The Invisible Middle

I’ve been impressed by research done by Ohio State’s Fisher College of Business and GE Capital’s 2011 National Middle Market Summit. If the US Middle Market (defined as companies with revenues between ten million and one billion in revenues) were a country, they would rank  4^th in the world behind Japan in comparison to the world’s largest economies with over $3.8 trillion in private sector GDP.

Moreover, the “Invisible Middle” had an astonishing 82% survival rate during the last recession in the face of an unprecedented credit crisis, sharply increasing commodity prices and sweeping regulatory changes that have haunted their larger competitors. Since the majority of these businesses are privately held, it’s harder to compare their internal financial performance metrics but the facts are clear; these companies represent the real growth engine of the US economy. Surviving middle market companies added more than two million jobs from 2007-2010, even as larger companies shed nearly four million jobs. The “Invisible Middle” serves as community pillars, providing stable employment and acting as responsible corporate citizens.

So what’s driving the growth behind these companies? Since most “Invisible Middle” CEO’s were not MBA’s from the best business schools  or had decades of training in preparation to lead companies like Microsoft or General Electric, what explains their phenomenal performance against their larger peers during the last recession?  While there are several factors that have driven growth, the most impressive to me is developing new markets and channels for their business and effective operational efficiencies that result in exceptional profit margins

Still, access to capital needed remains one of the biggest challenges to these companies. 55% of the companies reporting stated that they did not have sufficient access to capital markets to realize the potential they felt was achievable.  Recently, I’ve helped form a group in the metro Atlanta area to improve visibility of these well-deserved companies and efforts are underway to bring them together with super angels, venture funds and other capital sources to try and connect them with the funding we feel will immediately help create jobs and improve the economy in Atlanta, the state of Georgia and the country.

We’re looking for companies with truly outstanding stories to tell and capital investors interested in helping shape solutions for growth. Please feel free to reach out to me if you have ideas or would like to contribute to our efforts.  It’s time we create some visibility for the “Invisible Middle.”

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