O.C. Firm Tops Fast-Growth List : Expansion: Kingston Technology’s sales increase by 117,122% over 5 years. Nine other county firms are also listed by Inc. magazine.
Kingston Technology Corp. topped Inc. magazine’s list of the nation’s 500 fastest-growing private companies, bringing the computer company plenty of favorable publicity and greater name recognition.
Yet the good news had a downside for marketing director Ron Seide. He lost a bet with David Tu, co-founder of the Fountain Valley computer components firm, who was certain that Kingston would top the list. The payoff: Seide had to wear a tie for a week, not normal at a company that wears informality like a badge. And Tu selected the neckwear.
“It was an ugly tie,” Seide said. “It was not terribly attractive. But I wore it.”
Kingston and nine other Orange County companies that made the list still consider themselves small companies with few pretensions. They just continue to grow by leaps and bounds.
The Inc. list, published in the magazine’s October issue, ranked companies on percentage sales growth from 1987 through 1991. Companies had to have had 1987 sales of more than $100,000 but less than $25 million.
Orange County is home for nearly one in eight of the California companies on the list. Firms that made the grade vary from a data tape storage backup system maker, Transitional Technology Inc. (No. 10) in Anaheim; a commercial property management firm, Carlson Co. in Newport Beach (No. 224); a cotton clothing maker, Wek Enterprises in Buena Park (No. 388), to a general contractor, Diversified Pacific Construction in Irvine (No. 235).
Yet a growth rate of 117,122% over five years easily put Kingston on top, far ahead of anyone else.
Tu and co-founder David Sun, former engineers at AST Research Inc. in Irvine, founded the shoestring operation in 1987 with just $4,000 in cash and no venture capital. Company legend has it that when it was just the two of them, they would pose as a number of different managers on the phone, just to make it sound like a bigger company.
Sales took off almost immediately. Revenue rose from $120,000 in 1987 to $12 million in 1988 to $141 million in 1991. Kingston expects to have about $230 million in sales next year.
Even so, the growth hasn’t gone to their heads. None of the company’s 150 employees wear ties, usually, and the company’s headquarters have no fancy offices or desks and everyone--even Tu and Sun--takes part in day-to-day designing and building of components to upgrade computers. And there are no middle-managers.
“It’s still a very horizontal structure here,” Seide said. “We’re not caught up in the traditional business environment. We just want to get the job done.”
Even with the recession, the company is still hiring employees, including 10 new workers just last week added to the engineering, sales and marketing staffs. The company also churns out new products on a fast-paced schedule and can shift gears quickly when it introduces products because it subcontracts manufacturing to local assembly shops.
That low-overhead approach is mirrored at Cardboard Gold (No. 74), a distributor of sports collectible supplies and accessories, including wrappers for baseball cards and cardboard display holders.
The company has just 18 employees--seven of them part-time--even though it grew from $280,000 in sales in 1986 to $11.2 million in 1991.
Yet the most surprising thing about the company is the founder, Jack Mayes, who at 26 is one of only 30 CEOs under the age of 30 on the Inc. list. Mayes dates his company back to 1985, when he attempted to make some money trading baseball cards at an international card convention in Anaheim.
“I lost my shirt,” he said. “But I saw it would be a big business, a growing business.”
So he went into baseball card supplies, rather than card trading, which Mayes considered too unpredictable and “too much like the stock market.” The trading business also depended on paying in cash, rather than good relationships and credit options with suppliers.
“You didn’t need a lot of money to get started, just good contacts in the industry,” Mayes said. “We did really, really well.”
Besides a warehouse in Santa Ana, the company has another facility in Statesville, N.C., near the home of Mayes’ mother.
The company’s fortunes are expected to sag a little this year, with about $9 million in sales, because of an oversupply in the baseball card industry, Mayes said. But that hasn’t dampened his enthusiasm, especially being so young and successful.
“I love toys,” he said. “I have bought everything there is known to man.”
Like Mayes, David Silver and Dean Hough started their company when they were under 30. They founded Kofax Image Products (No. 58) in Irvine in 1985, when they were both just 27. Sales have risen from $287,000 in fiscal 1987 to just under $15 million in fiscal 1992.
Silver and Hough are former employees of FileNet Corp. in Costa Mesa, which builds huge document processing systems based on minicomputer technology. After helping start some of FileNet’s first products, they decided to make a go of it on their own, raising $4 million from investors.
Unlike FileNet, Kofax makes circuit boards that can be added to personal computers to convert them into image-processing machines. This allows a user to scan hard-copy text and convert it to the computer database.
“The perception was a PC wasn’t powerful enough to have an image application,” said company spokesman Brian Finnegan. “But now more and more people are discovering it and accepting it.”
The company’s first products hit the market in 1989, and now even FileNet is a customer. The company has plans to go public eventually, but “the general feeling is we still have some growing to do,” Finnegan said.
After all, being on the Inc. list is no guarantee of profit. Kofax posted a $351,000 loss in fiscal 1991, which was considered by the magazine. But it should rebound for fiscal 1992 with pre-tax net income of $1.5 million, Finnegan said.
The only other Orange County company on the list that posted a loss in the most recent year surveyed was Tycom Limited Partnership in Santa Ana, which makes precision drills used to manufacture circuit boards. Like Kofax, the company is expected to rebound this year with a $1.5-million profit, an amount twice as much as the sum it lost last year, said Tim Taylor, co-founder of Tycom.
Taylor, 35, and Scott Yardley, 31, started their company in 1986 with $650,000 borrowed from family and friends after leaving Megatool Inc. in Buena Park. But unlike many competitors, the two entrepreneurs wanted to focus not just on selling drills but on the services needed to train customers in how to integrate the technology into their factories. About 20 engineers are on Tycom’s staff to provide such services.
“It’s not just drilling holes,” Taylor said. “They have to understand the whole process. Our job is to make our customers’ manufacturing process more profitable.”
Tycom’s sales have grown from $290,000 in 1987 to $11.5 million in 1991. The company now has about 240 employees worldwide, including 130 in Orange County.
“We don’t just sell a tool and walk away,” said Martin Brogden, the company’s controller. “It’s an art. Drilling a hole is an art.”
On a Fast Track
The No. 1 company on Inc. magazine’s list of the 500 fastest-growing companies in the nation is in Orange County. And the rest of the state fared well, too. In fact, California leads the pack of 500 with 78 companies--almost double the number in second-place Texas.
Golden Sate Opportunity
Nearly 16% of the fastest-growing private companies in the United States are in California. California: 78 firms Texas: 41 firms Virginia: 30 firms Florida: 30 firms New York: 26 firms Massachusetts: 21 firms
Where They Are Statewide
About one in eight of the state’s fastest-growing private companies are in Orange County, and half are in Southern California. Los Angeles: 18 (23.1%) Riverside/San Bernardino: 4 (5.1%) San Diego: 7 (.0%) Rest of state: 9 (11.5%) San Francisco Bay Area*: 30 (38.5%) Orange: 10 (12.8%) * Includes Alameda, Contra Costa, Marin, San Francisco, San Mateo and Santa Clara counties
O. C. Companies on the Inc. List
Ten of the fastest-growing private companies in America are in Orange County, including the No. 1 company. Nearly half of them are manufacturers, and a third are consultants.
Kingston Technology
Rank: 1
Location: Fountain Valley
Date founded: 1987
Nature of business: Manufactures peripherals for PCs
1991 sales: $140.7 million
5-year sales growth: 117,112%
Employees: 110
Transitional Technology
Rank: 10
Location: Anaheim
Date founded: 1987
Nature of business: Manufactures computer tape subsystems
1991 sales: $11.5 million
5-year sales growth: 9,823%
Employees: 46
Tycom Limited Partnership
Rank: 51
Location: Santa Ana
Date founded: 1986
Nature of business: Manufactures precision cutting tools
1991 sales: $11.4 million
5-year sales growth: 3,848%
Employees: 210
Kofax Image Products
Rank: 58
Location: Irvine
Date founded: 1985
Nature of business: Develops image-processing hardware and software
1991 sales: $10.3 million
5-year sales growth: 3,503%
Employees: 96
Cardboard Gold
Rank: 74
Location: Santa Ana
Date founded: 1985
Nature of business: Distributes collectible sports accessories
1991 sales: $11.2 million
5-year sales growth: 2,760%
Employees: 16
Source: Inc. magazine
Carlson Co.
Rank: 224
Location: Newport Beach
Date founded: 1986
Nature of business: Manages commercial property
1991 sales: $2.2 million
5-year sales growth: 1,215%
Employees: 57
Diversified Pacific Construction
Rank: 235
Location: Irvine
Date founded: 1979
Nature of business: Provides general contracting and construction management services
1991 sales: $11.6 million
5-year sales growth: 1,189%
Employees: 16
Applied Utility Systems
Rank: 351
Location: Santa Ana
Date founded: 1985
Nature of business: Provides engineering consulting services
1991 sales: $6.8 million
5-year sales growth: 852%
Employees: 27
MDM Engineering
Rank: 359
Location: San Clemente
Date founded: 1984
Nature of business: Provides engineering and technical services
1991 sales: $10.1 million
5-year sales growth: 836%
Employees: 125
Wek Enterprises
Rank: 388
Date founded: 1987
Location: Buena Park
Nature of business: Manufactures cotton clothing
1991 sales: $7.4 million
5-year sales growth: 783%
Employees: 35
