By Dan Wyant

For more than two decades the Edward Lowe Foundation has focused on second-stage companies — which we define as growth-minded companies with about 10-99 employees and $1 million to $50 million in annual revenue. This group has historically been underserved in economic-development circles where the majority of effort and investment is spent on recruiting large companies from other regions or states.

Yet when it comes to job creation, second-stagers punch above their weight, generating more than double their market share. Case in point: In 2022 second-stage companies represented 16% of all business establishments in the United States, but generated 38.5% of all jobs, according to YourEconomy.org. What’s more, they’re very efficient at growing future jobs — especially when they get the right kind of assistance.

Indeed, Edward Lowe Foundation programs are specifically designed to accelerate growth for second-stage companies, and statistics from our partners show that the companies we’re touching add 2.4 full-time equivalent (FTE) jobs per year on average. This may not sound like very much. But over time, it adds up to some impressive numbers. For example, one of our programs hosted by the Louisiana Economic Development has served 415 second-stage companies in Louisiana, and together these companies have generated 3,115 new FTE jobs over a three-year tracking period. This reflects an $11.68 return for every $1 invested by the state. Statistics from our partners in other states show similar returns on investment.

Let’s contrast this with megadeals (individual projects getting $50 million or more from public coffers for a single facility). According to Good Jobs First, last year there were eight megadeals getting more than $1 billion in public funding — a record number — with an average cost per job of $726,000.

There is a political expediency that wants the megadeals because they make headlines and justify leadership. Yet in the words of our founder, Ed Lowe, “A big deal isn’t a big deal until it’s a big deal.” And megadeals come with many problems, such as:

• • Moving jobs from one state or region to another isn’t really job growth; it’s a zero-sum game.
  • The cost of job creation is excessively expensive (in 2022 the U.S. price tag was more than $19 billion).
  • Often the number of promised jobs don’t materialize.

People don’t appreciate the impact of the collective. Yet in economic development, just like in baseball, the game isn’t won by home runs, but by singles and doubles.

And when it comes to hitting singles and doubles in the economy, second-stage companies are our most valuable players. Having moved beyond the startup phase, they have greater fiscal wherewithal, which enables them to expand into new markets and introduce innovations that impact their industries. They’re able to provide more diverse, high-quality jobs and better benefits for employees. And in our experience, they are devoted corporate citizens.

It’s important for states and regions to include second-stage companies in their business assistance efforts — as a group, not just a couple of businesses. Supporting second-stagers as a group has the added benefit of diversifying the economy as these companies can be found in every industry and in every geographical region in the country.

Granted, second-stage companies rarely make the headlines because their growth is not flashy. But they are steady players and consistently hit singles and doubles. When it comes to the big deal, they are the real deal.

(Published Sept. 5, 2023)