Tuesday, 28 June 2016

Founder led companies outperforming the rest

We believe that investing with founders gives you an edge in the stockmarket. Behind every stock there is a company and behind every company are people. Why not invest with the best like Jeff Bezos and Mark Zuckerberg? Amazon and Facebook have outperformed for years they seem to be able to take risks and make investments most companies wouldn't be able to. We believe a main reason is the founders long term vision. Thankfully Bain & Company have quantified the out performance of founder led firms, you can see below that they beat the index by 3.1x.


The founder mentality=owner mindset
Bain's study found that when the founder was still CEO the company generated 31% more patents, were more likely to make investments and had a willingness to take risks to better position the company for the future. These companies had a strong sense of purpose for servicing customers this purpose helped employees feel more engaged at work. The founders treated everything like their own money because it was with large stakes in the business and hated bureaucracy. It's hard to have a successful business but it's even harder to keep growing into the future. The long term view of founder led companies meant that overtime they were positioned for change compared to management with shorter time horizons (average S&P500 CEO 9.9 years in 2014) and little equity in the business.

The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.