Private Titans
Startups create the buzz, but some outfits, like music publisher Hal Leonard, born in radio days, outperform for decades.
Inc.’s second annual list of the most vital private companies.
We are a nation of neophiliacs. We worship the new, whether it’s fashion, cinema, gadgetry, or, especially, business. Why else would a new company like Harry’s that sells an old product like razors command a $1 billion valuation for $100 million in sales while Procter & Gamble took an $8 billion charge to its Gillette Shave Care business last year? Startups are all about future sales and profits, and we all get caught up in their stories.
No one loves startups more than Inc., but in our second annual Private Titans list, we salute those privately held firms that are no longer ingénues but nevertheless are superstars. In our worship of what might be, we can forget what some companies have already accomplished, evolving and growing for years, or decades, or even centuries as generations of startups lose their energy like dying stars.
To compile this year’s list, Inc. teamed with PrivCo, which has developed the country’s most extensive database of privately held companies. That’s not an easy task, says CEO Basil Hamadeh, given that the value of private equities has grown more than eightfold since the early 2000s—twice as fast as global public equities. PrivCo uses financial modeling and other methodologies to analyze company performance, and then generates qualitative insights and investment guidance for its customers. The 50 companies listed here, and 950 others that you can find at inc.com/privatetitans, make the grade on the basis of a weighted score tied to sales and employee growth, balance sheet strength, valuation, and ability to raise capital, among other measures.
You’ll see some well-known tech-driven companies such as DoorDash and WP Engine, which have achieved unicorn valuations, as well as C3 IoT, a firm at the forefront of A.I. and machine learning. But the list also includes such businesses as Hal Leonard (see page 96), which has been around since the 1940s. Hal Leonard was co-founded by the Edstrom brothers, a big band–era duo who got started by licensing the hit song “I Wonder Who’s Kissing Her Now” from the movie of the same name. The company isn’t about to let the music stop because the world has gone digital.
Dynamic private companies have a future because they are always trying to create one. Hal Leonard is constantly scanning the universe for threats or opportunities. This is what Peter Cohan, who teaches strategy and entrepreneurship at Babson College, calls intellectual humility—having a successful record, because of skill or luck, but not assuming that the good times will continue.
That humility is a common attribute of successful private companies, according to Steve Spear, a senior lecturer at MIT who has studied the way organizations transfer knowledge. “Each of these companies cultivates a relentless, almost unquenchable curiosity about market needs,” he says.
At Viking River Cruises (page 92), curiosity has animated CEO Torstein Hagen for 23 years. Hagen is the consummate contrarian. When the cruise industry tacks, he runs with the wind, as he did after 9/11, when he doubled down on marketing. Now, with the industry caught in the coronavirus outbreak, he’s likely to make another bold move.
Companies that remain dynamic over the long term invariably have strong corporate cultures. One of the oldest on the list is Hancock Lumber, led by a sixth-generation family member (for more, go to inc.com/hancock). The company was formed in 1848, and current CEO Kevin Hancock is committed to making the employees the fulcrum of the enterprise. That’s a powerful plan for any company, says Cohan: encouraging employees to be independent thinkers who are happy to innovate for the customers, which creates a beneficial flywheel effect. “The customers will start promoting you,” says Cohan, “and the employees will recruit others who in turn value and get emotional benefit from giving customers great products and services.” And on you go, for a century or so.
In the past six months, the stock market has shied away from some IPOs, such as Casper’s, as if they were infectious, with investors recalibrating the risk they are willing to take on unproven companies. A few of the firms contemplating an IPO may have to stay private, which might not be all that bad. Running your business for the long term, outside of Wall Street’s glare, is exactly what the companies on our Private Titans list have been doing all along.