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How Do Disruptors Perform in Recessionary Times?

By Scott D. Anthony, Tim Huse

It's natural to assume that one casualty of today's tough economic climate will be up-and-coming disruptive companies that have had some early success but haven't broken through to the mainstream. After all, consumers and companies snapping collective wallets shut will surely take the wind out of the sales of the up-and-comers.

History suggests otherwise. We went back to look at how up-and-coming disruptors (defined as disruptive companies with revenues of less than $1 billion) did in the face of the last three economic downturns in the U.S. (as dated by the National Bureau of Economic Research to cover 1980 to 1982, 1990 and 2001).

In 1979, 11 such companies, including Intel, Home Depot, Nucor and Southwest, fit our criteria. Their compound annual growth over the recession between 1979 and 1982 was 22%. Between 1989 and 1991, the sample of 11 up-and-coming disruptors, which included Best Buy, Cisco and Charles Schwab, grew revenues by 33%.

Between 2000 and 2002, 23 up-and-coming disruptors such as Google, Amazon and Research in Motion grew revenues by 32%.

Our sample is heavily biased, but still the directional results are interesting. One natural question is whether all small companies grew at similar rates. They didn't—in fact, the 8,200 or so public companies with less than $1 billion in revenue in 1999 saw collective revenues dip by 4.2% a year between 2000 and 2002.

Read the full article on Forbes

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