25 Emerging Companies

It's been a couple years since we read much about initial public offerings, those orgies of investment banking fees and chest-thumping pride that are seen as the crossing-the-goal-line event by many early-stage entrepreneurs.

It’s been a couple years since we read much about initial public offerings, those orgies of investment banking fees and chest-thumping pride that are seen as the crossing-the-goal-line event by many early-stage entrepreneurs.

It could take a few more years, but IPOs will be back. And when they return, plenty of our 25 Emerging Companies are sure to participate. Others will remain in private hands, happily reinvesting cash to expand their empires. Yet others will bulk up through mergers and acquisitions.

What all these Midstate companies have in common is some combination of a promising business plan, skilled management and a lucrative market opportunity. These are the ingredients necessary for success several years down the road.

In the process of arriving at the final list of 25, Nashville Post compiled a far lengthier list of companies across all industries. They were studied for their prospects going forward, not so much for their current conditions. While some of them already are succeeding brilliantly, many are still building the base for future profits.

The final list includes companies like Murfreesboro’s Consumers Insurance, which has rebounded and is beginning to prosper under new top management, as well as America’s PowerSports, the perfect combination of veteran management and astute institutional investment. Then there’s National Seating & Mobility, the Franklin company that is the nation’s biggest in its field, yet continues to grow without ever formalizing an expansion strategy.

These three typify the 2002 list. Of course, not all Nashville-area businesses with bright prospects are present. It wasn’t our objective to compile an exhaustive list ranked in order of their relative potentials. Instead, we sought out less publicized companies that are doing the things that will make them the successes of tomorrow, and no doubt, the IPOs and M&As of tomorrow, as well.

AIM Healthcare
Medical expense collection/auditing

Despite AIM’s efforts to keep a low profile, those in the know are talking about the company’s success. While many businesses succeed because they come along with the right product at the right time, AIM’s focus is timeless: finding money.

Like a corporate bounty hunter, the Franklin-based company works on behalf of insurers to collect overpaid medical claims made to providers. On the flip side, AIM also works on behalf of providers looking to recapture dollars they may have overpaid to insurers.

Along with the universal appeal of money, AIM has one other thing going for it: strong demand. The health care industry is fraught with paperwork-related errors, especially when it comes to the filing of claims. As long as there is pressure on government reimbursements, hospitals in particular will look for ways to contain costs. For dollars that go out of their jurisdiction, they’ll call in AIM for the hunt.

AIM was started and funded by prolific entrepreneur Preston Ingram, who’s involved in several other local companies. Jim Sohr serves as president.

America’s PowerSports Inc.
Motorcycle, watercraft, ATV dealerships

Beginning with its 1998 acquisition of Woods Fun Center in Austin, Texas, America’s PowerSports (APS) has stuck to its plan of acquiring some of the nation’s most profitable dealerships of motorcycles, all-terrain vehicles, watercraft and snowmobiles.

Today, with seven dealerships, 250 employees and 2002 sales expected to near $100 million, the Brentwood company is busy negotiating for more. And there’s plenty out there. The motorsports dealership industry is dominated by mom-and-pops and ripe for consolidation.

APS believes in preserving the management teams of the dealerships it acquires and typically implements the best business practices found in the individual operations throughout the entire company. The six-person management team has yet to do its first deal in Tennessee. The nearest dealership is KC’s Powersports in Huntsville, Ala.

APS has three dealerships in its deal pipeline, giving Chief Executive Clark Vitulli (shown below, left, along with Andrew Alford) confidence that he will achieve the corporate goal of growing APS into the biggest power sports dealer in America. Backed by large Chicago private equity firm Wind Point Partners, the former operating chief of Mazda Motor of America has the financial wherewithal to accomplish his task. By dint of acquisitions and the revenue growth of the old, established dealerships that comprise APS, topping the industry-leading, $150 million-in-revenue mark should be a cinch.

Ardent Health Services
Psychiatric and acute care hospitals

In its quest to be a publicly traded hospital company, Ardent has two important things going for it: capital and expertise.

Along with $145 million, Ardent gained in June 2001 the leadership of health care venture capitalist Russ Carson and Chief Executive David Vandewater. Carson, the go-to man for large-scale deals in the industry, has his hand in numerous emerging health care services companies in the public markets. His firm tapped Vandewater, former second-in-command at Columbia/HCA under Rick Scott, and tasked him with adding acute care hospitals to its sizeable behavioral facilities business.

Companies that make it big in the hospital business must show the ability to seal multi-facility acquisitions in major markets, since the return on investment is higher and the opportunity to improve operations greater. So far, Vandewater has gotten results. Just eight months after the cash infusion, Ardent announced it would spend more than $300 million to sew up the Albuquerque market by acquiring two major health systems.

With annualized revenue of $414 million, Ardent owns 21 psychiatric hospitals and five acute care hospitals.

Automated Pharmacy Integration
Prescription drug dispensers, transaction data systems

Times are good at Fairview-based Automated Pharmacy Integration (API).

A relationship with the Veteran’s Administration (VA) established four years ago has turned into a $28 million line of business with no end in sight. The next project on the horizon is for a new automated pharmacy center for the VA in Dallas. API’s turn-key application will include everything from handling requests for drugs, preparing them for shipment and delivering the product. The $10 million project is expected to be operational in June 2003. API’s private sector work, currently consisting of two primary clients, includes a recent modification of Kaiser Permanente’s automated pharmacy software.

Chairman Dick Pruett who controls API and the American Conveyor Group of which it is a part, says API’s revenue could exceed $50 million in the next 12 to 18 months. (API is one of 14 units in American Conveyor, a 19-year-old systems integrator that provides its work-in-progress conveyor systems across the Southeast and Midwest.)

Given the efficiencies API delivers in terms of time and money, its revenue should continue to rise steadily as its customers react to rising pressure to cut costs through automation.

Avondale Partners
Investment banking

As long as there are risk-taking entrepreneurs, there will be people who specialize in raising capital. That is, or at least will be, what Avondale Partners is mostly about.

Formed 18 months after the demise of J.C. Bradford & Co. and SunTrust Equitable Securities, Avondale is positioning itself to be the Bradford of the coming decades—an investment bank that dominates Nashville, has a major presence across the Southeast and is recognized nationally for its areas of expertise.

Granted, the timing of the firm’s startup was good only in terms of the ready availability of investment banking talent. Otherwise, conditions have been tough. After decades of expansion to the point of huge overcapacity, the industry is in a brutal downsizing that ultimately will bring supply back in line with demand.

Once that point is reached, Avondale should capture huge market share. A return to vibrancy in the marketplace will mean big profits for the 44-person company.

In the meantime, its bankers are generating periodic bursts of revenue. And its team of research analysts, traders and institutional brokers is building a steady stream of transactional-based inflows.

So far uninvolved in fixed-income trading, asset management, high net worth retail brokerage and in-house investment funds, Avondale will have ample opportunities for profitable growth.

Consumers Insurance USA
Auto insurance

Consumers Insurance USA was fast out of the gates in signing up business after its founding in 1995, but it took the Murfreesboro company six years to turn a profit. Now, under new management since 2000, the company has the momentum to lift sales from $20 million this year to more than $100 million six or seven years out.

The Murfreesboro-based auto insurer focuses on small businesses and individuals with minor driving record problems. Its profits derive mainly from fees charged for renewals of its six- and 12-month policies and on the investment of its reserves.

Founded by independent insurance agents, Consumers takes market-share from national competitors by making life easy for agents. State-of-the-art artificial intelligence software permits agents to go online, enter potential policyholder’s information and get policies ratings and prices immediately.

Chief Executive Jimmy Clift says the company, which began writing policies in Missouri earlier this year, expects to expand beyond its Tennessee foothold, one state per year, to Arkansas, Illinois, Indiana and other surrounding states. Consumers Insurance will see $1 million make it down to the bottom line this year, and the former Deloitte & Touche partner targets 40% earnings growth next year.

Information system networking

When a governmental unit in Georgia recently decided to hook all its offices across the state into the same internal computer system, Cybera gave a convincing demonstration why its prospects are so bright. The closely held Nashville company won the contract for the work and completed the project at half the cost of the next lowest bidder.

The keys to Cybera’s efficiency are two-fold. Its technology builds the functional equivalent of routers and firewalls into its network so that clients don’t have to buy the expensive equipment. And by partnering with practically all providers of DSL, telephone and data comm unications services, Cybera can use its buying power to drive its costs below that of single carriers who have to piece together these sprawling networks themselves.

Its bargain-priced networking services are perfect for franchise operations or any other multi-site business, and for organizations who want to connect employees working from home into the company information system.

After just a year of publicly marketing its services, the 17-person company has 75 customers representing 1,200 different connection points. Chief Executive Cliff Duffey, one of several former Bluestar Communications executives who founded Cybera, expects 5,000 customer locations by mid-2003. That level of business should make Cybera nicely cash-flow positive.

DigiScript Inc.
Digital learning and training

DigiScript is capitalizing on the e-learning and training market in a smart way. Rather than bearing the massive costs of developing industry-specific content, DigiScript captures events/seminars that are provided by companies on film, makes them available over the Internet, and then builds a customized archive of the material.

Aside from cost savings, the model also gives DigiScript more growth potential because it is not confined to a single industry. The company has nearly 30 Fortune 500 companies on its client list. It derives revenues from hourly fees associated with capturing the data and licensing fees from the content.

The product, unlike many that sprung from the technology sector in the past few years, is full of competitive advantages, even in such basics as time and money savings for customers. Companies that use DigiScript’s product—they range from clinical trial companies to universities—avoid the costs of travel expenses, are left with a detailed, reusable archive for employees, and have an audit trail that can be used to fulfill regulatory requirements for matters like sexual discrimination training.

DigiScript made the right decision to fuel its growth by targeting corporations. Upon its inception, the company serviced professional organizations, a much more financially limited customer base.

The company is profitable, and revenue for 2003 will be roughly $10 million, says Chief Executive Brian Whitfield. DigiScript also has in its court a strong board of directors, including data processing pioneer Fred Goad.

Custom ordering software
www.edgenet.com< p> Many locals still think of Edgenet as one of the first dial-up Internet service providers in Nashville. Yet, it has been a couple years since the company sold its ISP operations and settled on a different expertise to establish a national presence.

With a 1998 acquisition, Edgenet got its hands on software for “made-to-order” services. Since branding it “m2O,” the Brentwood company has managed to seriously upgrade and insert its software program into some of the country’s largest housing products suppliers. Today, sales associates in more than 1,400 Home Depot stores and 800 Lowe’s rely on Edgenet’s m2O package to design, order and price custom windows and doors for customers.

There are many variables in these products—size, material, aesthetic touches—that can affect each other and create more combinations than most suppliers can accommodate. Edgenet’s product turns what was a one-hour task for sales associates into 10 minutes. The accuracy of their orders is far better, as well.

Edgenet’s core competency is designing software that solves very complex, multi-variable processes. Health care, the insurance industry and financial services are replete with such complexities. Expect Edgenet to penetrate those industries with the zeal it has displayed in homebuilding.

Community bank system

Many Nashvillians probably still aren’t that familiar with FirstBank. With headquarters in Lexington, Tenn. (about midway between Nashville and Memphis), this 14-year-old community bank’s eastward march did not reach Nashville until late last year. But since arriving 13 months ago, FirstBank has laid significant groundwork from its single local full-service location downtown.

Last November, FirstBank reported assets of roughly $750 million. That number topped $900 million by November 2002 and is expected to surpass $1 billion by year’s end. FirstBank’s Nashville branch generated about 65% of this growth with an estimated $100 million in both deposits and loans.

Jim Ayers, FirstBank’s primary shareholder, told Nashville Post last year that “general outflow” of small- and medium-sized companies from larger regional banks prompted its expansion into Davidson County. The bank’s efforts to court commercial business from such companies have been particularly successful and bode well for future growth.

Under the leadership of Bank of America’s former state head Doug Cruickshanks and Nashville market President Claire Tucker, look for FirstBank to open a second full-service Nashville-area location in 2003. That branch most likely will pop up in West Nashville or in Williamson County, depending on where FirstBank first attracts banking talent.

HCCA International
Health care staffing

HCCA alleviates a major problem that afflicts other companies in its sector: finding nurses. Rather than battling for workers with hospitals and other staffing firms, HCCA travels abroad to bring a fresh supply of foreign recruits back to the U.S. market.

Chief Executive Ron Marsten expects to bring 2,500 nurse recruits into the United States over the next five years, a venture he says will produce between $200 million to $250 million in revenue. Fueling his efforts is $10.8 million from seven firms, including Fred Goad’s Voyent Partners and Massey Burch Capital Corp.

While the process is tedious, HCCA knows the foreign markets well and has the right management team to lead such a venture. Its 30-year track record overseas enables the company to seek out pockets where risks such as language barriers and antiquated health care systems are not as high. Under the leadership of Marsten, an employee since 1979, the company has recruited more than 30,000 health care professionals for international clients.

Recruiting foreign workers for U.S. clients provides real economies of scale for hospitals, many of which spend millions of dollars per year for temporary nurses. With the HCCA model, clients get the benefit of keeping the workers for two years and paying lower or comparable fees for their work.

Healthcare Management Directions
Surgical hospitals

HMD is a bright spot in a dark sector. Despite many great ideas, few health care information technology companies have been able to deliver on their promises. The integration of new products with the industry’s widely used, outdated legacy computer systems has been an debilitating obstacle for most. Layering new systems atop the old often creates a hybrid so complicated that it spawns inefficiencies.

HMD avoids such problems with its “Smart Hospital” product. Instead of converting existing hospitals and information systems, HMD builds small surgical facilities, usually 15-to-60-bed facilities, from scratch. They have large clinical areas lined with wireless technologies and digital televisions. Conspicuously absent: business/administration functions and costly intensive care units and emergency rooms.

The setup makes for a very profitable, efficient way of practicing medicine. Success at HMD’s Louisiana facility, its first, is drawing attention and should bolster current fund-raising efforts.

New financing would fuel faster growth, permitting it to add as many as seven hospitals in the next couple years. Development costs per facility are $20 million to $50 million. Typically owning a 51% stake in these facilities, HMD should be able to build the financial base to support an IPO in several years.

Horizon Resource Group
Group purchasing organization

It’s not uncommon for hospitals to save 15% or more on the supplies they buy through one of the large group purchasing organizations (GPOs) that serve the health care industry. Last January, two hospital purchasing veterans and a former university system executive began applying the same model to colleges and universities.

Horizon Resource Group endeavors to consolidate purchasing made by some of the nation’s 6,000 schools of post- secondary education. The resulting buying power promises to deliver sizeable volume discounts for its members and profits to Horizon’s owners. GPOs make their money from vendors who pay fees based on the amount members buy. As with some health care GPOs, Horizon will not charge schools to join the buying group.

Currently, most universities buy most of their supplies directly. Franklin-based Horizon intends to sign three-to-five-year supplier agreements with vendors that will make discounted prices available to its schools. The company currently has roughly 100 colleges and universities on its client roster.

Horizon’s leadership has the relevant expertise. CEO Todd Abner, a one-time chief financial officer of HealthTrust Purchasing Group, and Chief Operating Officer Ward Brown, who worked in supply chain management for HCA, co-founded online health care GPO empactHealth.com. Senior Vice President Wayne Brown was dean of Belmont University’s MBA program and executive director of the Tennessee Higher Education Commission.

iPayment Holdings
Credit card transaction processing

Greg Daily is hoping to repeat the success in credit card transaction processing that he enjoyed from 1984 to 1998 as chairman of PMT Services. By acquiring numerous independent service organizations (ISOs), taking PMT public and selling it for $1.2 billion, Daily and PMT partner Rich Roberts made fortunes.

Of course, it won’t be a perfectly smooth ride this time around, as the events of October attest. Daily’s iPayment Holdings was well into negotiations to pay $34 million to acquire the 15,000-merchant portfolio of Humboldt Bancorp when talks abruptly ended October 7. Regrettably, iPayment had paid Humboldt a $1 million non-refundable deposit toward the acquisition just four or five days earlier.

Nonetheless, the credit card processing industry is still consolidating, and iPayment is bound to build its holdings well above the 60,000 merchant accounts it had this past summer. Whereas PMT dealt mostly with traditional retail clients, iPayment focuses on the “non-swipe” and “card-not-present” segment of the transaction processing market. This means that much of its business comes from online commerce.

It does not take long to build a large card processing firm, and Daily has plenty of experience. If past is prologue, expect iPayment to be among the first local companies to conduct an initial public offering once the marketplace settles.

IXT Solutions
Management and delivery of print and digital documents

What’s the big deal about mailing? Simply put a document in an envelope, lick it, stamp it, and drop it in the mailbox.

So how are Lyle Beasley and Craig Hodges building a fast-growing, cash-flowing business out of document delivery? For starters, their IXT Solutions processes huge volumes for corporate customers. One large client, Ohio-based retailer Elder-Beerman, mails half a million credit card statements each month.

Actually, IXT does the mailing. Critically, it also solves Corporate America’s problem with “data lock,” as Beasley calls it, by harvesting data from the documents and using the relatively new and highly flexible text format called XML to permit customers to work with the data. This means that instead of simply mailing 500,000 credit card statements, each mailing can contain a custom message or coupon appropriate to the profile of each customer. That’s powerful.

Currently, two-thirds of IXT’s business comes from health care companies, such as Community Health, AIM and Province. IXT scored a major coup in August by allying with Medifax EDI, a health care transactions processor that now recommends IXT to its customers.

IXT’s electronic and physical delivery of documents is gaining quick acceptance from companies eager to outsource document-related fixed costs.

Jabez Networks
Subscription Web sites/Web site development

According to Hebrew Scriptures, a man named Jabez prays that God will expand his territories. In the words of Chief Executive Jerry Cover, the mission of Jabez Networks is to “expand people’s online territories.”

The Brentwood company and sister organization JBS Sports are on their way to doing just that. With faith in the notion that people will pay for timely, quality content on the Internet, Cover and crew are pioneering the way to profits for online publishers.

Their first big success came last year with the purchase of Rivals.com, a popular site for college sports team fans. Rivals acquired Nashville-based AllianceSports in 2000, but choked on its own huge costs and a sole dependence on advertising revenue. Cover, AllianceSports founders Shannon Terry and Greg Gough, and others bought Rivals for a pittance, made much of the content paid instead of free, and quickly signed up 50,000 subscribers. Recurring revenues from monthly subscriptions made Rivals cash flow positive in seven months. Rivals recently ranked 22nd of all paid content sites in the number of subscribers.

Now they are applying that model—building a community of people with common interests, then providing paid and free content—to the subject of Christianity. Success with Christian site iBelieve.com could confirm the model and position Jabez/JBS for even larger opportunities in the future.

Online services for governments

Link2Gov has come a long way from charging $5 for online fishing license renewals. Earlier this year, it won a $19.7 million contract with the Internal Revenue Service.

At one point, the Nashville-based company that enables citizens and companies to transact with the government via the Internet came close to being a forgotten piece of dot-com history. After an aborted $57 million IPO in 2000, its principals refocused Link2Gov on its core competence—expertly serving government entities in government-to- citizen and government-to-business online transactions.

As several competitors folded, Link2Gov changed top management, cut its employee count and developed such services as voice response, kiosk and point-of-sale payment channels across 50 states. Funded with roughly $9 million, mostly from Atlanta-based venture capital firm Five Paces Ventures, the company now has 120 three-to-five-year contracts with county, state and national government entities.

After reaching break-even last September, Link2Gov will approach $4 million in gross revenue in 2002 and projects $15 million in 2003. Its 34 employees are adding one or two contracts a week as government organizations become more familiar with the company. President Tom Tarver says residual revenues from its contracts promise a reliable top line in future years.

MXISystems Inc.
Monochromatic X-ray imaging

Born out of a promising Vanderbilt University invention, three-year-old MXISystems holds an exclusive patent on monochromatic scanning technology. By directing X-rays at proteins and human genes to study abnormalities, its MX200 scanner could become the new market standard for breast cancer tests, beating mammography by providing three- dimensional views and reduced radiation exposure. It also eliminates the need for uncomfortable breast compression.

Currently, tests similar to those performed by MX200 can be performed only on $2 billion Synchrotrons at six U.S. Government-owned facilities. MXIS plans to price its MX200 scanner between $2.5 and $3 million. Each of the more efficient MXIS machines would replace two or three mammography machines at clinics.

MXIS is attempting to raise $20 million for FDA tests and installation of the MX200 beta units. Funded by Vanderbilt and 55 private investors, MXIS expects a $4.5 million loss next year. But the company projects $50 million in total revenue from scanner sales in 2005 and $186 million in 2007, says Chief Executive Howard Motter, former head of Nucletron Corp., a $45 million unit of Dutch firm Delft Instruments.

The company’s seven-person team has faith in its technology and its potential 2% to 3% niche in the mammography market, which totaled 1,900 machines worldwide last year.

National Seating & Mobility
Seating and wheelchairs fothe physically disabled

Ten years after its founding and at a $100 million annual revenue run rate, National Seating & Mobility (NSM) has plenty of room left to grow. That’s despite the absence of any formal development strategy.

The Franklin company constructs high-end mobility devices, mostly wheelchairs, for patients with cerebral palsy, muscular dystrophy, spina bifida and other physical disabilities. Demand from rehab technology specialists has resulted in the creation of an industry-leading 50-branch office network across the country employing more than 450 people.

After a growth spurt four years ago that only now is fully digested, NSM is again prepared to resume a controlled expansion. To date, the company has not had to tap the institutional market for its growth capital.

While the traditional home medical equipment (HME) industry feeds off volume sales of standardized products, each of NSM’s devices requires numerous customized fittings using parts from any of hundreds of manufacturers.

And as NSM marketing chief Bill Noelting points out, NSM first provides specialized products, then it looks for payment, mostly from states and private payers. Some in the HME industry study Medicare/Medicaid payment plans and produce equipment that fits the reimbursement schedules. NSM’s strategy should ensure that its growth is as sustainable as it is appreciated.

Physician messaging company

With no debt, positive cash flow, and gross margins of nearly 50%, NotifyMD is ripe with opportunity.

Until the summer of 2002, the 16-year-old company had yet to prove itself a worthy investment to the handful of venture capitalists who funded it. That was when a fairly new chief executive, Gary Ferguson, finally hit the profitability mark.

With the company’s bottom line shored up, NotifyMD is now focused on growing top-line revenue of its secure patient-message services for doctors. Overseeing that process is not only the competent management team of Ferguson and local long-time health care executive Phil Suiter, but also a group of venture capitalists long familiar with the company and ready to get the biggest bang for their buck. Additional expertise was tapped in the recent appointment of Charlie Martin as a board member.

NotifyMD’s customer base consists of 12,000 physicians and is growing. Annual revenue is near the $10 million level. The company is forging alliances to boost revenue and has heightened sales efforts to increase physician adaptation. Capital from those alliances will help fund acquisitions of other physician answering services. Six rounds of funding, five CEOs and four business plans later, NotifyMD is at last destined to produce a return for its investors.

Psychiatric Solutions Inc.
Psychiatric hospitals

Expect to hear more out of Psychiatric Solutions Inc. Since merging with publicly traded PMR Corp., a company with lots of cash but few holdings, PSI has the financial clout to buy behavioral hospitals.

This is its primary growth plan, and happily there are plenty of facilities available at reasonable prices. Most of these are stabilized hospitals that rode out the disastrous overbuilding of the 1990s. Pricing for services, both private and government pay, have steadied in the industry.

PSI management knows the industry well. Under the leadership of Joey Jacobs, a former accomplished HCA division head, PSI started as a physician management firm geared to psychiatrists, managed psychiatric units within acute care hospitals (the company still manages 50 units), and then began acquiring freestanding behavioral hospitals.

Management’s decision to buy psych facilities—the company bought five in 10 months—was no jump on the bandwagon. Now its earlier quick moves into the industry promise to confer on PSI an advantageous lead in the acquisitions game. But even with no acquisitions, PSI expects to post 2002 earnings of $3.5 million to $4.2 million, or 40 to 48 cents per share, through internal growth.

S&S Family Entertainment
Bowling alleys
Web site unavailable

Larry Schmittou paid his dues to baseball. He coached the Vanderbilt Commodores for 22 years, before quitting to bring professional baseball back to Nashville.

Years after divesting his stake in the Nashville Sounds, Schmittou is on his way to scoring his biggest payday on the lanes, not the sandlot. Middle Tennessee’s foremost sports authority is consolidating the bowling alley industry within a 300–mile radius of Nashville.

His two-year-old S&S Family Entertainment already owns seven bowling centers and is building its eighth—a 42-lane Family Fun Center with video games, laser tag, billiards and bumper cars located on Charlotte Pike at Old Hickory Boulevard. By clustering multiple centers in single markets, S&S can save on staffing costs.

If that strategy sounds sort of like the hospital industry, there might be a reason. Nashville Post understands that Schmittou’s partner is Rick Scott, former head of Columbia/HCA Healthcare Corp., which pioneered the clustering of hospitals. (Schmittou declined to identify his partner.)

With no debt or accounts receivable and profit margins north of 25%, look for S&S to amass 25 to 30 centers over the next three or four years. Thanks to a well-heeled partner and great cash flow, funding will not be a problem.

Southern Land Co.
Developer of high-end residential communities

Tim Downey is a stickler for details. The soft-spoken CEO of Southern Land Co., which moved from Chattanooga to Franklin this summer, once demolished a freshly constructed security outpost because the structure’s elevation did not match that of the rendering. It’s this type of meticulous oversight that helped win over much of the initial opposition to Westhaven, Southern Land’s grandest master-planned development to date.

Located along Highway 96 west of Franklin, the sprawling 1,500-acre Westhaven new urbanist development will eventually house 2,500 residential units (priced from $175,000 for townhomes to $500,000-plus for single-family residences), an elementary school, 300,000 square feet of retail/office space and a golf course. It’s sort of a super-sized Fieldstone Farms with more green space and the architectural integrity and flavor of Central Avenue in the tony Richland/West End neighborhood. About 8,000 residents will call Westhaven home when Southern Land completes the final build-out by 2015.

Such projects are financed mostly by high net worth and institutional investors. At this point, there is no formal investment fund, Downey says.

Closely held Southern Land’s revenue will top $50 million in 2002 and should double in four to five years. The company is now looking beyond Chattanooga, Atlanta and Nashville for opportunities in Orlando and Washington, D.C.

StreamCast Networks Inc.
Software developer

In 1984, Motion Picture Association President Jack Valenti equated a consumer alone with a VCR to the Boston Strangler alone with a woman. These days, public enemy number one in the copyright community is peer-to-peer computer file sharing. And at the center of that global controversy is Franklin-based StreamCast Networks and its 25 employees.

StreamCast’s flagship software product, Morpheus, has been downloaded nearly 100 million times by music listeners since it became available in 2001. It’s now the most popular download on the Internet, as well as the most commonly misspelled search word on Google. Proof of its mass appeal is found in its roster of impressive online advertisers.

The music and movie industries argue that they can’t compete with free services like Morpheus. StreamCast founder Steve Griffin counters that there’s a multi-billion dollar bottled water business “that competes with free everyday.” StreamCast might have some protection in the same Supreme Court decision that unleashed the VCR industry.

Well-funded and managed, Morpheus connects online consumers in a way they appreciate. As a result, even if StreamCast eventually must concede some ground to industry superpowers, it will continue operating on the cutting edge of Internet exploitation for years to come.

Symbion Inc.
Ambulatory surgery centers

Meet the local leader of a fast-growing, well-capitalized industry. When it filed plans for an initial public offering in May 2002, Symbion reached a milestone pursued by a handful of younger, similar local companies.

Although Symbion has yet to complete its IPO, and conceivably could pull it unless market conditions improve, the company still has a big lead in an increasingly competitive sector. This lead is important in light of what’s on the horizon for the surgery center business. With plenty of new money and players entering the sector, it is becoming increasingly fragmented. Symbion, especially if its pockets were filled with, say, $115 million in IPO proceeds, is positioned perfectly to lead the consolidation of these smaller companies. Management already has proven its ability to seal acquisitions. It bought a $50-million-in-revenue, Houston-based company in April, lifting Symbion’s annual revenue to $165 million. Symbion has grown to be a chain of more than 26 centers.

Another plus on the management side is Chief Executive Richard Francis’ earlier experience leading a public offering and managing a public company. As a former senior executive with HealthTrust, he had a major role in the hospital company’s $540 million offering in 1991.

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