Founder-led tech companies crushed the S&P 500

Over the last two years, technology companies whose founders were also chief executives have significantly outperformed the S&P 500 index.

Simply put, founder-led companies are those in which the founder is the CEO, board member, or has a position with significant influence.

Many investors prefer founder-led companies because they believe founders retain a long-term strategy and are less focused on short-term gains.

Founders run companies with a long-term vision that are more sustainable and bring more value to shareholders.

These founders have a deep commitment to a company, and most of their wealth is tied up in the company, so they will guard against mismanagement.

A Purdue University study of companies in the S&P500 discovered that, on average, founder-led companies were more innovative than their competitors.

Founder-led companies generated 31% more patents, which were more valuable than those from non-founder-led companies.

They were also more willing to adopt new business models and invest in new technology, which served investors’ needs.

These findings raise the question of how founder-led companies performed against the S&P 500 index in recent years.

Daily Investor created an equally weighted portfolio of 12 founder-led companies on the New York Stock Exchange and the Nasdaq Exchange.

The only consideration for a company to be included was whether its current CEO was also one of its founders.

For this comparison, Daily Investor included Tesla, Nvidia, Regeneron Pharmaceuticals, Airbnb, Fortinet, and Dell Technologies.

Other companies included were Block Incorporated, Spotify, Snap Incorporated, Meta, Salesforce, and Blackstone Incorporated.

The portfolio of founder-led companies was tracked from the time the S&P 500 hit its low point after the 2022 crash until today.

If $100 had been invested in the S&P 500, it would have grown to $161.70 today, which translates to an annualised compounded return of 25%.

If $100 had been invested in the founder-led strategy, it would have grown to $275.60 today, which translates to an annualised compounded return of 61%.

This comparison showed that technology companies whose founders were also chief executives have significantly outperformed the S&P 500 index.