It's important who calls the shots at the companies you're invested in. A corporation is merely a legal structure. It alone holds no worth. The accumulation of skill and intellect of the people within it creates value for the ASX shares you hold.
Think for a second… What are some of the greatest companies of our time? Nvidia Corp (NASDAQ: NVDA), Apple Inc (NASDAQ: AAPL), Tesla Inc (NASDAQ: TSLA), and Meta Platforms Inc (NASDAQ: META) might make suitable candidates.
What do they all have in common?
Most are founder-led. Apple was, too, until the late Steve Jobs stepped down due to his illness.
Companies running on 'founder mode'
Earlier this year, Airbnb Inc (NASDAQ: ABNB) co-founder Brian Chesky introduced the concept of 'founder mode' at a Y Combinator event. At its core, founder mode is a distinct way of managing a company, distinctly different to 'manager mode', as Paul Graham of Y Combinator writes.
Founders bring something to the table that professional managers fail to replicate. Chesky boils this down to three innate attributes of a founder:
- "[Founders] are the biological parent". The company is their baby
- "[Founders] have the permission". The authority and knowledge to make radical change where appropriate.
- "You built it, so you know how to rebuild it". A deep understanding of all the moving parts.
Here are three ASX shares you mightn't know are running in founder mode.
Netwealth Group Ltd (ASX: NWL)
Investment platform provider Netwealth was founded in 1999 by Michael Heine. Today, Michael sits on the board as a director, having handed his son Matt Heine the reins.
Since becoming a public company in 2017, Netwealth's net earnings have quintupled to $83.4 million in FY24. The company reported funds under administration of $88 billion in its latest full-year report, rising 25% from the prior year.
The Netwealth share price is up 209% over the past five years, equating to a compound annual growth rate of 25%. For context, the average historical return from the S&P/ASX 200 Index (ASX: XJO) is about 9%.
Life360 Inc (ASX: 360)
A solution borne out of the tragic events of Hurricane Katrina, Chris Hull and Alex Haro founded Life360 in 2008 as a way of using location-sharing to 'create a virtual safety net'.
Both co-founders are still involved in the leadership team and on the board. However, Hull and Haro's financial interest in the company is a modest 2.3% and 1.3% equity stake, respectively. But at $115 million and $63 million, the two are financially aligned with shareholders.
No, the chart below isn't plagued by an error. Life360 has simply smashed the benchmark over the last five years, gaining 540%.
Jumbo Interactive Ltd (ASX: JIN)
The online lottery with a playful elephant logo began 29 years ago when Mike Veverka coded the beginnings of the Jumbo Interactive we know today.
In total, Mr Veverka holds approximately 14% of the company's issued shares. Based on Jumbo's current market capitalisation, this stake is worth more than $116 million. The founder increased his position, buying another ~$100,000 in August after investors demolished the share price post-earnings.
Unlike Life360 and Netwealth, Jumbo Interactive shares have been outpaced by Australia's leading index over the past five years. Not only has the lottery business failed to beat the benchmark, its shares have fallen a considerable 36%.
Why it matters when investing in ASX shares
What do founder-led companies mean for investors like you and me?
Ultimately, most people buy ASX shares with the primary objective of growing their wealth, which is exactly what makes these companies so interesting for investors.
Blackwattle Investment Partners, a Sydney-based investment manager, has constructed what it calls the 'ASX founder index'. The hypothetical group of companies includes names such as Fortescue Ltd (ASX: FMG), WiseTech Global Ltd (ASX: WTC), and ResMed CDI (ASX: RMD).
The firm's founder index returned ~1,200% over the last decade. Meanwhile, the S&P/ASX 300 Index (ASX: XKO) only mustered up a ~200% (including dividends).
We all know past performance doesn't indicate future returns, but that is one hell of a difference in wealth by investing in a founder-focused bucket of ASX shares!
