What Makes Founder-Led Companies So Special, And Why Are They Important To Investors?, With Baillie Gifford

What are founder-led companies?

Founder-led companies are businesses in which the original founder of the company remains deeply involved in its leadership. This is noteworthy as companies grow and become successful – especially those that end up being household names.

These founders will often serve as chair or CEO – or hold some other influential position in the company. Meta, Netflix, SpaceX, Amazon, Shopify, and Spotify are all examples of well-known founder-led companies.

Challenges of investing in founder-led companies

While founder-led companies offer many advantages, they’re not without their downsides.

A key risk in founder-led companies is their reliance on a single individual. While a founder’s leadership can drive innovation and long-term vision, it also introduces vulnerabilities. Succession risk is a major concern—if the founder steps down, the company may face disruption, and their successor may lack the same strategic direction. Decision-making can also become overly centralized, with founders resisting outside input, leading to insular leadership and overlooked critical feedback.

Additionally, some founders struggle with scaling, as managing a large, complex organization requires different skills than running a startup. While these risks are significant, many founder-led companies mitigate them by establishing succession plans, strong leadership teams, and more structured decision-making as they grow.

Benefits of investing in founder-led companies

Despite these challenges, founder-led companies have a number of advantages that make them particularly appealing to long-term investors.

Long-term vision and innovation. Founders often prioritize the long-term success of their companies over short-term profitability, driven by a relentless pursuit of solving a problem and an obsession with progress. Their commitment to the business’s overarching mission lets them make bold investments in transformative projects – even when those decisions seem counterintuitive in the moment.

Launching an unprofitable subscription model or investing in new unproven technologies, for example, might lack a clear financial incentive and strain resources in the short term. But these kinds of plays often pay off in lasting competitive advantages.

Alignment with shareholders. An important element that sets founder-led companies apart is the founder’s personal investment – both financial and emotional – in the business’s success. Founders often have significant stakes in the company, so their goals are often aligned with those of shareholders.

Failing forward and tenacity. One defining trait of founder-led companies is their general ability to view “failure” as a stepping stone rather than a setback. Unlike state-owned enterprises or other corporations that face intense scrutiny over missteps, founder-led companies often have the flexibility to experiment, iterate, and learn from their mistakes.

Adaptability and resilience. Founder-led companies are highly adaptable, able to pivot quickly in response to challenges. Unlike bureaucratic corporations, they can swiftly adjust business models, manage capital constraints, and react to consumer shifts—critical during crises like COVID-19. This agility helps them navigate uncertainty more effectively.

Case studies

Founder-led companies have a strong track record of delivering exceptional results for investors, often by making bold, long-term decisions that reshape industries. Here are four notable examples.

Meta (Mark Zuckerberg) – Mark Zuckerberg’s technical expertise and decisive leadership have been central to Meta’s success. From coding Facebook in his dorm room to acquiring Instagram and WhatsApp before competitors grasped their potential, he has consistently spotted opportunities early and moved fast.

His bold AI investments highlight this strength. In 2022, he doubled Meta’s order of Nvidia’s high-end AI chips—not just to improve video recommendations, but anticipating broader AI applications before they were obvious. This gave Meta a critical first-mover advantage, enabling the rapid development of its large language model, Llama, and unlocking new revenue streams.

Nvidia (Jensen Huang) – Jensen Huang has led Nvidia for over 30 years, guiding it from a small startup to one of the world’s most valuable companies. Early on, the company nearly failed when Microsoft made an industry-wide change that rendered Nvidia’s early work obsolete. Rather than giving up, Huang scrapped his plans, reworked Nvidia’s entire approach, and found a way to bring new products to market faster than competitors—a strategy that set the company up for long-term success.

Huang’s biggest breakthrough came when he invested in AI technology long before the world saw its potential. He poured resources into a software platform that allowed Nvidia’s chips to power AI research—despite skepticism from others. Years later, this decision made Nvidia the go-to provider for AI advancements, from self-driving cars to drug discovery.

Zipline (Keller Rinaudo Cliffton) – A private company revolutionizing healthcare logistics, Zipline uses autonomous drones to deliver medical supplies to remote and underserved areas. Originally an ambitious experiment in Rwanda, Zipline has grown into a global operation, partnering with governments and organizations to expand life-saving deliveries across multiple continents. Rinaudo Cliffton’s vision of applying robotics to real-world challenges has created a highly scalable business with the potential to transform healthcare access worldwide.

Nubank (David Vélez) –David Vélez founded Nubank in 2013 after experiencing firsthand the frustration of Brazil’s traditional banking system—long queues, high fees, and limited access for lower-income customers. Determined to challenge the dominance of Brazil’s big banks, Vélez built Nubank as a fully digital, low-cost alternative, starting with a no-fee credit card. Despite not being a native Portuguese speaker or having a background in retail banking or coding, Vélez fought through regulatory hurdles and skepticism to create a bank that now serves over 100 million customers across Latin America with one of the highest customer satisfaction scores in the industry. Vélez’s persistence clarity of vision, and commitment to long-term growth have been central to Nubank’s success, proving that a customer-focused, founder-led approach can take on even the biggest financial institutions.

These case studies illustrate how founders’ long-term focus, adaptability, and innovative thinking have driven exceptional growth – even at the cost of short-term volatility.

What to consider when investing in founder-led companies

If you’re thinking about investing in founder-led companies, here are some practical tips to help you make the best decisions possible.

Think long-term. These companies are often on transformative journeys – and transformation takes time. Short-term volatility along the way is normal, and focusing on their long-term potential can really pay off.

Assess leadership. A founder’s previous track record of innovation, adaptability, and resilience can indicate their ability to steer the company through challenges.

Understand the risks. Founders can be ambitious – and sometimes resistant to outside advice. Diversification is key to managing potential missteps.

Do your research. When you invest in founder-led companies, you’re betting on their long-term vision. Sometimes this means holding on during periods of uncertainty. Trust your research and conviction – and remember that some of the best-performing companies in history faced significant drawdowns before delivering exceptional returns.

About Scottish Mortgage Investment Trust

Scottish Mortgage Investment Trust is a global growth fund that invests in transformative companies led by visionary founders. With a long-term mindset, it focuses on businesses reshaping industries, from AI and e-commerce to healthcare and clean energy. Many of its holdings – like Meta, Nvidia, and Zipline – are founder-led, benefiting from strong leadership, bold decision-making, and a relentless drive for innovation. By backing these entrepreneurial pioneers, Scottish Mortgage seeks to capture outsized returns from businesses that redefine the future. You can find out more about the trust here.

*Your capital is at risk. The Scottish Mortgage Investment Trust is managed by Baillie Gifford & Co Limited. Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA. A Key Information Document is available by visiting scottishmortgage.com

This guide was produced in partnership with Baillie Gifford.* Learn more about The Scottish Mortgage Investment Trust here.