SD ranks 5th for cities with fast-growing companies

San Diego ranked No. 5 on Inc.'s list of the top 10 cities for fast-growth companies, moving up two spots from last year and beating out startup hubs like Dallas and San Francisco.

The business magazine, which released the list Wednesday, ranks each city based on the number of firms listed on its ranking of the 5,000 fastest-growing companies. The businesses are ranked based on the past three years of revenue growth.

New York City topped the list, with 205 of the nation's fastest-growing companies, many of them rooted in the Big Apple's booming tech scene. San Diego, with 81 companies on the list, ranked between fourth-place Austin (87 firms) and sixth-place Houston (76 firms). The top-cities ranking only counted firms in the San Diego city limits. Countywide, the number of firms on the Inc. 5000 was 113.

"It's not the first time San Diego shines," said Inc. 5000 editor Diana Ransom. "It has always punched in higher than the size of its metro area would suggest."

San Diego didn't make the 2012 top-cities ranking, but in 2013 it landed in seventh place with 71 companies on the Inc. 5000, behind Houston and San Francisco.

"This is a very valuable finding for San Diego," said Lynn Reaser, chief economist for Point Loma Nazarene University. "Having an outside source validating your ranking and your potential for growth is very compelling. Plus, I think it defies much of the negative publicity that the public seems to be digesting almost on a daily basis: The perception that companies are leaving in a mass exodus."

San Diego's enviable weather has helped make it a hotbed of innovation and growth for companies like utility metering and billing firm Multifamily Utility, Inc. writer Yolanda Lu wrote. Multifamily, San Diego's fastest-growing company on the Inc. 5000, experienced a 5,196 percent surge in revenue over the last three years, from $108,707 in 2010 to $5.7 million in 2013, landing it in 56th place nationwide. Photo archiving company PhotoBin, in 60th place, saw revenue grow from $125,117 in 2010 to $6.3 million in 2013, an increase of 5,003 percent.

(Beto Alvarez)

Other San Diego County firms making the list ran the gamut of industries, from self-help publisher Motivational Press (No. 275) and adult sports league operator Vavi Sport & Social Club (No. 1,555), to nutrition snack maker Perfect Bar (No. 1,901) and e-commerce website builder Miva Merchant (No. 1,996).

Some, like genetic testing lab Pathway Genomics (No. 173) and sunglasses maker Knockaround (No. 524), are new to the Inc. 5000 while others, such as athletic training equipment maker SKLZ (No. 4,620), are repeats.

"Overall, we like this list in a lot of ways," said Mark Cafferty, CEO of the San Diego Regional Economic Development Corporation. "It's really based on growth, and I think San Diego's story is one of growth."

It's also a good indication that, despite criticism of the regulatory environment here, small businesses across a variety of industries are thriving in San Diego, he said.

"What you see is a lot of smart, interesting people in San Diego who are doing great things in this diverse base of clusters that we have, which I think often we bunch together and call our 'innovation economy,'" Cafferty said.

While he likes aggregate data and real numbers, Cafferty said, rankings such as the one from Inc. give his organization something to talk about when marketing San Diego as a destination for other companies to put down roots — or keep those already here from relocating.

Beacon Economics economist Jordan Levine said he also doesn't put much stock in such rankings, but he thinks the Inc. placement speaks to the underlying data, which show that San Diego is a relatively strong economy.

As for San Diego outranking San Francisco on the top cities list, he said, the Bay Area is still creating more jobs than San Diego, largely in technology.

By contrast, the Inc. ranking shows that San Diego's fastest-growing companies come from a range of sectors, which Levine said is a good thing.

"I'm the type of person who thinks we should never put all our eggs in one basket," he said. "I think it's great that we have the biotech and the Qualcomms ... but the more broad-based we can get the growth to become, the more insulated we are to future shocks that could affect one segment of the economy."