The ‘American Dream’ is real – and has changed our world

Take the Wright Brothers – they were bicycle salesmen who didn’t even receive high school diplomas, but they made history in 1903 with the first powered manned flight.

The Wrights are part of a long list of curious, ambitious American pioneers who have created huge value. Perhaps this reputation is why investors remain steadfast in their commitment to backing US start-ups.

Recent data from Dealroom found that the US is home to over 1,500 unicorns, far outpacing China in second place with 385, and the UK with 152. And that’s on top of an exceptionally dominant large-cap market. At the end of 2023, 62 of the world’s 100 most valuable listed companies were US-based.

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The US is even more dominant in young companies, many of which are private. It remains the best place to find and invest in exceptional growth companies. The reasons are manifold and, we believe, will persist long into the future.

It has the best academic research institutions in the world, and a strong talent pool supplemented by immigration. The US has a broad and deep venture capital system that supercharges start-ups’ growth by providing funds in addition to technical and managerial advice. It has strong intellectual property protection and a business-friendly environment.

Finally, its culture of optimism, ambition, and willingness to accept failure is unrivalled.

American entrepreneurialism is as strong as ever, and we place significant weight on finding company founders and leaders who exhibit the right blend of characteristics to achieve their long-term missions.

There are direct lineages and striking parallels from some of the original American dreamers to those changing our world today.

The Wright Brothers pioneered aviation more than a century ago. Keller Rinaudo Cliffton, chief executive and co-founder of Zipline, has evolved their innovation to create autonomous drones that deliver everything from medical supplies to Walmart orders. This is just one example. There are more comparisons.

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From Leroy Grumman’s corporation, which made the Apollo missions’ lunar modules in the late 1960s, to Elon Musk’s SpaceX, making the next version for the Artemis missions. And from Robert Noyce, who invented the silicon microchip and co-founded Intel, to Jensen Huang at Nvidia, whose artificial intelligence “superchips” are driving many of today’s software and scientific advances.

Then there’s Wall Street banking titan John Pierpoint Morgan and Visa founder Dee Hock, and John and Patrick Collison, co-founders of digital payments company Stripe. Or venture capitalist Bob Swanson and biochemist Dr Herbert Boyer, co-founders of the groundbreaking biotechnology firm Genentech, and Stéphane Bancel, co-founder and chief executive of mRNA vaccine maker Moderna.

The pursuit of the American Dream built the United States. Today, opportunities abound in all kinds of exciting sectors.
Ginkgo Bioworks is pioneering the use of synthetic biology with its platform to code DNA in a manner similar to software programming.

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Alnylam Pharmaceuticals is tackling debilitating diseases by developing drugs that silence faulty genes. And Roblox is entertaining, connecting and educating millions of people via its online video game platform.

But it’s not easy for individuals to invest in the next generation of Wright Brothers, and it can be expensive. That’s where UK investment trusts, like our US Growth Trust, come in. A cheap S&P 500 index tracker fund will offer broad exposure to the US and some of its big names, including Apple and Microsoft. That can play an important role in people’s portfolios. 

But a tracker won’t give you access to some of the emerging innovative and disruptive growth companies. And it won’t allow you to invest in private growth companies like SpaceX, Zipline and Stripe. Nor will it give you access to Solugen and its fossil fuel-free approach to making chemicals, or Epic Games with its video game Fortnite and 3D graphic developers’ tool, Unreal Engine.

These companies, driven by founders with powerful visions of the future, are staying private for longer than firms did in previous decades. SpaceX is still private at over 20 years old.

The structure of an investment trust has allowed investment managers to blend public and private companies in one portfolio with a low fee. A third of the companies in the US Growth Trust are private. They are already quite large, well-run businesses – but with a huge commercial opportunity ahead of them.

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The potential for active investors to harness the success of US companies, public and private, is great. In just four generations, we’ve gone from having an aircraft barely capable of transporting its pilot across 850ft, to companies making autonomous drones carrying out 10-mile grocery deliveries and self-landing rockets transporting astronauts to a space station orbiting 250 miles above.

By giving flight to bold ideas that can generate huge value over time, the innovative companies coming out of the US today epitomise the American Dream made real.

Ben James is an investment specialist at Baillie Gifford