Ann Arbor job growth is Gazelle-powered

Ann Arbor Job Growth Reporting
When you think of the gazelle, images of alert, fleet-footed deer-like creatures darting across the African plain should come to mind. While the term has become one of those business labels that entrepreneurs and investors like to regard as sexy, there is more than a little metaphorical meat to the word. There are, indeed, small high-tech firms that seem preternaturally gifted at zigging and zagging through financially rocky down-turns without missing a stride. They may not always take the path they expected, but they're nimble and smart enough to get where they need to go.

Ann Arbor has a herd of these gazelle-like companies, and they've been picking up speed -and employees- with a dexterity that traditional, big-name companies just can't match.

Tracking the herd

Concentrate has been tracking job growth in Washtenaw County since January of 2012. In that time we've been identifying gazelles -small businesses rapidly growing into second-stage firms- in our weekly news stream. More than just hopeful stories of a vibrant new economy ecosystem, these firms have revealed themselves to be one of the primary drivers of local, high-tech job growth. The top 5 fastest-growing, locally based gazelles (all of which happen to call Ann Arbor home) created an average 100 new jobs each, and have the potential to create a lot more very quickly.

So, let's talk about another animal. One less known for its speed and agility, and more for its steadfast ability to tread over the toughest terrain. We're talking about the Llama here, and strange as it may sound, in Ann Arbor the llama is also a gazelle.

LLamasoft  is a downtown Ann Arbor-based firm, which specializes in logistics software. Launched in 2002, it has grown into a $40 million company, landing on Deloitte's Technology Fast 500 Ranking for each of the last three years (2012, 2013 and 2014). The first two of those years it was the only Michigan-based firm. Last year (the most recent year available) it was one of only three firms hailing from the Great Lakes State, securing the 139th spot on the list.

"It's a combination of market traction and market volatility of companies needing to redesign their supply chains,"says Toby Brzoznowski, co-founder & executive vice president of LLamasoft. "We have established ourselves as a global leader in that space.”

Which also means his company is hiring just as fast. LLamasoft currently employs a team of 250 people, bringing 70 on board in 2014 alone. It has created 170 jobs since 2012 and always has about a dozen position openings to fill at any given time. This isn’t just an example of an up-and-coming firm riding current growth trends. The 13-year-old firm has experienced exponential growth for most of its existence.

"We were doubling in size when the market was tanking," Brzoznowski says. "The growth has been there.”

Gazelle job creation

LLamasoft earns its gazelle label honestly. It's a company that is both expanding quickly with innovative new products and has a high ceiling for growth. It is the sort of company that creates excitement in the local economy and good-paying jobs that attract topnotch talent. 

"A big reason you're seeing more gazelle companies is the work that has been done over the last 10 years," says Bill Mayer, vice president of entrepreneurial services for Ann Arbor SPARK. "Our entrepreneurial ecosystem is stronger than it has ever been.”

As a result of Concentrate's interviews with CEOs and other new economy executives, we have been able to establish a robust database of growing companies. Those job-creation numbers represent both hires made over the year before the story was published and how many open positions those companies had at the time of publication. We also tracked how many people the companies employed in total.

During the last 2.5 years, 548 companies created 2,439 jobs, increasing local staff totals from 5,311 employees to a workforce with more than 7,750 full-time equivalents. That adds up to a 46 percent spike. Gazelles represented a significant portion of that job growth. The top 10 fastest growing gazelles (all of which happen to be Ann Arbor-based) accounted for 637 new positions, or 26 percent of the job gains. The combined staffs of the top 10 fastest growing gazelles also represented 14 percent of the total jobs in our data-base.

The pace of that job creation has maintained a steady clip, averaging 68 new jobs each month. The creators of those jobs came from numerous sources. Large companies with satellite offices produced significant gains, such as Systems in Motion (an IT firm based in California), which expanded its Ann Arbor office by 130 people to more than 230 today. But a good portion of the job gains came from incremental hires at small businesses with a handful of employees. These firms may add only one new position at a time but their cumulative impact is significant.

Gazelle job growth represents the most promising trend in talent-based hiring. LLamasoft increased from 80 employees at the end of 2011 to 250 people today. Duo Security, an online security software startup, has gone from its two co-founders to more than 100 employees and a newly expanded headquarters in five years. Online Tech, a data center firm with aggressive Midwest expansion, has tripled its staff to more than 60 people. Agriculture software startup FarmLogs has hired dozens of people since it launched in 2012 and is on track to hit 50 employees this year. ForeSee, which provides user-satisfaction surveys online, went from a local staff of 80 to 250 in the four years before its acquisition. 

All of the above-mentioned companies have taken venture capital to grow their businesses. There are currently 129 venture-backed companies in Michigan, up 70 percent over the last five years according to the 2014-15 Michigan Venture Capital Report from the Michigan Venture Capital Association. That report also points to at least $300 million that has been invested in Michigan-based startups each year since 2012. 

Ann Arbor has long been the center of that venture capital activity in Michigan. Eleven of the 26 VC firms headquartered in Michigan call Ann Arbor home. Nine of the 11 out-of-state venture capital firms with offices in Michigan set them up in Ann Arbor. Each one of those VCs brings millions of dollars in seed capital to the table, much of which has been invested in slow-cooking local startups.

"I like to say it begins with patience," Mayer says. "Usually you run 6-12 months with your first customer before it's ready for the larger market. ... The ones that really start to make it build momentum after three to four years.”

Gazelles of a different stripe

Not all gazelles are of the same stripe. While many are based in the tech sector or are nearing their fifth birthday, some are more traditional ventures that have been working on their business models for many years.

Leon Speakers makes home entertainment systems, specifically geared toward the high-end speaker market. The company has been knocking around Ann Arbor for nearly 20 years. It got its start when Noah Kaplan graduated from the University of Michigan and was looking to turn his education at the U-M School of Art & Design into an actual living.

Over the last four years, Kaplan's business has really taken off, spiking its revenue by 300 percent. Leon Speakers also hired a dozen people over the last year, expanding its staff to 50 people. Nevertheless, the company has decided to consolidate its gains as a multi-million-dollar firm, and is aiming for a more conservative 15 percent revenue growth.

"It was a little too fast," Kaplan says. "The scale of what we're doing is much bigger.”

When Leon Speakers first started to grow its biggest challenge was meeting demand. It overcame that challenge by implementing lean manufacturing practices to its factory on the south side of Ann Arbor. Today Kaplan claims his locally produced electronics are cost competitive with imported electronics, and one of his new challenges is finding enough of the right people to make them. 

SPARK's Mayer says Kaplan's concern is not an uncommon refrain among local startups. "We're seeing good job growth but the challenge is finding the right workers with the right skill set that are ready to go." 
Noah Kaplan, Leon Speakers
Noah Kaplan, Leon Speakers
Noah Kaplan is the CEO of Leon Speakers, a high-end home entertainment center manufacturer. The Ann Arbor company has grown exponentially over the last few years.

Why has your company grown faster in the last four years than its first four?
Starting around 2010 we began to work on the overarching vision for the company. Around that time I ended up buying my original partner out of the business and joining the Detroit Entrepreneurial Organization which forced me into the process of understanding leadership. Blood, sweat and speakers quickly transformed into a vision, a leadership team and a new five-year plan. I still work every day to stay focused and continue to surround myself with people who are smarter than I am!

Leon Speakers has grown 300 percent over the last four years, but you have more modest aspirations this year. How do you know when to throttle back on a company’s growth?
As you know growth comes with challenges. At Leon, nothing is more important to me than maintaining quality and culture. Over the past years we added on some new verticals in commercial audio and we acquired a company called Media Décor in Florida and more than doubled our staff. This year I looked around and knew it was time to reflect and reinforce what we had built and to take time to write the next five-year plan with the team we have today; and to break old habits. We are working on the main foundation to sustain the next phase of growth with entirely new perspectives and an incredible team who help me be more patient.

You started Leon Speakers with $600 from your father right out of college. What, if anything, should the Ann Arbor area do to help fund more young people with big entrepreneurial aspirations?
I think the most important “funds” come in the way of intellectual exploration and connecting with resources to help transform ideas and passion into viable business models. I know this sounds a bit abstract but that small investment was backed by the large infrastructure that Ann Arbor has to offer. The more forums and conversations we can start the more interest we can stir in the next generation of businesses.

Art is a key piece of the Leon Speakers growth plan. How can companies best invest in the arts to help further their business models?
I think that art and design are not only important to our growth, but are a vital part of any great city’s economic growth. Two years ago I joined the board of the Ann Arbor Art Center to begin to connect with organizations who aligned well with our vision. This has led to great new partnerships in the community and we are about to roll out PopX, a brand new art fair in the city launching this October. I want Ann Arbor to stay relevant as a creative and artistic place to live so that we continue to attract and retain great people. Inside Leon we like to surround ourselves with things that inspire us and we want our staff to feel free to express their individuality. Cities and business are alike in this way, culture is a serious currency of modern times.