Analyzing the Top 10 Fastest Growing Companies in America
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|Farza||Sep 21, 2019|
Currently writing this from a beautiful park in Brooklyn on a hella nice Thursday afternoon.
I’m going to be going over the top 10 fastest-growing companies in America of 2019 based on the 2019 Inc 5000.
People in startups often tell each other to learn from the mistakes of failed companies so you don’t make the same mistakes they did. Makes sense! It’s also common for people to find companies that are extremely massive right now and religiously look up to them. I see people do this all the time with Apple, Stripe, Airbnb, Facebook, etc. I do it as well. Makes sense! I don’t think either of these techniques is wrong! Learn from successes and learn from failures.
But, this is kinda weird to me. Why aren’t we actively surveying existing companies in the present that are growing rapidly to try and figure out what makes them great? Would’t that be way more useful?
For example. Lets say I told you there is a company right now doing $24.9 million in ARR selling stuff like spaghetti made of carrots and rice made of cauliflower. Let’s say I also told you that they have grown 23,880% in the last three years and are the 3rd fastest-growing company in America. Wouldn’t you want to know more about them and how they got so big so fast? Yah. Feels important (note: the company is called “Cece’s Veggies Co”).
Feels way more important than reading Steve Job’s biography for the third time or listening to a random podcast about a random success story of a Silicon Valley billionaire. Don’t get me wrong. I think both those activities are useful for pumping you up and inspiring you to do big things. But, I think you should also be spending time in the present actively analyzing companies that are blowing up.
After all, startups = growth and figuring out what makes different companies in 2019 grow can be super useful. Perhaps you can apply their business model to a different vertical. Perhaps you can apply their growth strategies to your own company. Perhaps you can figure out the “hacks” they used to blow up and copy them.
For that reason, this weeks email is going to be about America’s 10 fastest growing companies. I’m going to briefly talk about what each company does, talk about what I think their “magic” is (the main thing helping them blow up), and then challenge you guys (and myself) with some questions.
Providence Health Management (#9)
Has grown 12,565% in the last 3 years and currently doing $225.9 million in ARR.
Providence is a health management company which means they help places like doctors offices, retirement homes, and hospitals handle stuff like:
Complying with new regulations.
Buying new technology
Tracking a patient’s records
Billing insurance companies.
Based on my research, it seems this is all stuff that most big hospitals handle on their own and most smaller practices also handle on their own (hence why most smaller practices have a ton of office staff). But, Providence seems to have found a niche: retirement homes and rehab centers. Providence is literally “healthcare management as a service” for these facilities (they don’t actually have a software solution). The facility itself provides top tier care for patients and Providence handles literally everything else from a remote office.
This took me a long time. What makes these guys special? Why are they focusing so much on retirement homes? Why have they exploded in the last 3 years?
Well. Took my sometimes, but I arrived at one potential reason: Obamacare.
The Affordable Care Act (ACA) - also known as Obamacare does a lot of things. Like, a lot. But, I’ll only discuss it in context to Providence. Because what they did was genius.
Providence started buying out a shit ton of retirement homes in 2015/2016. What was happening then? Well, the ACA was going into full effect and the government was beginning to force facilities to abide by certain regulations. One big piece of the ACA was a complete overhaul of the retirement home system. After the ACA, retirement homes had to do stuff like:
Establishment of internal procedures by nursing homes ("compliance and ethics programs") to reduce civil and criminal violations and improve quality assurance.
A requirement that states maintain a website with information on all nursing homes in the state, including survey reports (Form 2567), complaint investigation reports, plans of correction, and other information that the state or CMS considers useful.
Collection of staffing data electronically from payroll records and other verifiable sources and public reporting of hours per resident day of care and turnover and retention rates.
You can find the bigger items here, it has like 25 things. It’s a lot. And most of it is rather difficult to implement if you aren’t a well-run facility.
Well. Guess what. Most retirement homes didn’t make the changes in time. And guess what happened? The government had to shut them down. And guess who was there to buy them out at rock bottom?
PROVIDENCE HEALTH BABYYYYYY LOOOOOL.
Providence deeply understood everything about the new regulations and the AFA and became experts at enforcing these regulations. They created a system they could copy/paste to many retirement homes at once so that these homes could abide by regulations and stay open. Now, well, Providence owns those homes that were about to be shut down and are profitbally and lawfully runs each one.
Health care management seems to be important. I had no idea. Based on a quick Google search, there seems to be a bunch of software companies attacking the space but they all seem bloated as fuck which makes sense because hospitals are complicated beasts. But what about software for smaller operations places like retirement homes, chiropractors, individual dentistry practices? I’m sure all these facilities care about abiding by new regulations and having basic software to do things like track patients, hire new employees, and keep track of changing laws. I legit can’t find a light piece of software anywhere that does this. All I can find is really complex hospital software. Would these smaller operations pay for a lightweight healthcare management tool?
Providence used changing laws and regulations to their advantage. Where can I find the latest important laws without reading 100s of pages of documents?
Startup idea: Changing laws and regulations is usually something you hire a lawyer for because it can legit cause your business to get shut down. Seems like a very important problem that you don’t want to have. But, this sounds expensive as fuck because you’ll always need a lawyer on retainer. Can I make software to automatically tell places like airports, doctors offices, or pharmacies about change in regulations? I could just use NLP on new law documents as they come out to track new changes. Below are the most regulated industries in the US. Could I get 10 of these facilities from one of these industries to pay for software that could easily tell them when regulations change in that sector to avoid them getting rent by the government?
Bear Mattress (#7)
Has grown 13,481% in the last 3 years and currently doing $20.5 million in ARR.
“What the fuck is a mattress company doing in the top 10” is what I thought when I saw this company. There are so many damn mattress companies that it has become a meme to start a mattress company. It’s a tough business too. The logistics behind creating your own mattress and shipping it while still staying profitable isn’t easy.
From their website’s section titled “Why Bear”:
“Each mattress is made with Celliant® technology, clinically proven to promote a more restful sleep, aid in quicker recovery, and help you wake up with more energy. It will never wash or wear out and works right through a protector, sheets and your clothes”
Okay. So it’s a mattress made with some magic material I’ve never heard of.
Yo. So what the fuck is Celliant? I googled it. From Wikipedia:
Celliant is a brand-name synthetic polymer bicomponent fiber made from polyethylene terephthalate with optically active particles embedded into the core. Celliant claims it increases oxygenation in body tissue and demonstrated to reduce minor aches and pains.
I N T E R E S T I NG.
So. We got this magical material called “Celliant” that apparently can increase the oxygen in your blood and reduce minor body aches. It’s apparently also being used by companies like Reebok and Under Armor. It does this by converting your body heat into infrared light and emitting it into your body.
How the fuck does this work? Looks like some BS.
I researched more and found a bunch of studies by some really accredited universities who put this material through clinical trials.
Bear Mattress itself also ran a single clinical trial and all the studies essentially proved that “the energy Celliant recycles back to the body triggers vasodilation in the capillary bed and makes more oxygen available to your cells”. It’s apparently also categorized by the FDA as a “medical device”.
HMMMM. Okay. Seems believable enough. The concept of using infrared light as a form of therapy is not new. Celliant is essentially infrared light therapy, but without all the crazy lights and that’s pretty cool.
According to Web MD, “U.S. consumers spent $309 million on light therapy in 2016”. I also have some family members with arthritis who have undergone light therapy because “when longer wavelength or visibly ‘red’ light hits the skin, it nudges mitochondria (the cell’s powerhouses) to make energy more efficiently and boost production of healing anti-inflammatories or disease-fighting antioxidants.” (WebMD).
Now, this material called Celliant is coming along and companies like Reebok, Under Armor, and Bear Mattress are all using it so consumers can get certain benefits of light therapy without all the wacky light setups. Honestly, you could just be sleeping with a bunch of infrared lights setup above your bed - but that’d be weird, right? It’d be much better if it was just somehow built into the mattress without all the wacky lights. And that’s Bear Mattress.
Honestly, the real winner behind all this is the company Hologenix who paid for the clinical trial behind Celliant and actually productized and marketed it. They also have the patent for it. Celliant seems to be real. And that means every athletic clothing company is going to be hopping on it ASAP if it starts popping off among consumers. And, they will all need to go through Hologenix to actually get it!
How the heck do you just make a new material like this? Was it 100% original? Did Hologenix recruit some material science Ph.D student who was working on it and patent it themselves? Seems wild.
Startup idea: I’d love to make a shirt out of Celliant, like this one Amazon and market it as this revolutionary shirt that really supercharges your workouts and health. Perhaps I can get some Instagram influencers involved. Hmmmmm.
There are only around 10 clinical studies of Celliant with around 100 people within each study. That’s 1000 people for the creators of Celliant to say, “omg! this works! everyone buy this! it’s good for you!”. Bear Mattress did a single study. But, if Bear didn’t run that single-trial - no one would believe in their mattress! That’s pretty crazy. I didn’t think it’d be that easy. What else is just a few “clinical trials” away from being declared as “officially good for you”? For example, if I got 1000 people to eat Cheetos every night before bed and 900 of those people felt a longer, deeper sleep - does that mean Cheetos can market themselves as a snack you should have before you go to sleep? Probably, yes. But - Cheetos doesn’t know how the fuck to do a clinical trial! Could a startup do clinical trials as a service for other companies? Cheeto’s could pay this startup $1,000,000 to run the study and it’s super worth it for Cheeto’s because if they do actually help people sleep they could essentially open up a whole new market.
Has grown 11,996% in the last 3 years and currently doing $21.4 million in ARR.
Nom is an ad tech company that makes sure your video ads are played alongside videos that actually make sense in context to the ad. For example, let’s say you’re Bose and you want to run a video ad campaign for some noise-canceling headphones. Well, what Nom does is they will make sure that the video ad is played alongside relevant material. So, you’ll get the ad before watching a music video on YouTube, not before watching a Keto cooking recipe guide on YouTube. They also make sure that the ad isn’t played alongside content that is harmful to the brand. For example, Bose would never want their ad played before a video talking about a man who died in a car accident wearing Bose noise-canceling headphones because he couldn’t hear the horns of other cars. That’d be bad! Nom prevents this through a product called “MediaAudit” that uses NLP and humans to make sure a client’s ads are played on relevant videos that are not harmful to the brand.
I think their magic was figuring out that brands don’t want their ads played next to shit that could hurt them. Rocket science, right? Before, brands may have not even known what was happening because the ad machine is big and scary and I doubt executives at big companies know exactly how it works. But, if an executive on the marketing team sees their ad played alongside some dude dying on YouTube, they will be mad as fuck and want to fix the problem immediately. I think Nom got that. They saw the problem. Fixed it. And have made it easy as hell to just run a video ad campaign on YouTube alongside relevant content!
Why doesn’t the ad team at YouTube just build this?????
Startup idea: Companies want their ads played alongside safe, relevant content. Nom focuses mainly on YouTube. How much further can we take this idea? What about Twitch streams? What about SnapChat ads? What about Reddit ads? Can we take the core problem Nom is solving for video on YouTube, and apply it to ads across many different platforms? Can we create a product where companies like Bose push one button and can publish their ads on safe, relevant Pinterest posts or relevant Twitch streams using computer vision?
Audio ads can be so much better. If I’m getting a SoundCloud or Spotify ad, why can’t it be something relevant? If I listen to a hip hop song with heavy bass - give me an ad for the latest Dr. Dre Beats Headphones with Bass Boost!
I feel like ads are not actionable. Like, you see them, and that’s it. I wish we could kind of go back to TV ads where they were like “call in the next 15 minutes and get this and you’ll get 10% off!”. Why can’t we do that now with ads? I would definitely feel more pressured to buy something if it felt like it was rare and urgent. Imagine if I got an ad on Instagram to get 5% of a Canon Camera in the next 15 min - I’d be like holy fuck I’ve been wanting to get this camera and now is my chance! I wonder why no one in ad tech does this? Does it just not work?
Connected Solutions Group (#8)
Has grown 12,701% in the last 3 years and currently doing $23.3 million in ARR.
Ok, I really like this company. They are another one of those sleeper winners. You have no clue who they even are. Their landing page looks like garbage and takes like 8 seconds to load. But yo. It doesn’t matter. ConnectedSolutionsGroup (CSG) specializes “in providing cellular based wireless, M2M, IOT, and data device solutions for enterprise level clients across the country”.
Lets say you’re a construction company and you need 900 new phones for your workers that have long battery life and are rugged enough to handle a construction environment. Well, CSG does that. They’ll find the base phone at a good price point, figure out how to make it more rugged, add whatever other customizations the company wants, and that’s it! This is a basic use case where CSG comes in clutch.
This is one of CSGs most popular products:
This thing is a beast. It’s called the “mobile command center 2.0” and it makes sure that no matter what happens you are always connected to phone lines or the internet. It’s solar powered, extremely rugged, satellite-connected, and has two phones attached to it for god know what. You might be thinking - who needs this? Well, apparently A LOT of people. This is a product CSG built in partnership with Verizon. It’s used by a lot of Verizon’s on-site workers who are working all over different parts of America to set up internet and phone lines. If you’re out in the middle of nowhere setting up phone lines, I can see how this mobile command center would come in handy. It’s apparently also used a lot by hospitals all over the US in the case of a power outage where a hospital’s internet and phone lines go down.
Pretty cool :). CSG also has like 10 other products. You can check out their site for more.
Hmmmmm this one is hard. I guess CSG is winning because they found that giant enterprises (like Version, construction companies, etc) would need hardware and IoT consultants to help them deploy solutions to the field. And it seems that CSG can take a solution they built for one client (ex. A rugged phone for a construction site) and deploy that same solution to other enterprises looking for something similar.
I’m probably missing something - but that’s how I see it. This isn’t a super sexy company. They find big, hardware communication-related problems, create the solution, and deploy the solution.
What other enterprises and industries require IoT/hardware solutions more in the future where we can copy CSGs strategies? There’s no way CSG is going to take over the world on its own. For example - could there be a CSG that specializes in airports or a CSG that specializes in helping farmers communicate when they’re in the middle of no where? The world is getting more and more connected, after all. Some industries are still lagging behind and will need to pick up the pace.
CSG can take a custom solution they built for one client and slightly alter it so they can sell it to another client. Works well for hardware! Can this work for software? Wait, I guess that’s just SaaS? Hmmm. I guess it’s sorta like Wordpress - where the consumer builds a custom website and can ship it as their own without any trace of Wordpress. I like software like that - which allows you to create and allows you to share templates of your creation with other people (ex. Wordpress, Webflow, Notion) so more people can create.
Cano Health (#6)
Has grown 14,183% in the last 3 years and currently doing $271.8 million in ARR.
FIRST OF ALL. HOLY SHIT. GUESS WHERE THIS COMPANY WAS FOUNDED? THAT’S RIGHT BABY. MY HOME TOWN OF PEMBROKE PINES AYYYYY LES GOOOOOO.
This is my favorite company on this list btw.
Okay. So, we got another health company in the top 10, what’s it about?
Cano Health started with one facility in 2010. The founder wanted to help people with no healthcare get access to an affordable dentist and primary care physician. So, he teamed up with his Mom and let anyone walk in, pay $30, and get care. Pretty wild, right? A doctor who wasn’t chasing the money. He just wanted to help. This ended up being profitable a few years later and Cano Health had built up a massive base of patients and ended up opening a second location which also became profitable. It was at this point that they got bought out for $30M by InTandem Capital Partners who helped them get more capital to expand. They now have 36 centers. Note: They have abandoned the $30 per visit model.
Cano Health is special today because they’ve consolidated a persons entire medical experience under the same brand. Cano has branches with dentists, weight loss experts, chiropractors, cardio specialists, and even runs its own pharmacies. They have complete control over everything.
That means a patient only ever has to deal with Cano Health. They rarely need to leave its ecosystem.
This is a little complicated. I promise to be as unboring as possible. This is actually hella cool shit.
I think understanding why Cano Health exploded is extremely important. Analyzing them has helped me seriously understand around 40% of the US healthcare system. I’ll try and dump those learnings for you all here.
Cano Health is another superstar created in the wake of the Affordable Care Act - just like Providence Health Management. They cater heavily to patients under the support of Medicaid (disabled or extremely poor patients) and Medicare (elderly patients). Providence Health Management took advantage of laws changing in regards to nursing homes. What did Cano Health do? They figured out how to cheaply run an effective medical practice that spanned many different fields (from weight loss to cardiovascular), specifically for Medicare and Medicaid patients.
First, let me explain Medicare + Medicaid. Medicare is for the elderly. Medicaid is for the disabled or the poor. Both are programs funded by the government. Both programs are heavily regulated which pretty much means that if you bill someone with Medicaid $10,000 for a knee cast, that bill will be reviewed by the government, and if it doesn’t make sense the government won’t pay up.
In contrast, if you have private insurance, the hospital will bill your insurance $10,000 and the insurance company is incentivized to receive higher bills from hospitals. The more a health insurance company spends each year the more revenue they can earn through premium increases the next year. Kinda fucked, right? This is why you may see crazy hospital bills all the time in the US.
That means, and this is very important, hospitals (and doctors in general) make less money off people who have Medicare and Medicaid because they can’t bill them as high as people who have private insurance.
Here is a little more proof of this fact:
The blue bar is how much the hospitals (in California) charged. The green bar is how much Medicare + Medicaid actually payed out.
The blue bar is how much the hospitals (in California) charged. The green bar is how much private insurance companies actually payed out. Noticed how much more private insurance companies pay out in contrast to Medicare + Medicaid.
Basically - hospitals make a ton more money to not support people on Medicare and Medicaid. Remember the hospital I went to as a kid? Cleveland Clinic? Yup - they don’t take Medicaid in any of their Florida facilities. In fact, I Googled it - and the majority of places that take Medicare + Medicaid.
Okay. So what does this have to do with Cano Health? LOL.
Cano’s model of controlling all aspects of the medical experience (from weight loss to cardiovascular) is very interesting but isn’t anything new. Hospitals have been doing this forever. Cano is a little different. They don’t run one big hospital. They bought a bunch of smaller, individually run practices all throughout Florida and consolidated them under one brand. They pretty much created a giant hospital. But instead of one giant building with massive costs - they have a bunch of dispersed facilities that run cheaply on their own. This makes it the perfect facility for Medicare and Medicaid patients. High-quality care. Low costs.
Cano created the perfect place for Medicare and Medicaid patients to find high-quality care and are raking in hella $$$ from the government through Medicare/Medicaid. The money was just sitting there and hospitals were too greedy to pick it up because they were busy chasing patients who could rake them in even more money. Cano saw that and decided to help.
Wtf happens to Cano Health if Trump decides one day to cut funding for Obamacare. Are they just fucked? Are they worried?
Cano works in Florida. What about the other 49 states? Who’s building Cano for them?
Startup idea: I really like this idea of taking complex, distributed experiences (ex. going to the doctor) and consolidating them under the same brand - like Cano did! Where else can this work? I feel like it can work for farmer fresh food. People want to buy directly from farmers. But they don’t want to lose their mind doing so. I wanna buy tomatoes, apples, and rosemary. I don’t want to have to go and find three different farmers to directly buy from them. Instead, I could establish one brand that connects all three of those farmers - and people buy from that single brand. You’re still buying directly from the farmer, but you trust me to pick the best farmers, who produce the highest quality goods, handle payments, and provide customer service so you don’t have to deal with three farmers.
The Top 5
Okay. I’m not going to go over the Top 5 companies of 2019. You can find them here. I challenge you guys to pick one or two of the companies in the top 5, and do your own little study on them just like I did here and send it to me. I’ll include it in next weeks email!
This has been insanely fun to write. Thanks for reading if you got this far! And I hope you actually decide to analyze at least one company in the top 5. Trust me. It’s fun! Make sure you send it to me when you’re done :). FarzaDoesStuff@gmail.com