Facing uncertain times, discussions have turned to questions of strategy and some even to questions of leadership and fitness to serve. Are first-time founders too “green” to navigate these choppy waters?
At Monk’s Hill Ventures, much of our recent discussion has centered around how to best support our portfolio founders. Despite the current headwinds, we are confident founders can thrive. Now is not the time to withdraw, but to double down and continue deploying both new and follow-on investments.
As an entrepreneurs backing entrepreneurs fund, we have experienced multiple boom and bust cycles across markets over decades. Before sounding the doomsday bell, we thought it would be timely to revisit the fundamentals. Why are technology companies important? Why should we back founders?
To answer these questions as well as gain some inspiration, we took a look at the most valuable companies in the world1. Who are their founders? What common traits do these founders and businesses share? What are the learnings that we can extrapolate from the data?
This piece aims to share our observations from this research, some of which may not have been commonly noted. In the research process, we discovered that we had divergent views on what was surprising, and these differences themselves were noteworthy. We also realized that these observations may not be intuitive, but contain fundamental truths that shape our thinking.
While these observations are based on global companies, they have resounding applicability to our home markets in Southeast Asia.
Here they are below:
Eight of the ten most valuable companies got there with first-time founders
With the exception of Tesla and Visa, the 10 most valuable companies in the world are all founded by and largely still led by first-time founders2. This data point stands in stark contrast to the off-cited statistic that 82% of first-time founders fail; first-time founders can, and do, get it right3. And when they get it right, they get it right in a big way.
Founders are value drivers. Founder-led companies are the most valuable companies in the world. As a team of former founders supporting founders, we believe that this is a direct causation: founders generate outsize value. As a venture capital firm, the onus is on us to ensure that each founder has the right support, mentorship, and tools needed to succeed.
Note: Apple (Steve Jobs and Steve Wozniack), Microsoft (Bill Gates and Paul Allen), and Alphabet (Sergey Brin and Larry Page) no longer have their founders at the helm, but notably entered the top 10 ranking during their tenures. Morris Chang, the founder of Taiwan Semiconductor, or TSMC, stepped down in June 2018 when the company was ranked 23rd; TSMC entered the top 10 in 2020. Notably, in 2018 two other first-time founder-led technology companies were in the top 10: Tencent and Alibaba.
Eight of the ten most valuable companies in the world are technology companies
At first blush, this seems quite obvious. Most have heard of the ‘FAANG' companies whose outsize performance has driven the majority of the S&P 500’s returns in the past few years. Yet it is pertinent to underscore the value of technology companies at a moment when skepticism is at an all-time high.
When examining higher P/E multiples for technology companies compared to other industries, we believe they reflect the fact that technology companies have far greater room to innovate and continue generating value. Unlike an asset-heavy or operations-intensive business, technology companies can achieve virality in a way that traditional businesses simply cannot. There is, in short, far more room to grow.
The only companies to reach the top 50 in the past two decades are technology companies
Much criticism, sometimes rightly so, is levied at the intense pressure on venture-backed businesses to scale in short timeframes. Based on analysis of the top 50 companies, the only ones to have done so in the past two decades are technology companies. In comparison, across the vast majority of industries, it takes a long, long time to build valuable businesses.
Outside of accelerated tech timelines, valuable businesses are created in many ways. Many ‘new’ companies are actually corporate spin-outs from other large companies or formed through strategic M&A. The youngest non-technology company not created through a feat of corporate financial engineering and/or is not state-owned is Home Depot, which was founded in 1978. This leads to our next observation that…
Home Depot is a bigger company than Chevron, Shell, Merck, Coca-Cola, Alibaba, Toyota, McDonalds, and several other companies
Home Depot, despite only operating in North America, is more valuable than numerous big-name multinational conglomerates. Business executives are often indoctrinated to scour expansion opportunities and hunt new markets for growth. Yet among the most valuable companies in the world, Home Depot stands alone in being a single-market business. In focusing just on North America, Home Depot is able to become one of the most valuable companies in the world4.
The takeaway is that the size of the market matters. In Southeast Asia, for example, the challenge for SaaS and other tech verticals is a limited willingness to pay among the (already underdeveloped) potential customer base. The reality in Southeast Asia is that a single market is not large enough yet for a technology company to truly achieve venture-backable returns. At Monk’s Hill, we don’t look at single-market companies.
One company among the top 50 has a female founder
From the data set, we identified only one female founder: Sandy Lerner, co-founder of Cisco Systems. After graduating with a Master’s degree in computer science from Stanford in 1981, Sandy co-founded Cisco in 1984 alongside her then-husband Leonard Bosack.
We are not wholly unsurprised by the underrepresentation of female founders in our data. We have several hypotheses for why, some of which can—and most cannot—be evaluated quantitatively. An obvious consideration is the socioeconomic context: the average age of the 50 most valuable companies in the world is 70 years old, implying they were, on average, founded in 1953. Opportunities in that era, suffice to say, were vastly different for women and men. Women represented 32% of all bachelor’s and 31.3% of all master’s degree recipients in the US compared to 57% and 61% respectively in 2019.5 Only one-third of working age women were in the workforce compared to 77.8% in 2023.6 Furthermore, women’s wages were only 44% that of men’s.7
In short, we believe that Sandy Lerner may currently be the exception, but we hope that female founders like her will become the norm. Given the long time horizon required to build successful enterprises and the relatively recent history of greater gender equality in access to educational and professional opportunities, one company out of 50 is disappointing and could be more inspiring, but not surprising.
Conclusion
When Monk’s Hill Ventures was founded in 2013, one of our core beliefs was that the vast majority of value is created by entrepreneurs. This belief has not wavered. As Southeast Asia’s economies continue to develop and traditional structures are uprooted, entrepreneurs represent untapped value on an unprecedented scale.
By looking at historical data, while “past performance does not guarantee future success,” it does provide, in the sharpest relief possible, clarity on indicators of success. And what we see is this: we need to support first-time founders—especially women—more than ever. The benefits of backing the next generation of entrepreneurs will take time to materialize, but the value that they generate will be extraordinary.
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1 For the purposes of our research, we defined top companies ranked by market capitalization globally. First-time founders are individuals who had never founded a company before, which can include seasoned executives (for example Morris Chang from TSMC).
2 Excludes Saudi Aramco, as ~98% of its shares are still directly or indirectly controlled by the Saudi government.
3 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=933932
4 92% of Home Depot’s sales revenue are generated in the U.S.
5 https://www.brookings.edu/articles/the-male-college-crisis-is-not-just-in-enrollment-but-completion/
6 https://www.dol.gov/newsroom/releases/osec/osec20230707
7 https://fraser.stlouisfed.org/files/docs/publications/women/b0249_dolwb_1953.pdf
About the Author
Caroline Chen is the 2023 Fellow at Monk’s Hill Ventures and an incoming MBA candidate at the Stanford University Graduate School of Business. Caroline is a former fintech operator and is passionate about the role of technology in driving inclusion and sustainable development in emerging markets.
Edited by Jayeeta Mazumder
