter Hershberg and Joshua Stylman remember thinking that their internet search engine marketing company might eventually grow large enough to have 10 employees or so. "We've grown to about three dozen employees in two years," says Hershberg, 32. "[It's] a lot faster than we anticipated."

Co-founding Reprise Media in February of 2003, this entrepreneurial pair had a wealth of experience within the internet marketing business. When their first internet marketing company was acquired by Ask Jeeves in 1999, the pair joined Ask Jeeves' executive management team before striking out on their own again three years later. Believing that media planners didn't yet have an optimally effective way to sell internet marketing, the pair saw a niche in creating viable search engine marketing plans for clients--consulting with them to choose keywords, bid on them, and then place ads to show up on the results page when someone does a search on Google, Yahoo!, and the like. "We're sort of like an 'ad agency meets a consulting firm' with a specific concentration on [search engine marketing]," says Stylman, 31.

As clients saw that buying ads to show up on keyword-specific results pages was netting results, the industry began to grow, and Reprise Media was right in the middle of it. Only 20 months after startup, Hershberg and Stylman opened a satellite office in Boston, and sales have skyrocketed from $1.5 million in 2003 to a projected $20 million in 2005.

Despite having multiple offices, Hershberg and Stylman have created a company culture of collaboration and cooperation, using a company intranet where employees post interesting information about themselves, from what they do in the company to "food you can bribe me with," says Hershberg. And outside employees often come to the Manhattan office, the mecca of Reprise Media, to get on the same wavelength with colleagues.

Expecting the market to continue to grow, Hershberg and Stylman know the future of Reprise Media is bright. Though quick growth demands more systems and processes in place, Stylman notes: "We've become way more ambitious. When we see an opportunity in the market, we know we need to grab it." --N.L.T.

#67 Exhale

Annbeth Eschbach isn't a woman waiting to exhale, but her New York City mind-body spa, Exhale , has breathed new life into the spa industry and projects 2005 sales of $15 million. Eschbach delivers on what she calls the "demand for alternate forms of fitness, complementary medicine and healthy lifestyle products that has exploded over the past five years." By focusing on both mind and body well-being, she created a spa where multicultural aesthetics and a warm environment fill the void left by traditional luxury spas that espouse extravagance and oft-intimidating auras.

Eschbach, 46, spent 12 years on the executive team of a large spa and club operator where one of her responsibilities was directing the spa division, so it's no surprise she could engineer such tremendous growth for Exhale, which had sales just under $1.4 million in 2003, its first year. However, she also credits her "enlightened investors," her management team, daily reporting tools and the soulful culture cultivated at Exhale as key reasons for her success. Unlike the quickly certified trainers and indifferent employees found at some gyms and spas, "we hire only people who are born nurturers--those are the best people to take care of our guests," says Eschbach. Exhale carefully screens prospective employees and asks questions that reveal depth of soul. Once hired, employees attend a training and certification program and sample all the classes and services Exhale offers, including the mind-body class Core Fusion and acupuncture therapy.

Exhale did encounter some issues when it came to finding investment partners who shared Eschbach's vision. "Most investors wanted to pursue the opportunity through more traditional means--acquiring an existing business that had numbers that could be evaluated and had an infrastructure already in place," says Eschbach. She never deviated from her proposed concept and found financial nirvana with private equity firm Brentwood Associates. With six spas currently open, Exhale plans to expand to 15 to 20 units by 2007 and has been approached by developers from several cities. Says Eschbach, "We intend to take this transformational service offering and expand our sphere of touch into the lives of people on a daily basis." --April Y. Pennington

Making the Cut

This is how it all begins: Drawing on multiple data sources, including the proprietary "MoneyTree Survey" of VC investing by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association, PricewaterhouseCoopers provides Entrepreneur with an initial list of fast-growing companies. Entrepreneur mails each company a questionnaire, which the entrepreneurs must complete and submit along with their current financial statements. We then measure each company's sales growth from the date of inception, listing the businesses in growth order.

For a business to be considered for the list, it must meet the following criteria:

Entrepreneur research conducted by Maggie Iskander and Tracy Stapp

About PricewaterhouseCoopers

PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 138 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders.

The Technology, InfoComm, and Entertainment & Media practices serve the specialized needs of more than 1,400 VC-backed private companies with extraordinary growth potential in the computing, networking, software, semiconductor, life sciences, internet, telecommunications, entertainment and media industries. The Private Equity practice works with more than half of the 100 most active VC firms in the U.S. For more information, visit www.pwc.com/tice , www.pwc.com/privateequity and www.pwcV2R.com .

The Private Company Services practice focuses on the manufacturing, retailing, wholesale and distribution, restaurant, construction and services industries to help companies make strategic decisions throughout the business life cycle that improve cash flow and increase owners' wealth accumulation. For more information, visit www.pwc.com/pcs .