NEW YORK, Nov. 14, 2014 /PRNewswire/ -- Deftly using technology to disrupt the status quo, many of this year's finalists are opting to label themselves as tech companies, a strategic move that is becoming more common for those businesses in pursuit of funding. What other tactics are high-growth entrepreneurs using to attract funding, disrupt the boundaries of traditional industries and scale quickly? Blurring the lines, EY's latest report, outlines how innovation and youth trump tradition.
Fifty-six percent of the companies in the tech sector received VC funding whereas only 27 percent of businesses from other industries attracted investors. Over a quarter (26 percent) of the tech companies were involved in a merger or acquisition in the last three years. The report found that choosing the right industry sector was crucial to a company's valuation and long-term success.
"Companies, especially technology businesses, have the ability to leverage innovation into the company creation process and drive down costs significantly compared to what we saw 10 years ago," said Jeff Grabow, US Venture Capital Leader, Ernst & Young LLP.
This report, which examines the companies of the 663 EY Entrepreneur Of The Year finalists, provides a snapshot of the key characteristics of the nation's fastest growing companies. Together, the businesses represent $197 billion in revenue and employ over 529,000 people. In each of the last two years, these companies experienced an impressive 34 percent growth in revenue.
Perhaps what is more surprising is that 46 percent of these companies are 10 years old or younger, demonstrating how young firms are driving innovation and job creation in the U.S. economy while thriving during the worst global economic downturn since the Great Depression. Women entrepreneurs are also on the up as 12 percent of the finalists were female. If you consider that only 5 percent of companies are run by women and just 2 percent have revenues over US$1 million, there is clearly a rise in the successful female CEO.
"We see two significant trends emerging along the path to accelerated growth: broad adoption of technology and a relatively young population of entrepreneurial companies yield a heightened interest by professional investors to fund and scale these companies," said Mike Kacsmar, EY Entrepreneur Of The Year Americas Program Director.
The report also found that while VCs are committing to the same amount of capital, they are staging the funding due to the low startup costs associated with establishing businesses today. Once the business has a proven value proposition, additional funding comes in to finance the company's growth. The line between VC and private equity also seems to be fading. More PE firms have begun investing smaller companies with higher growth potential, a field traditionally only VCs touched.
"We see a future of vibrant innovation and rapid financial acceleration. Market segments are converging, industry lines are blurring and companies that have long stood the test of time are being disrupted at lightning speed. Tradition is being trumped by innovation," said Herb Engert, EY Americas Strategic Growth Markets Leader.
About EY Entrepreneur Of The Year™
EY Entrepreneur Of The Year is the world's most prestigious business award for entrepreneurs. The program makes a difference through the way it encourages entrepreneurial activity among those with potential and recognizes the contribution of people who inspire others with their vision, leadership and achievement. As the first and only truly global awards program of its kind, Entrepreneur Of The Year celebrates those who are building and leading successful, growing and dynamic businesses, recognizing them through regional, national and global awards programs in more than 145 cities in more than 60 countries. ey.com/eoy
About EY's Strategic Growth Markets Network
EY's worldwide Strategic Growth Markets Network is dedicated to serving the changing needs of high-growth companies. For more than 30 years, we've helped many of the world's most dynamic and ambitious companies grow into market leaders. Whether working with international mid-cap companies or early stage, venture-backed businesses, our professionals draw upon their extensive experience, insight and global resources to help your business succeed. For more information, please visit us at ey.com/sgm or follow news on Twitter @EY_Growth.
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This news release has been issued by Ernst & Young LLP, an EY member firm serving clients in the U.S.