I had a close friend and business mentor reviewing our business plan the other day and he asked me a direct question: “Why does Equifaira focus so heavily on founder led clients?” It made me think about this very important factor of our business model. Three key reasons immediately came to mind. In my experience:
- Founders care more about their business than non-founders;
- Founders are more creative and innovative, and;
- Founder led business are more likely to be successful.
He nodded and moved on to the next question. Let’s breakdown those key reasons here in more detail.
An article in the Harvard Business Review entitled “Founder-Led Companies Outperform the Rest — Here’s Why” which cites a recent study by three professors at Purdue’s Krannert School of Management is part of a growing mountain of evidence of the superior and more lasting performance of companies where the founder still plays a significant role as CEO, chairman, board member, or owner or adviser. Specifically, the study found that S&P 500 companies where the founder is still CEO are more innovative, generate 31% more patents, create patents that are more valuable, and are more likely to make bold investments to renew and adapt the business model — demonstrating a willingness to take risk to invent the future.
We see “the founder’s mentality” especially prevalent in private companies that we work with. It isn’t a very a bold statement that: “founders care more about their businesses than non-founders”. It is obvious. Our experience is that founders are obsessed with their businesses. They have a special purpose for the business and are driven to achieve their vision creating a “gravity well” that brings the talent to drive the business.
These are the attributes of the founders that we look for and work with. We find that because they are owners, they typically work harder and smarter. They make decisions and take concrete actions to move the company forward, taking ownership over results and costs. The best founders are in service to the company and its shareholders. Because in a very real sense it’s true, they treat every dollar like it is their own making sure that every dollar is spent wisely adding maximum value to the business.
Leading by example and this combination of a special purchase, they own the results and lead the charge generating fanatical followers within employees and other stakeholders of the company and even outside. This over the top engagement is infectious across the business and we believe generates better problem solving, a higher level of caring about the products and services, superior customer experience and accountability.
The second factor is that we have experienced that founders are often more creative and innovative and founder led companies are more likely to exhibit these characteristics. They are always on the lookout for opportunities to convert the wants and needs of their customers, to value the company can deliver. Connecting all the dots between product and or service development, to marketing, to sales and delivery to bring innovations to market is a critical result.
Founders care deeply about what’s happening on the frontline. They understand that’s where the business succeeds or fails. They make heroes of frontline personnel, empowering them in ways that in turn propagates the sense of ownership over the results.
The third element is the founder led businesses are more likely to be successful. A very good reason on its own for us to lean into these companies. Combining the above two elements and adding in the attitude that success somewhere else could never compensate for failure here, founders are less likely to quit when the going gets tough. We are big believers in the adage, she who doesn’t quit, wins!
In summary, attributes we have observed of founders leading successful companies include a relentless persistence to fulfill their vision. They have the owner mentality and personal investment “skin in the game” and money on the line. They are creative and innovative with a focus on frontline execution. These attributes inspire employees and stakeholders that deliver results all culminating in a better chance of success.