Q: Why Focus on Founder Owned Businesses?

by Sean Cantwell

A: At Volition Capital, we’ve built a firm on the belief that founder-owned businesses possess unique traits that ultimately lead to successful outcomes.  This belief is based on our long history of working with founders who display extraordinary dedication and resourcefulness in order to achieve great results.

Below is a list of 5 reasons why we choose to partner with founders:

Commitment.  We believe there is a commitment and passion that is unique to founders.  Founders were there when the light bulb went off .  They took the leap to start the company from nothing more than an idea. They breathed life and capital into the company by any means possible.  Founders are the ones who will put the company on their back if necessary and carry it forward.  The commitment of the founder to success of their business is unparalleled.

Resourcefulness.  Founder ownership implies that minimal outside capital has been raised to date.  In order to achieve Volition’s minimum revenue target of $5 million without raising outside capital, the company must have a business model that works and a management team that knows how to efficiently invest money in order to generate a return.  These characteristics provide us with a high level of confidence in management and a belief that additional capital will be spent wisely and lead the company to even greater heights.

Meaningful Ownership.  We believe that management teams, not investors, are responsible for building great companies and driving shareholder value.  As such, we like to invest in businesses where founders retain a meaningful ownership stake in the business post-investment.  We are more than comfortable providing founders with liquidity as part of a transaction but in all cases we like management to retain meaningful ownership.  We want management to be properly motivated and ultimately rewarded for all their hard work and dedication and believe the best way to accomplish this is through meaningful equity ownership.

Alignment.  Companies that raise large sums of capital from multiple investors over multiple rounds of financing sometimes result in conflicting interests among shareholders.  This dynamic can create scenarios where certain outcomes are good for some shareholders but not all shareholders.  We like the dynamic in founder-owned businesses where simple ownership structures leads to 100% alignment among all shareholders to maximize value.

Opportunity to Add Value.  Founder-owned businesses that achieve $5 million in revenue without the aid of outside capital have displayed the ability to achieve a lot with very little.  These companies have achieved results without large sums of capital and in many cases without a formal board of directors.  We believe these businesses can benefit greatly from our network and our expertise in building strong boards, entering new geographies, evaluating strategies, and preparing for IPO or merger.  We focus on more than just investing and believe we can provide great value to our portfolio companies.  We call this “Capital +”.