The Inc. 500 - A security analysis
A couple days back, I sort of mocked Somerset for this line in its press release about its earnings: "the exponential growth in concern and demand for security." But then I started feeling a little guilty about that. I mean, security is outpacing other industries, right? Right? Isn't that what everybody says - security is a safe harbor in the financial storm? So, I thought to myself, since security is dominated by private companies, with a lot of technology start-ups, surely security is well represented on the Inc. 500, a list of the fastest growing public companies in the country. Surely! Well, not so much. Any security companies in the top 50? Well, there's Ahura Scientific, at #25, which "develops rugged, compact optical systems for rapid identification and verification of liquid and solid chemicals. Applications include environmental testing, detection of pharmaceutical counterfeits, sampling of potential liquid explosives at airport checkpoints, and medical diagnostic tools." I think that definitely counts as security. They did went from $990,198 in 2005 to $46.2 million in 2008. Not too shabby. Of course, I've never actually heard of them. Which is probably on me. Moving on: The ID Experts come in at #32. They don't really count for my purposes, though, since they're all about identity theft, and I'm going to put that out of the realm of physical security, which is the type of security that's supposedly going through the exponential growth, and none of you readers really deal much with identity theft. But then to find anything even close you've got to go to #164 for Packet360, which isn't really a security company, but at least plays in the security realm, dealing in wireless backbones. I don't think that really counts, but at least I've seen a press release from them. At #180 we've got GuardianEdge, which sounds like a security company, but just does data encryption. Doesn't count. At #238 we've got elQNetworks, which, as you might think, does network and data security. Doesn't count. Finally, at #242 there is a legitimate security company working in physical security, doing threat assessments, integration, etc. Ever heard of Hilliard Heintze? The do this: "Emergency preparedness, crisis and disaster recovery planning and management, background screening, computer forensics, and security staffing for corporate functions are among its core competencies." Maybe you haven't heard of them because they only grossed $4 million last year, and are on the list because they started out at $400,000 in 2005. Remember, this is about growth. Still, a company I should at least know about. They are followed at #243 by Bargain Locks. No explanation necessary. Still, proof of growth in the demand for security, no doubt.
And at #305 we have our first traditional security company, Power Home Technologies, which installs alarm systems and CCTV in homes and small businesses, based in North Carolina. They're a Vector dealer, and they've got a snazzy web site, and they grew from $1.1 million in 2005 to $9.6 million in 2008. Now THAT'S what I'm looking for. That's some exponential growth, right there - 781 percent growth.
And, yet, it ranks #305 overall. Hmmm.
I think Premier Integrity Solutions counts, too, at #313. They do drug testing, but also criminal monitoring, etc., which is physical security in general. It counts. But they probably don't read my paper.
Oh, hey, WOW, Devcon is at #329! Oh, wait, that's not the same Devcon... Psyche!
A guard firm, Securit, comes in at #367. Not bad. They do background checking and such, too. One hundred and eighteen employees on only $5 million in revenue? Yep, that's a guard firm.
ESET, at #379, is a spyware blocker. Doesn't count.
We've been talking about this potential growth of video monitoring - well, iVerify is actually putting up the numbers. They clock in at #405, going from $1.2 million to $9.1 million, 2005 to 2008. That is a terrific vindicator of the model, if you ask me. To quote them, "The company's audio and video monitoring center houses specialists who oversee the security of clients' employees, critical assets, inventory, entryways, cash registers, and other high-risk targets."
637 percent growth is nice.
And, oh my stars and garters (boy is that a weird saying), there's a video systems manufacturer here, too, Luxor Direct, at #460. They do: "Luxor sells surveillance and security DVR technology for homes and businesses throughout the U.S. and Canada. The company is currently expanding its markets and its product line in anticipation of future growth."
I have not heard of Luxor before, but they're an OEM, so it's not that surprising. They use proprietary "ClearPix" compression, which they claim is better than H.264, et al. Still, something's going right: They went from $844,000 to $5.6 million in three years.
And that's it, for the top 500.
So what conclusions can we draw? Maybe not many. The 500 companies on this list grew ridiculously fast, even if they didn't really get hit by the economic slide till the end of the reporting period. The 500th company grew 528.5 percent. Who can do that?
Well, only little start-ups, mostly. Those that can go from something in the hundreds of thousands to something in the millions in three years. They're start-ups, most of them. Legacy companies like Pelco aren't going to be on the list because growing that fast would mean going from $300 million to $1.5 billion (although TV maker Vizio is on the list, with 2008 revenues of $2 billion, so it's not impossible to do that).
Further, some of the most innovative young companies in security, especially in manufacturing, are overseas, and this is an American list, so there's that.
However, that said, it's not like there aren't a lot of start-ups in security. All of the PSIM companies, IP camera companies, IT-savvy integrators, video management software companies, analytics companies, etc., are start-ups, sort of by definition. Where are they on this list? Shouldn't one of them gone from $500,000 to $5 million?
Maybe they just didn't fill out the survey, or submit their financials. Security companies are conservative by nature. Maybe Inc. just didn't explore the security industry very thoroughly. But if that's so, it's emblematic of security's lack of visibility in the mainstream consciousness, which I have maintained all along is a problem.
Clearly, there are companies growing fast in this market, but when you compare security to industries like government services (where there may be some overlap, but I didn't see much), media, consumer goods, even retail, security gets smoked.
Why is that?