The second post in a series based on the National Center for the Middle Market’s in-depth research report, The DNA of Middle Market Growth: The Three Types of Growth Champions and the Factors that Drive Their Success, this post looks at the Investor growth typology and how this model produces the most rapid revenue growth in the middle market.

Of the three types of Growth Champions the Center identified in our latest research report, those we dubbed as Investors enjoy the most rapid year-over-year revenue growth. As a group, these businesses report an impressive growth rate of 11.5% compared to 5.6% for companies that invest more modestly. As their name suggests, Investors grow by putting their money where it makes even more money, namely R&D, new plants and facilities, and the acquisition of other businesses.

Investors are scalers, and they grow faster and bigger as a result.

Investors are characterized by their willingness to put capital to work across a range of growth-producing activities. Like many growing middle market businesses, including Innovators, the Investors’ primary route to growth is market expansion, or the pursuit of new customers and new territories. They invest in expansion both domestically and abroad, and they self-report being particularly good at taking advantage of opportunities in fast-growing foreign markets. Perhaps as a result of this expansion, Investors represent some of the largest middle market businesses: Nearly half (47%) of the companies in this cluster make between $100 million and $1 billion per year. As a group, their average annual revenue is $196 million.

Acquisitions play a key role in the growth of Investors.

One way Investors acquire new customers and move into new geographic regions is through the acquisition of other businesses. Of the three types of Growth Champions we identified, they are the most likely to make an acquisition (or to be acquired). They are considerably more likely than other types of growers to expect an increase in M&A activity in their industries. And they are most likely to have some private equity ownership, with more than four out of 10 (42%) of these companies owned in part by private investors.

When making those acquisitions, Investors are likely to pay attention not just to the customers they are gaining, but also to the new employees they are onboarding. Of all the Growth Champions, they place the greatest importance on attracting and retaining quality staff. One of the Investor companies we talked to, Daseke®, is a leading consolidator of flatbed and specialty trucking companies. Owner Don Daseke emphasized the importance of investing in people. He’s grown his business from $30 million to $1.3 billion by seeking out companies with exceptional management teams and ensuring that those teams and their staff stay in place post-acquisition.

Confidence and optimism drive Investors’ success.

Our research shows that economic confidence, which can be taken as a proxy for overall economic conditions, weighs heavily into the growth and success of all middle market businesses. And Investors appear to have confidence in spades. As a group, they expect a more favorable business climate in the months and year ahead, and they anticipate increasing demand for their products and services. This confidence likely factors into their willingness to invest heavily in their businesses as opposed to building their cash reserves.

Learn more about middle market growth strategies, and explore the other types of growth DNA in the middle market.

Get our full findings about the various types of middle market Growth Champions and identify your company’s unique growth DNA by downloading our latest research report, The DNA of Middle Market Growth: The Three Types of Growth Champions and the Factors that Drive Their Success

Next in this series
Post 3: A Model for Middle Market Growth: 7 Managerial Factors that Drive Performance
Post 4: Innovator Growth Champions: Always Going for More