Coffee Heir Became a Billionaire With an Early Bet on Invisalign

(Bloomberg) -- When Gordon Gund took control of the fortune his father left to him, the odds were high that he wouldn't do much more than enjoy the spoils of inheritance.

But Gund, 78, is no ordinary heir. He began investing in the 1970s, around the same time he went blind. He bought stakes in the Cleveland Cavaliers basketball team, biotech company Gilead Sciences Inc. and Align Technology Inc., whose clear plastic aligners have been embraced by patients seeking to fix wonky teeth without the metal wires and brackets of traditional braces.

His Align stake, valued at $29 million at the company's 2001 initial public offering, is now worth $1.7 billion, propelling Gund's net worth to at least $2.3 billion, according to the Bloomberg Billionaires Index. The firm's profit topped Wall Street estimates for 10 of the past 11 quarters and its shares have surged 169 percent this year, the best performance by far in the 62-company S&P 500 Health Care Index.

Align's removable devices have been embraced by teenagers and adults. The company announced this year that 5 million patients started using Invisalign, helping boost revenue by 38 percent in the third-quarter from a year earlier.

It's the kind of wealth creation not normally seen among billionaire heirs, who have a combined $1.6 trillion and comprise about one-third of the Bloomberg index, a daily ranking of the world's 500 richest people. Self-made billionaires make up the balance, and their combined $3.6 trillion is more than double the wealth inherited by their peers, and growing at a faster clip.

“In theory, motivation is always going to be greater for founders rather than heirs,” said Dominic Samuelson, chief executive officer of Campden Wealth, a network and education business for generational wealth holders. “It's absolutely not the norm for wealth to be successfully passed between generations.”

Gund and his siblings trace their wealth to their father, George Gund II, who bought the U.S. patent for decaffeinated coffee after it was stripped from its German owner during World War I. He commercialized the process before selling the Kaffee Hag brand to Kellogg Co. in the late 1920s for $10 million, mostly in stock. Today, the Gund family remains one of the cereal maker's biggest shareholders with a 7.5 percent stake, worth about $1.6 billion.

Gund's office in Princeton, New Jersey, is crammed with career mementos, including a signed jersey of LeBron James, the star of Gund's hometown Cavaliers, which increased in value 20-fold during his two decades as an owner.

He began investing almost a half century ago after a four-week stay in a hospital in the former Soviet Union failed to save his eyesight. He returned home determined to make his mark in business, soon becoming one of America's earliest venture investors.

“It was really just Kleiner Perkins and a couple of others at the time,” Gund said, referring to the Silicon Valley venture-capital firm that was founded in 1972.

Retinitis Pigmentosa

Gund suffers from retinitis pigmentosa, a degenerative eye disease, and has been blind since 1970. Helping find a cure for blindness is taking up much of his time. He co-founded the Foundation Fighting Blindness in 1971 and, with his wife Llura and wider family, has contributed more than $200 million for research to cure blinding retinal diseases.

The foundation helped fund research that led to a gene therapy treatment for a type of sight loss developed by Spark Therapeutics Inc., which may be the first of its kind to win approval from the U.S. Food and Drug Administration after gaining unanimous backing last month from an advisory group.

"Once it does the job it was set up to do,” he said of his foundation, “it will go out of business.”

Slam Dunk

A dimly lit office and the occasional taps of his white cane as he walks are among the few indications of his condition. He rarely uses braille, relying instead on a longtime assistant to read investment pitches and news stories. At meetings, he said he can size up people by carefully focusing on their words and nuances of voice to make a judgment on a prospective venture.

The billionaire is also a decent skier in addition to being an accomplished businessman, former National Basketball Association Commissioner David Stern, who sometimes hits the slopes with Gund in Colorado, said in a phone interview.

“Its always daunting,” Stern said, “to have an unsighted person asking you questions about footnotes in annual reports.”

--With assistance from Caroline Chen and Larry Reibstein

To contact the reporter on this story: Tom Metcalf in New York at tmetcalf7@bloomberg.net.

To contact the editors responsible for this story: Robert LaFranco at rlafranco@bloomberg.net, Peter Eichenbaum

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