Skin in the game: Why investing in founder-led companies can pay off

Studies show outperformance of founder-led companies for investors, including one from Credit Suisse and numerous listed on the ASX.

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• Several studies show outperformance of founder-led companies, including one from Credit Suisse

• Reece is a leader in supply of plumbing, waterworks and HVAC-R products in Australia, New Zealand and the US

• Soft-tissue regeneration company Aroa Biosurgery was founded by veterinarian, CEO and managing director Dr Brian Ward

When it comes to investing in equity markets how do you known whether the management team is aligned with interests of shareholders?

Financial planner and head of AJ Financial Planning Alex Jamieson told Stockhead one consideration could be if they are founder-led.

His firm invests on behalf of clients in Australia and US equities with ~$400m assets under management and is a strong supporter of found-led companies.

Several studies have shown outperformance of founder-led companies, including one from Credit Suisse.

The CS Family 1000 report analysed 1000 founder-led companies, finding they outperformed broader markets by 4.5% annually over the long term.

Jamieson said there have been some incredible stories of companies doing well where the founder has "long-term skin in the game".

"Essentially, a founder-led company has that X factor which a CEO that has worked only as an employee doesn’t have," Jamieson said.

"They have built a company from the ground up and most of their legacy wealth is often tied to that business.

"They are usually very driven so probably way more than the average worker and almost to point of being obsessive."

He said founders often have great instincts when it comes to the future growth prospects of their company.

"They have the ability to look around the corner because they’ve been doing the role for so long and are continually innovating and in a lot of cases are the market leader," Jamieson said.

There are global names such as Amazon, founded by Jeff Bezos who has stepped down as CEO but remains chairman and the company's largest shareholder.

There’s also Berkshire Hathaway, originally a textile manufacturer, which technically wasn’t founded by CEO and chairman Warren Buffett. The 'Oracle of Omaha' and his investment group took control of the company in 1965, however, and grew it to  become the global conglomerate it is today.

Another name which readily springs to mind is chip-maker Nvidia, founded in 1993 by president and CEO Jensen Huang  along with Chris Malachowsky and Curtis Priem.

On the ASX there is no shortage of founder-led companies. For instance, health-imaging stock ProMedicus (ASX:PME) was started by Dr Sam Hupert and Anthony Hall, who met at a wine-tasting event back in the early 1980s.

Then there is retail giant Harvey Norman Holdings (ASX:HVN), started by chairman Gerry Harvey and Ian Norman, who met working as door-to-door salesmen selling vacuum cleaners in the early 1960s.

Here are four other ASX companies with compelling founder-led backstories…

Reece (ASX:REH)

Reece has become a global leader in the supply of plumbing, waterworks and HVAC-R products, in Australia, New Zealand and the US.

The company is led by CEO Peter Wilson and as been majority-owned by the Wilson family since the 1970s.  According to its website, the company employs more than 9,000 people and operates more than 800 branches.

"Reece is an amazing business," Jamieson said.

The company said its values come from when Alan Wilson was building his growing plumbing supplies business under the guidance of his father Leslie Wilson.

"Their personal values of caring mateship, teamwork, exceptional customer service and giving new ideas a go worked for Alan, the business and the people who worked with him," Reece noted.

Airtasker (ASX:ART)

Airtasker is focused on building the world’s most trusted marketplace to buy and sell local services, connecting people who need work done with those wanting to work.

The company was co-founded in 2012 by CEO Tim Fung and Jonathan Lui based on the idea that busy people pay others to run their errands and listed on the ASX in 2021.

The idea came after Fung asked a mate with a truck to help him relocate apartments and realised that many tasks related to moving house could be outsourced to other people.

Airtasker generated positive free cash flow of $1.2 million with its goal to continue generating positive cash flow in 2025.

The company also completed $51.6 million in partnerships with leading media players in 2024 for its Australia, US and UK operating companies.

Airtasker said it was leveraging its scalable software platform and using cash generated by its Australian operations to expand into new markets, turbocharged by local media partnerships.

The company’s share price is up ~89% in the past year.

Life360 (ASX:360)

Life 360 is a leading global location safety app that offers a range of features from geolocation sharing, communications, driving safety and more.

The company was founded in 2008 by founder and CEO Chris Hulls. Life 360 listed on the ASX in 2019 with Hulls telling Stockhead executives of the local bourse were sweet-talking global tech companies on the merits of the ASX as a smaller Nasdaq.

"We were very early to market and people didn’t understand the power of location when we first launched," Hulls said.

"In terms of dedicated location and family sharing business we are now very dominant.

The company has seen a strong share price rise – about 600% in the past five years – and is up about 250% over the past year.

Aroa Biosurgery (ASX:ARX)

The New Zealand-headquartered soft-tissue regeneration company was founded in 2008 by veterinarian, CEO and managing director Dr Brian Ward.

With an interest in regenerative medicine, Ward began to research suitable tissue alternatives after observing that New Zealand’s pasture animals were largely free from disease.

ARX’s source material for its growing range of soft-tissue repair products is ovine forestomach matrix (sheep rumen) sourced exclusively from New Zealand, which provides a scaffold – or framework – for new tissue to build.

The forestomach matrix is processed and sterilised to remove DNA and cells, leaving the tissue scaffold called the extracellular matrix (ECM) which has a dense network of vascular channels, a similar structure to human skin and contains more 150 proteins known to be important in the healing process.

Listed on the ASX since 2020, Aroa has regulatory approval in more than 50 countries.

"Taking an idea from concept to commercialisation is incredibly hard work but deeply rewarding," Ward told Stockhead.

"You have to think creatively and just persevere, despite setbacks, keeping your end goal in sight.

"Building a company and developing a technology like we have, that helps to improve people’s lives around the world, is hugely rewarding."

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

At Stockhead, we tell it like it is. While Airtasker and Aroa Biosurgery are Stockhead advertisers, the companies did not sponsor this article.