Do Great Companies Need Great Founders?

In America, great wealth has been created for investors through founder-led companies. Folks like Sam Walton of Wal-Mart, Steve Jobs of Apple Inc, Bill Gates of Microsoft, and even Mark Zuckerberg of Facebook are great examples.

This got me thinking. For investors like us, besides looking at the numbers behind a business, should we also be taking a hard look at the personalities running the firm? More importantly, is having a great founder a big factor in ensuring the success of a company?

On the local front in Singapore, companies with founders who are still in active leadership positions include OSIM International Ltd. (SGX: O23), Raffles Medical Group Ltd. (SGX: R01), Breadtalk Group Limited (SGX: 5DA), Kingsmen Creatives Ltd. (SGX: 5MZ), and Neo Group Ltd (SGX: 5UJ), just to name a few.

Looking at this list gives me a sense that having a great founder is more often than not a plus for company. Companies like Breadtalk Group and Neo Group operate in highly competitive markets with low barriers to entry; the former runs bakeries and restaurants while the latter is involved with food catering and food & beverage retail stores.

Since 2004, Breadtalk has managed to grow its sales by more than 10-fold from S$50.2 million to S$582 million currently. With Neo Group sales had more than doubled from S$23 million in the financial year ended 31 January 2010 to S$57 million currently. Without the vision of their founders, the companies might not be able to achieve the success they enjoy today.

But with all that said, there are also some founder-led companies that have bombed pretty spectacularly. Creative Technology Ltd. (SGX: C76), once the poster child of Singapore’s high-technology industry, was unable to revamp itself after the success of its “Sound Blaster” soundcard ran its course. From a peak in annual sales of S$1.34 billion in 2000, Creative’s revenue has dwindled to S$110 million in the last 12 months.

Moreover, it also does not seem necessary for a founder to be at the helm in order for a company to be great. In Singapore, less than 25% of the Straits Times Index’s (SGX: ^STI) 30 constituents are founder-led.

Foolish Summary

There might never be conclusive evidence about the value of investing in founder-led companies. But regardless, it’s still an interesting question to think about as it could enhance our investing tool-kit.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.