20VC: The 10 Question Framework a $217BN Manager Uses to Make Investment Decisions | Lessons from Turning Down Stripe, Coinbase and Losing Money on Northvault | The Bull Case for Bytedance | How Anduril Could Be a $200BN Company with Peter Singlehurst

Summary

Podcast Summary: The Twenty Minute VC (20VC) Episode with Peter Singlehurst

Release Date: March 19, 2025

In this insightful episode of The Twenty Minute VC (20VC), host Harry Stebbings engages in a deep conversation with Peter Singlehurst, Head of Private Companies at Baillie Gifford, a renowned investment management firm managing a staggering $217 billion. Peter shares his expertise on investment frameworks, lessons learned from notable investment decisions, and his bullish perspectives on companies like ByteDance and Anduril. This summary captures the essence of their discussion, highlighting key points, notable quotes, and valuable insights.

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1. Introduction to Peter Singlehurst and Baillie Gifford

Peter Singlehurst introduces the evolving landscape of private company investments, emphasizing the trend of companies staying private longer to build better businesses. He mentions the rise of large company-facilitated secondary rounds as a new feature in the investment ecosystem.

Peter Singlehurst [00:00]: "I think what people realize today is that you can build a better business by staying private for longer."

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2. Peter's Journey into Private Company Investing

Harry delves into Peter's transition from public market strategies to private company investing. Peter recounts his initiation into private investments within Baillie Gifford around 2014, taking on responsibilities that were previously managed by senior partners.

Peter Singlehurst [05:04]: "I just put my hand up and I said, well, I'll do it. That's sort of how it all started."

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3. Baillie Gifford's Investment Philosophy: The 10 Question Framework

Peter elucidates Baillie Gifford's 10 Question Framework, a comprehensive approach to evaluating investment opportunities. This framework encompasses:

• Growth Opportunity: Assessing potential over 5 to 10 years.
• Enduring Determinants of Success: Including product quality, competitive advantage, and organizational culture.
• Financial Analysis: Evaluating return on equity and scalability.
• Valuation Methodologies: Aligning with public market strategies to identify intrinsic value.

Peter Singlehurst [20:13]: "We call it our 10 questions framework. The questions basically break down into four areas."

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4. Lessons from Missed and Incurred Investments

Peter candidly discusses Baillie Gifford's investment experiences, highlighting both setbacks and the lessons they've imparted.

• Intarsia: A biotech company that failed due to FDA rejection. Peter views this as a known risk that manifested.

  Peter Singlehurst [07:40]: "They had their therapy rejected by the FDA and it went out of business."

• Northvolt: A significant investment loss attributed to overestimation of the team's execution capabilities.

  Peter Singlehurst [09:20]: "We were too enamored with the idea of a business like Northvolt needing to exist... but the team's ability to execute was lacking."

Peter reflects on the importance of distinguishing between uncertainties inherent in investing and genuine mistakes stemming from flawed analysis.

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5. Assessing Investment Risks and Scalability

The discussion delves into Baillie Gifford's approach to risk assessment, focusing on business model quality and scalability rather than product-market fit, given their focus on growth-stage companies.

Peter Singlehurst [10:21]: "We're much more focused today and have really been for the last kind of five or six years on companies that we define as being true growth stage companies."

He cites Wise as a prime example of a successful investment that exemplifies their focus on scalable business models leading to high returns on equity.

Peter Singlehurst [12:26]: "Wise was a little bit smaller when we first invested. It's now a multi-billion dollar revenue business."

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6. Private vs. Public Company Dynamics

Peter discusses the strategic decision-making between keeping companies private longer versus going public. He argues that remaining private allows companies to maintain focus without the pressures of public markets, although he acknowledges situations where going public is beneficial.

Peter Singlehurst [36:28]: "Focus. It's really hard to be a public company... Companies realize they can have greater focus by remaining private for longer."

He also touches upon the challenges of liquidity in a world where companies remain private, suggesting that large secondary rounds may become more prevalent.

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7. Bullish Perspective on ByteDance

Peter presents a strong bullish case for ByteDance, highlighting its robust revenue and profit generation in China. He emphasizes that their investment is predicated on ByteDance's Chinese operations, which remain highly profitable despite geopolitical challenges.

Peter Singlehurst [33:42]: "ByteDance is the most astonishing revenue and profit generation company in China. The users, the profit that they make in China is just off the charts."

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8. Prospects of Anduril Becoming a $200BN Company

Discussing Anduril, a defense technology firm, Peter outlines the company's potential to reach a $200 billion valuation. He compares Anduril's trajectory to that of Tesla and SpaceX, focusing on their innovative solutions and large, stable markets.

Peter Singlehurst [41:23]: "Anduril sort of conjured in my mind was a pattern that we'd seen in two places before... Tesla and SpaceX."

He underscores the importance of a strong management team and clear competitive advantages in sustaining long-term growth.

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9. Investment Decision-Making Process at Baillie Gifford

Peter provides an inside look into Baillie Gifford's rigorous investment process, highlighting the extensive vetting that each potential investment undergoes. The process involves:

• Initial Screening: Meeting with over 1,000 companies and reviewing 600 private funds.
• Diligence Process: Conducting thorough analyses, culminating in detailed 10Q reports.
• Investment Committee: A small group of four members deliberates on final decisions, ensuring focused and strategic investments.

Peter Singlehurst [47:28]: "We met a thousand companies, we looked at 600 private financing rounds, we did 65 first cuts... and we made 11 new investments."

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10. Future Outlook and Optimism

Concluding the episode, Peter expresses optimism about the current conditions for growth-stage investing. He highlights the abundance of venture-backed companies entering the growth stage and the enhanced human capital available to scale these businesses effectively.

Peter Singlehurst [65:28]: "We're in this period of capital where... lots of venture stuff being tried, lots of experiments, human capital and the right quantity of financial capital just makes me really excited."

He also addresses the potential fate of mid-sized companies that may not fit into traditional growth or private equity models, positioning Bending Spoons as a solution to revitalize such businesses.

Peter Singlehurst [66:49]: "This is the opportunity for Bending Spoons... they can take those companies and they can improve the products and they can make them profitable."

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11. Final Remarks and Reflections

Harry and Peter wrap up the discussion with reflections on the investment landscape, the enduring value of founder-led companies, and the cultural strengths of Baillie Gifford as an investment firm.

Peter Singlehurst [58:33]: "You can be a generalist and that you can be a globalist in how you invest and that you can still add real value for your clients by being specialist in growth equity investing."

He also shares personal insights, such as how fatherhood has deepened his sense of responsibility, subtly influencing his investment perspectives.

Peter Singlehurst [63:15]: "When you become a parent... everything in life just becomes somewhat accentuated."

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Notable Quotes with Timestamps

• Peter Singlehurst [00:00]: "I think what people realize today is that you can build a better business by staying private for longer."
• Peter Singlehurst [05:04]: "I just put my hand up and I said, well, I'll do it. That's sort of how it all started."
• Peter Singlehurst [07:40]: "They had their therapy rejected by the FDA and it went out of business."
• Peter Singlehurst [12:26]: "Wise was a little bit smaller when we first invested. It's now a multi-billion dollar revenue business."
• Peter Singlehurst [20:13]: "We call it our 10 questions framework. The questions basically break down into four areas."
• Peter Singlehurst [33:42]: "ByteDance is the most astonishing revenue and profit generation company in China."
• Peter Singlehurst [41:23]: "Anduril sort of conjured in my mind was a pattern that we'd seen in two places before... Tesla and SpaceX."
• Peter Singlehurst [58:33]: "You can be a generalist and that you can be a globalist in how you invest..."
• Peter Singlehurst [63:15]: "When you become a parent... everything in life just becomes somewhat accentuated."

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Conclusion

In this episode, Peter Singlehurst offers a masterclass in growth-stage investing, leveraging his extensive experience at Baillie Gifford to provide listeners with valuable insights into effective investment strategies, risk management, and the evolving dynamics of private and public markets. His candid reflections on past investment decisions underscore the importance of adaptability and continuous learning in the venture capital landscape.

For those interested in delving deeper into Peter's strategies and Baillie Gifford's investment philosophy, listening to the full episode on 20VC's YouTube Channel is highly recommended.

Transcript

[Peter Singlehurst]

I think what people realize today is that you can build a better business by staying private for longer. You're starting to see the evolution of these very large company facilitated secondary rounds. I can see those starting to become more of a feature. There's lots of investments we've made that have been painful experiences. But ironically I would say not all of our bad investments are necessarily mistakes. We haven't taken the plunge into any of the big AI LLM companies we start, still are trying to define what we think competitive advantage will look like at the large language model level.

[Harry Stebbings]

This is 20 VC with me, Harry Stebbings.

[Unknown]

Now.

[Harry Stebbings]

I am excited for the show today. If you hadn't guessed it already, I'm a bit of an investing nerd and one of the best, most thoughtful, most long term investors is Baillie Gifford. They just do things differently. They don't care what others think and they manage 217 billion. Yes, 217 billion. Today I'm so excited to welcome Peter Singlehurst, an old friend of the show. He's head of private companies at Baillie Gifford where he's worked on deals like Epic Games, Bending Spoons, anduril, Grammarly, Airbnb and Affirm to name a few. But before we dive in today, here are two fun facts about our newest brand sponsor, Kajabi. First, their customers just crossed a collective $8 billion in total revenue. Wow. Second, Kajabi's users keep 100% of their earnings with the average Kajabi creator bringing in over $30,000. In case you didn't know, Kajabi is the leading creator commerce platform with an all in one suite of tools including websites, email marketing, digital products, payment processing and analytics for as low as $69 per month. Whether you are looking to build a private community, write a paid newsletter or launch a course, Kajabi is the only platform that will enable you to build and grow your online business without taking a cut of your revenue. 20 VC listeners can try Kajabi for free for 30 days by going to kajabi.com 20v kajabi.com K A J A B I.com 20VC and after building your online empire with Kajabi, it's time to scale your global team with remote seamless hiring solutions. So every business is a global business in 2025. But how do you do payroll for your global business and team and comply with international labor laws? Well, remote handles payroll, benefits, taxes, stock options and compliance to help companies of all sizes pay and manage full time and contract workers all over the world. No matter where your team all works. Remote's Global Employment Solutions keep your team, your finances and your intellectual property secure. Remote never charges hidden fees, just best in class Global Employment Solutions for a low flat rate. The world's top Remote companies love remote. GitLab, the world's largest all remote organization, trusts Remote to run their global team. Remote is funded by Index Ventures, Sequoia Capital, and the host of the greatest podcast ever, Harry Stebbings and 20VC. Ready to learn more? Head over to remote.com 20VC that's 20VC and begin hiring within minutes. Enjoy 10% off your first three months by using the promo code 20VC at checkout. And when it comes to scaling your business, having the right infrastructure is just as crucial as building the right team. That's why AWS is the perfect partner for startups and why they're proud to sponsor this Week's episode of 20 VC. The AWS startups team comprises former founders and CTOs, venture lists, angel investors and mentors ready to help you prove what's possible. Since 2013, AWS has supported over 280,000 startups across the globe and provided $7 billion in credits through the AWS Activate program. Big Ideas Feel at home on AWS and with access to cutting edge technologies like generative AI, you can quickly turn those ideas into marketable products. Want your own AI powered assistant? Try Amazon Q. Want to build your own AI products privately? Customize leading foundation models on AMAZ Bedrock? Want to reduce the cost of AI workloads? AWS Trainium is the silicon you're looking for. Whatever your ambitions, you've already had the idea. Now prove it's possible on AWS. Visit aws.Amazon.com startups to get started.

[Unknown]

You have now arrived at your destination. Peter we last did this on Zoom. I'm so pleased that we get to do this in person.

[Harry Stebbings]

Thank you so much for joining me today.

[Peter Singlehurst]

It's a pleasure, Harry. Really nice to see you again.

[Harry Stebbings]

It's so good to have you here. But listen, I actually scrapped the like.

[Unknown]

How did you get into venture question.

[Harry Stebbings]

Because it was bluntly very obvious for a lot of people who went to.

[Unknown]

Stanford and studied CS that they would then become what they did. But we were just chatting now and you said about how you got into private company investing and it was so cool I wanted to ask it on the show. So how did you get into private company investing at Baillie Gifford? What was that moment?

[Peter Singlehurst]

The specific moment was I was on a public market strategy. It's called the long term Global Growth strategy. It's a $50 billion public market strategy. And this was in 2000 2014. I was working with three very senior investment partners within the firm. James Anderson, Mark Urquhart, Tom Slater. And we were starting to see these private companies of real scale, the sorts of companies that we'd always invested in. And back then it was like businesses like Airbnb and Spotify and Tom and Mark and James, they kind of had their hands full looking after these tens of billions of dollars of our clients capital. And so we were sat in a room and James said, well, who's going to do this? Who's going to look at these private companies? And I just put my hand up and I said, well, I'll do it. That's sort of how it all started.

[Unknown]

Were you nervous?

[Peter Singlehurst]

No, maybe I should have been. If I'd known what I was letting myself in for, I would have been nervous.

[Unknown]

What would you advise yourself now, knowing all that you do, Telling that younger self, entering the position you were.

[Peter Singlehurst]

That's a really hard question, because the natural tendency there is to give advice that would help you avoid all the mistakes that you made. But the mistakes that you made are the things that have helped you learn. Right. So I'm not sure I would give myself specific advice about the craft of investing, because I think that's something you can only learn by experience. I think what I would say to myself is, when it comes to thinking about how you can bring this capability in, this offering to more of our clients, I would say to myself, be a little bit less purist. When we first started doing this, we were doing it from within these permanent capital vehicles, and we continue to do that. And it's amazing for being super long term. But the result of that was that we had a lot of our clients who wanted to be investing with us in the kinds of companies that we were investing in, these kind of high growth, often quite large private companies, but they just couldn't do these permanent capital vehicles. And they were sort of saying, look, can you just do a more traditional fund structure? And I wish we'd been aware of some of those traits. Trade offs earlier on.

[Unknown]

Why were you not?

[Peter Singlehurst]

I think often when you're investing, the things that give you some kind of edge or capability are the things that are different from how other people go about things. And there are some differences that you can have that are core to those advantages. And then sometimes there are differences that are not actually core to those advantages and sometimes it's quite difficult to distinguish them. So I mean, Just to give you an example, I mean, we're a little bit different in terms of how we recruit people, the kinds of people we bring into the organisation. We're a bit different in terms of where we're based. We're based in Edinburgh, in Scotland. These are the things I think are really important. I thought that those permanent capital vehicles were also something that was really important, and in some senses they are, but I think I probably overestimated how important they were as a difference. And actually, as it turns out, I think we can do a perfectly good job for our clients in permanent capital vehicles and also in more traditional structures.

[Unknown]

You mentioned there the learnings from mistakes. And it's really the craft of investing that is learned through mistakes. When you think back about the most painful mistake that caused the biggest learning is that one that comes to mind.

[Peter Singlehurst]

There's lots of investments we've made that have been painful experiences. But ironically, I would say not all of our bad investments are necessarily mistakes. So when you invest, you are trying to predict what's going to happen in the future or estimate the probabilities of what will happen in the future. Sometimes you take on uncertainty when you invest and the negative outcomes go against you. That's part and parcel of investing. There are then other kinds of investments where they are mistakes because there's something you should have seen, there's something that you didn't weigh weight appropriately and you lose money, and those are mistakes. So I'll give you two examples of both camps. The first company we invested in that went bankrupt was a company called Intarsia. It was actually a biotech company that was developing a GLP one. I mean, imagine if that company had managed to stay solvent. It would have been an astonishing investment. But it didn't. They had their therapy rejected by the FDA and it went out of business. That was a kind of known uncertainty and that risk manifested and it went against us and we lost money for our clients. Still very painful, but I think kind of part of the business of investing. Another example that I would put in the second camp, where there are things that we got wrong in our analysis, would be quite topical today. Northvolt. Northvolt's been a very bad investment for us. What was the mistake there? I think we were too enamored with the idea of a business like Northvolt needing to exist for all the reasons of energy sovereignty in Europe. But what we got wrong was the team's ability to execute. They didn't execute properly and they didn't execute well. And that's why that didn't work. And that's something I kick myself for because I think that is.

[Unknown]

Were there signs?

[Peter Singlehurst]

Look, there's always signs with hindsight. I think there were signs that we started to see over the course of our investment. And when we started to see those signs, we pulled back on providing additional capital to the company.

[Unknown]

That was my subsequent question, which is there's kind of forgivable mistakes, which is your first evaluation. The really painful ones, I find, is when you think more and more and cannot detach your emotions from that investment. Did you continuously double down?

[Peter Singlehurst]

We did make additional investments beyond our first investment, but there were times after that where we all asked for more capital and for reasons around the execution, but also for reasons around the structure of the financing rounds themselves that we believed were going to lead to real misalignment within the cap table. We passed on putting additional capital in.

[Unknown]

You mentioned Intarsia. There. There's a lot of risk baked into that. There's market timing risk, there's regulatory risk with FDA approvals. That's a lot of risks that a lot of venture investors won't take, period. How do you think about the risks that you're willing to take on entering an investment versus the risks that you're not willing to take?

[Peter Singlehurst]

I think, as ever, when you're investing, you try over time to narrow down your area of focus and lean into those areas where you believe you have greater competitive advantage. Today, we probably wouldn't invest in a company like Intarsia. We're much more focused today and have really been for the last kind of five or six years on companies that we define as being true growth stage companies. So where we're not taking product risk, we're taking business model quality and scalability risk. And so what you've seen in our portfolios over the years is a continued refinement and a continued narrowing and focus of the kinds of companies that we invest in, because those are the kinds of companies that we believe we have the greatest edge.

[Unknown]

It's funny, I had. I've got Mitchell Green from Lead Edge on the show. Lead Edge has been very successful in growth. And they have like their eight principles for what they invest in. And it's like profitable, high growth, good margins, like no competition. Da, da, da. I'm like, yeah, sure, and I want to marry Mila Kunis, of course. And it's like, that's very obvious when you think about your characteristics there. Business model scalability risk. What does that mean or look like in an actual tangible Example.

[Peter Singlehurst]

Yeah. So we think about what we do in a quantitative and a qualitative way. So in the qualitative sense, we're trying to invest in companies that have been de risked on the product side. And you're then trying to analyze whether they can become exceptional businesses, meaning can they become many times bigger than their current size and can it be a business that earns a high return on its equity? So I'll come to your question on like a tangible example. But if you look at the median company, when we invest, the median company in our portfolios is doing about $200 million in revenue, is still growing at about 70% year over year and is still very slightly loss making, minus 14% EBITDA margins. But these are median stats. Right? So some are already profitable, some are still loss making. So look, if a company's doing $200 million in revenue, chances are it's got a product that works, that people want to buy. So we're not taking product, market fit risk.

[Unknown]

And that's your entry point.

[Peter Singlehurst]

Yeah, so that's when we're first investing and where we've done a really good job for our clients in investing. It's where we found companies that are kind of in that sort of ballpark and then they've gone on to become many, many times bigger than that. So take an example that's close to home. Wise. Wise was actually a little bit smaller than that when we first invested. I think it was probably about 50 or 60 million dollars in revenue. It's now a multibillion dollar revenue business. It's continued to grow in its core consumer to consumer FX market. It has this whole part of its business that didn't even exist when we first started investing, which is their business, FX transfer market. And it's now a company that has a really high return on equity. But it was loss making when we first invested. What we got right there was like, yes, it was the total addressable market and all this kind of stuff, but it was also a business model that was able to scale and at scale would be able to earn a large amount of profit relative to the relatively small amount of equity that was in the business. And anybody that comes from the world of public markets, that comes from the world of trying to understand good quality businesses at scale, knows that one of the single most important factors is the return that you make on equity. And this notion, this concept, it's almost an anathema within the venture world.

[Unknown]

It really is.

[Peter Singlehurst]

And I don't think that's necessarily a criticism of the venture world because by definition, right. If you're investing in a company when it's first being started, the question of return on equity is probably going to be somebody else's problem down the road. So it's not necessarily a problem for their business model, but I think it is a problem for the quality of company formation because it distorts the quality.

[Unknown]

Of company formation because it leads to.

[Peter Singlehurst]

Overcapitalization of businesses and it leads to companies being. I sort of have this like sometimes this mental model in my head and it's not a very nice sort of mental image, but how they make foie gras.

[Unknown]

I love this one. Yeah, we got the foie gras of startups. Yeah. Pipe down. Yeah.

[Peter Singlehurst]

And it's like capital. And I think this has started to change, but I think that if you kind of go back in sort of the 2019, 2020, especially 2021, companies just were given too much capital, but I.

[Unknown]

Think they still are. Peter, if we're actually looking at it, you essentially have this surge of growth capital. Okay. So you've got supply side of cash going way up and then those investors are going, you know what? I'm willing to pay two years ahead of time for this 30 million-ARR company because I know that it's going to be a bit 10 billion. And so if I get in at two and a half I'm still going to forex, but I just guarantee it by getting in early. And what they think is that the amount of capital doesn't change the outcome. And I think we both agree that if you stuff something with cash so much the foie gras blows up.

[Peter Singlehurst]

I think it's happening in certain parts of the market today, but it's not universally true. I'm going to use this as a straw man schematic example, but if you want to invest in an AI LLM company, then this challenge that you highlight certainly continues to persist. If you want to invest in an area or a sector that, that was really, really hot three or four years ago, but where everybody's got a little bit bored and fed up and gone off and looking at other things like if you want to invest in a fintech company today, actually a lot of these companies are making amazing strides towards profitability. They're not having everyone and their mother throwing capital at them. And you can find some really good businesses either, already profitable, making great strides towards profitable, still have enormous opportunities ahead of them, great products, great management teams, and you're not being asked to pay the Earth, or you can look even further afield. And this is where I think for us, we are globalists, we're general, so we're not beholden to investing in particular sectors or geographies. And then you can find some astonishing businesses. And I know that you had, you had Luca Ferrari, the founder of Bending Spoons, on the show a little while back. I think that's an amazing example of this company that, largely bootstrapped, has created the most amazing scalable business model, profitability, like most companies would give an arm for. And they did it by sort of circumventing that world of over capitalization.

[Unknown]

So do you sit internally and we have these schedules and you're like Harry, not sticking to that one. Do you sit internally in Baillie Gifford and go, we're going to consciously not be a part of this new generation of AI companies because the pricing is just so out of whack.

[Peter Singlehurst]

We don't look at it and say, no, we don't want to be part of this. We look at it and we say, where do we think value is going to accrue? And if we're going to own a business for the next 10 years, what is going to define the right to win in terms of revenues, but also in terms of profits over the long term? And that comes down to things like competitive advantage culture, these kind of quite intangible things. So we have companies that are part of this, you know, this revolution of these amazing products in the AI space. We're shareholders in databricks, we are shareholders in business. A company like TENS Torrent, which is working at the sort of the chip and the infrastructure layer. And so we've done tons of work on this area. We haven't taken the plunge into any of the big AI, AI, LLM companies, not because they're not amazing products and they don't have big revenue bases, but because we still are trying to define what we think competitive advantage will look like at the large language model level. I think we know what it looks like at the infrastructure level, I think we know what it looks like at the distribution level. But when you have these forces of commoditization within the LLM space, such as open source models such as Deep seq.

[Unknown]

I completely agree with this. I think everyone agrees the kind of three layers in the commoditization within the middle layer being the LLMs. But when you look at the application layer, the scalability of these companies in terms of revenue is unlike anything we've seen before. From your macaws to your midjourneys to your lovables, to your bolts, and they're scaling at 3, 4, 5 million a week. And so the price is exorbitant. So can you play at the application layer and have your disciplined investor mindset?

[Peter Singlehurst]

A disciplined investor mindset doesn't mean you should ever just not look at certain areas or not look at particular entries. Because if you can build conviction in why one company can be a breakout success, then you really should lean into valuation. Like being a disciplined investor doesn't mean I will never pay more than X multiple, because when you find a really special company, you should lean into valuation. Now, the danger is that you can tell yourself a story that every company is a special company and then you lean into valuation too much. But the trick is not paying high prices, it's being judicious and selective about when you choose to pay a high price.

[Unknown]

Do you know what I'm really worried about? I'm really worried that we see this revenue scaling like we've never seen before. And there's a generation of enterprise companies that we're invested in which are not growing from 2 to 100 million in a year that triple, triple, double, double. Have we misled a generation of companies about revenue scaling? And that has changed and that won't be enough now to get that C, D, E round?

[Peter Singlehurst]

I think there's a possibility of that. But I would say that there will still be companies that are from that sort of pre AI era that will still be exceptional companies because they have a particular way of building a product that is just very difficult for AI to replicate. And again, like, you know, I think coming back to financial technology, I think this is quite a good area where the difficulties and the nuances of those kind of companies is. A lot of it is about, like, how you manage regulation and like, will AI sort of have an impact here? Yes, I'm absolutely sure it will. But there's still foundational problems in building those kind of products that I don't think are just going to be totally blown apart by the fact that we now have these incredible AI tools.

[Unknown]

When you think about, about defensibility, when you think about trying to understand revenue quality, I looked at Seven Powers by Hamilton Helmet. I think it's probably one of the best. I don't know if you've read it.

[Peter Singlehurst]

I've not.

[Unknown]

Oh, my God, I'm going to send it to you. It basically distinguishes what makes a company defensible and it breaks it down into seven different factors. Do you have a framework for trying to understand Sustainability of value in a company.

[Peter Singlehurst]

So yes we do. And this is a framework that actually goes right the way back to when I was on the long term global growth team that came out of that team. We call it our 10 questions framework. The questions basically break down into four areas. The first couple of questions are about the growth opportunity over the next five years, but also over the next ten years and beyond. So trying to look really far out. The next set of questions are about the enduring determinants of success. So product is one of those, but competitive advantage and then importantly how competitive advantage will evolve and change with time and scale. And then the third is probably the most intangible. But, but I think you could say the most important, which is organisational culture. And within that we would of course include a management team and their ability to execute. And I think the important thing to note here is that it's not about good cultures or bad cultures. It's about the alignment and the integration of the culture of an organization with the particular ambition or mission that that company has. So those enduring determinants of success at the second camp, third camp is financial analysis, like can this be a high return on equity business? Trying to look at precedents for high returning businesses in industries. What is it in a given that means a business versus a business in a given industry can earn a high return on capital or a low return? And then valuation and our valuation methodologies probably look a lot more like the sort of public market valuation methodologies because we're trying to find companies where we think we can have very long term intrinsic value which is much, much greater than the market price that we're willing to, that we're able to pay today.

[Unknown]

You said about enduring competitive advantage. One thing that I think we're seeing today is the cannibalism of a lot of, of existing businesses. Business models with new AI tools coming out. Do you think it is possible to accurately predict enduring competitive advantage with the shifting sands changing so much underneath technology companies?

[Peter Singlehurst]

I think it depends whether the competitive advantage lies in product or in something else. Often the most enduring competitive advantages don't lie in a particular product. They don't lie and sort of like my mug is better than your mug and I'll continue to be able to sell more mugs than you can. And again, the risk of overusing the example. What is the competitive advantage advantage of bending spoons? It's not any of their particular applications. Right? It's not.

[Unknown]

It's a playbook for M and A.

[Peter Singlehurst]

It's a business strategy. It's an approach to how you are able to integrate a business that you've acquired into a shared set of services and tools that you've built out to enable those businesses to grow and become even better products and you know, to be able to generate free cash flow from those. And then the competitive advantage often is also deeply integrated into the culture and the character of the founders and the kind of organization that they build. So can that erode over time? Yes, it can absolutely erode over time. But is it something that can be destroyed by AI? I'm not sure. I think it's more enduring than that. If we were saying, well, the competitive advantage for business XYZ is their widget is better than somebody else's widget. Well, could AI make a better widget? Well, maybe.

[Unknown]

Is there a stark difference when you compare the investments where there is the founder that is the CEO and there is not. We obviously have Paul Graham kind of eulogized this earlier this year. But I'm just intrigued when you said about of organization and culture, I'm intrigued to see if you have data around whether founder led companies are enduring and sustaining. Much better than non founder led.

[Peter Singlehurst]

Yeah, I mean I think these numbers will be a little bit off. It's something like 9 out of 9 of our 10 biggest investments are still founder led. So overwhelmingly we still skew towards founder led businesses even at these levels of scale that we're operating at. Right. And that's largely because if you're looking at companies that are doing $200 million in revenue, if a founder isn't able to get to that level, often you've seen the churn before. You're even kind of getting to our stage and then we're still like selecting very positively towards businesses that are founder led. That doesn't mean there aren't some great businesses out there that are led by non founders. I think Vinted is a good example of that.

[Unknown]

I was seeing the same. I was actually messaging Thomas earlier.

[Peter Singlehurst]

Yeah.

[Unknown]

So Project Europe with Amazing. You guys invented business.

[Peter Singlehurst]

Yeah.

[Unknown]

Oh, wow.

[Peter Singlehurst]

Yeah. A non founder that's totally transformed that business.

[Harry Stebbings]

Unbelievable.

[Unknown]

I don't think it's like a refounding invented to be fair.

[Peter Singlehurst]

It sort of is. Yeah. I think that's a good way of putting it.

[Unknown]

Totally. I'm a podcaster, so you know, we're good at packaging.

[Harry Stebbings]

You mentioned growth as the number one.

[Unknown]

You know, when we look at like at bending spoons, I think quite publicly the round was like $5 billion valuation. When you think about upside requirements on entry. Do you do outcome scenario planning and think, well, if X and Y happens then it's a $25 billion company and then we've got a 5X?

[Peter Singlehurst]

Yeah. So we are very consistent in how we model upside. For every company we look at, we try to model to a five times upside. So we're being consistent in the levels of upside in our modeling. But then what we are testing is the probability and assumptions that you need to make to get to that level of outcome. And that's so that you can kind of have a mental, you can have a mental comparability across investment cases. Of course we are also looking at longer tail greater levels of upside in the companies we're investing in. But the base modeling is always to.

[Unknown]

That five times and the probability that's assigned to that five times. What is an acceptable probability? Is it like we feel there is an 80% chance and if it's above 80% then we will write the check. And if it's not, because obviously everything has like a 1% chance.

[Peter Singlehurst]

So no, it's certainly not as high as that. And if you think that there's an 80% chance of making a five times return in investment, you're probably deluding yourself in the levels of probability and confidence that you can have in a long tail or high outcome scenario like a five times return. So for us there's a long answer to this question which is looking back at 30 years of public market data. But the short answer to the question is the probability of any given company going up five times, if you were just picking randomly, is something like 5%. So if you can find a company where you think there is something like a 30 or 40% probability of it going up fivefold, well actually those are really good odds. And so we're not looking for 80% probability of a company going up fivefold. If something is in the range of 30 to 50% probability of going up fivefold, well then we'll take those bets every time.

[Unknown]

How do you think about duration? Your structure means that technically. Oh, you know, open ended, we don't need to think about it. But there's always the opportunity cost of cash. It can always compound badass somewhere else. How do you think about duration and the willingness to wait for that?

[Peter Singlehurst]

It slightly depends what fund you're talking about. We have some funds where we're able to recycle capital. And so within those funds we are able to trim from companies that have gone public that we first own privately and recycle that capital into new private businesses. And we do that when we think that there is greater upside to be made in whatever the new companies that we're investing in from continuing to own that additional capital in that public company. In other more traditional fund structures that we manage, they are more sort of traditional limited life fund vehicles. We can do a little bit of recycling, but there, I think the important thing is just about always keeping your bar high and being patient. So the last fund that we raised, we closed it in 2021. We deployed very little in 2022 and 2023 because valuations were still too high. There were all kinds of games being played with convertible notes and everybody sort of pretending that companies were still worth what they were in 2021. So we deployed very little in 2020. And it was really only as we got into last year that we started finding great businesses, but at great prices. And some of the games around valuation and structure starting to diminish a bit. And so we started deploying more in 2024.

[Unknown]

It doesn't feel like it's much better pricing, Peter. Maybe we're in different markets, but it does not feel like, oh, excessive excitement's gone and now we're back to a state of rationale and calm.

[Peter Singlehurst]

So it depends where you look. If you look at the data, multiples in Series C and beyond in the US are below 2021. I mean, still at elevated levels.

[Unknown]

I mean this nicely. I never care about these, I'm so sorry, data reports that are always produced because they count a thousand Cs. And it's like, no one cares about 1000 Cs. I care about the five Cs that are going to be a 25X. And it's like this is a game of outliers. And so for the outliers, they're more known and they're more obvious. And this excess supply of cash just concentrates more quickly. And we see those prices go way up, which is why you have unbelievably expensive five, $10 billion rounds for these Series Cs and these.

[Peter Singlehurst]

I think you're totally right. I think that there is a herding into a much smaller number of names. I think there's quite a sort of understandable human psychology here. The industry is still digesting the trauma of 2021 and the pullback in 2022. What happens when an industry or an ecosystem goes through a traumatic period? You look for safety and you look for safety by not being too different from what your peers are doing.

[Unknown]

I think we've always been like that. Though, that's why we did what we did in 20, 21 and 22. It's a brilliant story of the boy and the teacher. Do you know this?

[Peter Singlehurst]

No.

[Unknown]

Oh, it's fantastic. And the teacher says, in the maths class, there's eight sheep in a pen. And one jumps out, how many are left in the pen? And the boy's the only one to go, none. And the teacher goes, no, what do you mean you don't understand maths? And the boy goes, no, you don't understand sheep.

[Peter Singlehurst]

That's a great story.

[Unknown]

It's a great story, right? And it's exactly that which is like we are the most herd cult like people and we just follow the herd, which exactly to your point, if you go to Fintech, actually there may be.

[Harry Stebbings]

Or Web3.

[Unknown]

I mean, I don't know if Web3 is still a thing, but like, you know, I'm sure you can get bargain prices.

[Peter Singlehurst]

Yeah, I think that's true. And so look, this is where trying to have as broad a universe as you possibly can means that where appropriate, you can kind of dip into those hot areas if you find something of good enough quality. But you can also look elsewhere. Right? So our universe consists of probably something like 2 to 3,000 companies. As a team, we can cover that universe. And if you look at what we did last year, we invested in six different countries. That's not because we were trying to be exotic, it's just that we were, were finding great businesses all over the world and a lot of them like really off the beaten path. So obviously Benny Spoo's Milan. But we invested in a Portuguese business last year, invested in a Brazilian company, an Indian company, an Israeli company.

[Unknown]

That's really interesting. So when you look at the Brazilian and the Indian, we get a load of hate for this. But Brazil has not shown pathways to liquidity at scale. They've shown Nubank and everyone says Nubank, it's won in 20 years. There's Delocal, and they're not at all at scale. India has continuously actually been the Europe of this technology ecosyste. Now's the time. Now's the time. We're still waiting. How did you guys think about that? Macro market risk.

[Peter Singlehurst]

Yeah, look. So I think that it would be naive to say there isn't more macro market risk, but you then need to make sure that you're paying a price that rewards you for taking that risk. And in a sense, that is our job. As investors, it's to price risk appropriately. And as growth investors, we're Trying to price the risk and uncertainty around companies becoming many times their current size on the sort of path to exit and path to liquidity. I think this is what where having a very long term time horizon, we are willing to take a little bit more risk there Again, just provided we are being paid to take that risk.

[Unknown]

Do you proactively plan ahead in terms of capital requirements a business will need and do you really think about the dilution that will be impacted on you?

[Peter Singlehurst]

So yeah, we certainly plan ahead. Think about what capital we should reserve for companies but like an Uber say.

[Unknown]

Or a doordash or an instigator, very cash consumptive businesses versus a traditional enterprise SaaS company which, which can be much less cash for income. Do you think about that?

[Peter Singlehurst]

Yeah, we do think about it. We want to make sure that we have an appropriate balance of kinds of capital needs. But last year quite a few of the companies we invested in, they were already profitable or they were turning profitable this year. And then the question of dilution becomes much less of a risk to the investment case because companies become self funding terrible.

[Unknown]

They're clearly not growing fast enough back into growth. We don't see these in the black. It's always worrying.

[Peter Singlehurst]

I think this is the misnomer of our industry again, right. Everyone sort of talks about like this trade off between growth or profitability. It should never be about growth or profitability. It should be about incremental return on investor capital. It should be about long run return on equity.

[Unknown]

Does Amazon play into what you're saying? Does Amazon play into what you're saying or not? Because obviously Amazon for years did not have profitability and they continuously reinvested in new products in R and D. Is that playing into what you're saying or not playing into?

[Peter Singlehurst]

I mean I think Amazon for us as a firm was a formative investment. We first invested invested in Amazon as a firm in I think 2004. And we saw the growth of that through many, many years of unprofitability and then into many years of profitability. Tesla, another example of that. We first invested in Tesla in 2013. We've been on the journey of these companies that have not been profitable when we first invested, where we've been considered in many cases daft for owning those companies for really long periods of time. But we've seen that scalability and that growth, growth, those enduring competitive advantages manifest themselves into scale and profitability.

[Unknown]

What company do you think you're considered DAF for owning today? That actually is a killer bite dance. Bold talk to me, why do you say that? And how do you get comfortable in the knowledge that bluntly there is a invisible hand being the US administration that could end it all, end it all.

[Peter Singlehurst]

Shut down TikTok doesn't make any difference. ByteDance, I mean ByteDance is the most astonishing revenue and profit generation company in China. The users, the profit that they make in China is just off the charts.

[Unknown]

I have an incredibly western view which makes me feel incredibly naive. What is the ByteDance business in China and why is it so good?

[Peter Singlehurst]

So I mean there are two main applications in China, taotiao, there's not really a direct comparable but like a better version of Apple News and Douyin, which is like TikTok in China. They're the market leader in online advertising in China and I think at the moment they're about number three in E commerce in China. China, it's enormous. It's an absolute monster. And look, so TikTok has a big user base and it's. I don't want to sort of dismiss the impact it could have on the investment case if it were to remain in the US and go on to become very successful. But our investment in ByteDance is predicated on the business in China and yeah, the quality of that business is quite something to behold.

[Unknown]

If TikTok US were banned or that was no longer part of the call ByteDance business, to what extent would it have an impact? Like I'm so nice, like 5%, like 20%, like 25%.

[Peter Singlehurst]

I mean our base case is that it does get banned and we still see a path to making at least five times our money even with TikTok not being part of that investment case.

[Unknown]

Wow. When did you get in?

[Peter Singlehurst]

2019, I think. So we weren't super early in it, but it's grown astonishingly since we invested.

[Unknown]

How do you think about liquidity there? Because I have many LPs that are also holders of ByteDance either directly or through different funds that they're at in and they're all kind of going, when's it coming? How does that provide liquidity to its investors?

[Peter Singlehurst]

I think it'll be public at some point either in the US or Hong Kong. Obviously one of those is probably a little bit more likely than the other.

[Unknown]

Do you think there's. I'm sorry, do you think there's any chance now with China and US relations public in the US can't rule anything.

[Peter Singlehurst]

Else out at the moment with the US and the things that are happening there. But I mean the companies also. This is Sort of publicly reported. They buy back their own shares. They're so proud, profitable.

[Unknown]

We mentioned where you go public. The question I actually have to ask is why go public? When you look at the Collisons, they said very rightly, I think on a show the other day, if you need a 25 year old analyst from a bank to tell you that you should increase your margins, then maybe you actually don't have a great business. Why should companies go public anymore given the extended privatization windows we have for capital markets?

[Peter Singlehurst]

I'm not sure I particularly have a good question to that answer either. And that's why. Why? I'm a private company investor and investing in private companies on behalf of my clients. But that being said, yeah, I do this from within a large public market organization.

[Unknown]

Has that changed for you?

[Peter Singlehurst]

So no, I think it's just continued to accentuate because of the excess supply.

[Unknown]

Of cash now or the cash in private markets. Meaning you don't need to.

[Peter Singlehurst]

I think it's more subtle than that. I don't think it's necessarily about capital cycles within private markets that is leading to companies stay private longer than. Of course it matters. I think what people realize today is that you can build a better business by staying private for longer.

[Unknown]

And why do you think that is?

[Peter Singlehurst]

Focus. It's really hard to be a public company. It's really hard. It's not just the reporting requirements that you have. You can have people owning your shares for all sorts of reasons that are misaligned with what you're trying to do as a company. You have to do everything in the cold light of day. All your competitors get to know pretty much everything about your business because you have to tell your shareholders pretty much everything about your business. Business. It's just really hard. And I mean I say this, I have the most enormous amount of respect for companies that go public well and are able to flourish as public businesses because it's really hard. So I think companies realize they can have greater focus by remaining private for longer Now. I think there are some good reasons for going public. I think it's right that employees should be able to get liquidity. But that's increasingly being served by these very large secondary private rounds. I think if you're an acquisitive business, having a public currency can be helpful. I think that if you're a business that operates in a regulated environment, I think it can be helpful for regulators to see you as a public company. We're shareholders in epic games and that's been private since 1992. And I once asked Tim Sweeney, the founder of that company, how he thinks about that and he had quite an interesting answer. He said that, well, at some point it will be easier to be public than it is to be private. At the moment it's much easier to be private than it is to be public. But at some point the various forces that exist within your business mean that actually the easier option is to be public. And those forces can be need for liquidity. They can be if you need to be acquisitive or engaging with regulators. So these forces can, I think, become good reasons for becoming public.

[Unknown]

If we exist in this continued world of extended private company being capitalized by large, large pools of capital, how do we get liquid? If we used to go through IPOs, how do you plan out? Okay, there's no IPOs now and Stripe's going to stay private for another 10 years. We're just going to hold.

[Peter Singlehurst]

You're starting to see the evolution of these very large company facilitated secondary rounds. Stripe databricks, I can see those starting to become more of a feature. I don't think we'll end up in a world where you have exchanges for private companies. I think you just have too much complexity in the share class structures. You have things like rofas, you have company. I can't see those exchanges really working. But you know, maybe we also get into a world where these companies become very profitable, they continue to grow and they start paying out dividends as private businesses. You know, maybe that becomes a source of liquidity for investors.

[Unknown]

Did you do the $60 billion Databricks round?

[Peter Singlehurst]

I'm trying to remember the first, I think the first one we invested in was about $30 billion. I think we did our pro rata in that round. Yeah.

[Unknown]

Do you see a 5x from 60?

[Peter Singlehurst]

Yeah, yeah. Remember we did our pro rata in the 60 billion round, which is a little bit different from saying we're doubling down. Right. So it's, we stood our hand, we put a small amount of extra capital into it, but we didn't double down in the 60 round.

[Unknown]

Do you think a lot of these private investors who are putting billions of dollars to work now and we're seeing them kind of move from venture to this new IPO style, are they going to get burned?

[Peter Singlehurst]

The trend that we've seen in growth stage private company investing over the last 10 years looks a little bit like this, Right? So these companies or these kinds of companies, they all used to be public business businesses and the natural owners of them were public market organizations. It was Baillie Gifford, it was T row, it was BlackRock. Companies started staying private longer. So the natural owners and the long term historic owners kind of got pushed out of owning those kind of companies. It's created a vacuum into that vacuum and I don't mean this in a pejorative sense, but the opportunists came into that vacuum. So you had hedge funds, you had traditional earlier stage investors spinning up these growth stage funds and owning companies that they knew but had never owned companies at that stage scale before post 21. I think a lot of those guys got pushed out, but some have remained and some have remained at really scale. My hope is that they're developing real expertise of what it means to own companies at this stage and scale because you want to have good owners of companies. You want to be operating in a market where you have rational investors making rational decisions, doing really solid analysis on companies because you need that market to be pricing efficiently. I think there are examples of that, but I think what you're really seeing is more of like, like an institutionalization and a professionalization of this market. To give you one example of what that can look like. Wish I held us in Andreal. We first invested in that company last year. The round that we took part in, there were the insiders in it. But then other than the insiders, the only new investors that came into that round were investors that were traditional public market investors but could also do some private investing. And that's because what the company needed was investors that are used to owning companies at that stage of growth and that scale and over time can help them transition into the public markets.

[Unknown]

Can you talk to me about the rationale behind that one? I'm a big believer in Anduril, so I have many thoughts around why I'm excited for them. But why did you get so excited for them?

[Peter Singlehurst]

So I could go into the specifics of the company, but what Anduril sort of conjured in my mind was a pattern that we'd seen in two places before. Those two companies that it sort of conjured were Tesla and SpaceX. What Anduril have done is they have developed products that, that are largely software enabled but are still really hard technical hardware problems that they have solved. They have proven that the products work and that people want to buy them. So there's no question about product market fit or do they work or anything like this. And then they are operating in very, very large markets that have largely not changed in decades and where there is clear water between them and their next nearest Private competitor. That was true of Tesla in 2013, it was true of SpaceX 2018 and I think that's true of Andreal today. So it's that combination of really difficult hardware problem that they've solved, an industry that's largely not changed, and clear space between them and other private competitors, especially.

[Unknown]

On the clear space. Palmer is a wonderfully eloquent speaker and brilliant to have on a podcast.

[Peter Singlehurst]

He is and he's amazing. But the thing that people forget about Anduril is you've got Brian Schimpf, the.

[Unknown]

CEO, Matt Grimm, amazing operator. Yeah, I totally agree with you. You mentioned that they wanted people who were public but also did private. We've seen Sequoia do that evergreen fund structure and believe that actually you have asymmetric information because of being a private investor. And then you should be able to manage the book more efficiently than your public markets, more than your LPs because of that exposure.

[Harry Stebbings]

Do you buy that or do you.

[Unknown]

Think there is a fundamentally different mindset to manage a private book versus a public?

[Peter Singlehurst]

But I don't think there is. There are big differences, right? Like how you go about sourcing opportunities is obviously totally different in the private markets compared to the public markets. The core analytical questions I think are pretty similar. You have different sources of information whether you're doing public or private, but you're still looking for the same characteristics. If you make it very simple, you're still looking for companies that can become many times their current size and earn a high return on equity. I think one of the big differences is in what it means to be a good owner of a growth stage company. And there are big differences here between not only private ownership and public ownership, but also kind of growth stage ownership and venture ownership.

[Unknown]

You mentioned Anduril. There two questions on the back of that. You compared it to SpaceX and Tesla. I think great analogies. We're seeing SpaceX and Tesla both be hit by Elon's stance in political activity. How do you think about that as a risk?

[Peter Singlehurst]

I worry about it. The thing that people forget about SpaceX is that there's an amazing management team there that is not Elon Musk. You have Gwynne Shotwell who is able to keep a very low profile, perhaps precisely because of the high profile that Elon Musk has. So that gives us a lot of comfort. But is it a concern? Yeah, of course it's a concern.

[Unknown]

But it doesn't matter about her low profile. If you have whole states canceling SpaceX contracts and that will continue in Canada's their second biggest market, Mexico's their third. At what point does it become a critical weakness? Weakness?

[Peter Singlehurst]

It's a big worry when you look.

[Unknown]

At your Andurils, your SpaceX, your Teslas, and you're seeing more and more move to defense, to hard tech, to really challenging technical problems. I worry that this generation of investors, and potentially me included, is almost out of date in this new world of very challenging technical problems. No longer is it, as we said, triple, triple, double, double enterprise investing. Have the heuristics changed on what it takes takes to be a venture investor?

[Peter Singlehurst]

So I've never thought of myself as an expert or an investor in technology. I invest in companies, I invest in businesses, and those businesses will often use technology to create these incredible business models that are very scalable and can be sort of high returning. But I'm not a student of technology, I'm a student of businesses and business models. Now there are people on my team who are much more interested in technology itself and also love investing, love businesses. But my focus, and I think this is a focus that perhaps makes me better at, say, growth stage investing than I would be at venture stage investing is trying to understand great businesses, not great technologies.

[Unknown]

What do you worry about most today in the investing world?

[Peter Singlehurst]

Deglobalization. We're global investors. One of the things that's made us successful over the years is finding interesting companies all over the world. The very first investment. This is a story we love to tell our clients. The very first investment Bailey Gifford ever made was in a Malaysian rubber plantation that was producing rubber for the tyres that were going to be needed on the Model T Ford. We've always been global. The very first private investment we ever made was not in the us, it was in China, sitting in Edinburgh in Scotland. There's not that many companies to invest in there. So our remit, our investments and our client base has always been global. And from an investment perspective, but also just from the perspective of humanity, I worry about an era of more barriers, weaker ties between countries, because I think it's better for investing, I think it's better for us as people.

[Unknown]

Do you think China is a massive opportunity as the world's capital markets withdraw from it? Do you think China remains a big opportunity?

[Peter Singlehurst]

I think it does, yeah. I think it does remain a big opportunity. Now.

[Unknown]

Are you still actively investing in China?

[Peter Singlehurst]

Yeah, I mean, in the public markets, we have a team in China. We continue to look at opportunities in China. Is there added risk investing in China? Of course there is, absolutely. But then you need to be rewarded for taking that risk. I'm a sort of big believer of the sort of saying, so, you know, be, be greedy when every, when others are fearful and fearful. When others are greedy and everyone is fearful of China. Right now if everybody is saying one thing which is China's uninvestable, you would be daft not to be questioning that and saying, well, hang on a minute, like, is that actually the case? Maybe I should go and have a look. So I'm hoping to get out there over the summer of not being in far too long. But yeah, we will continue looking for investments in China.

[Unknown]

Can I ask if we peel back the curtain on Baillie Gifford's investment process when we look at private company investing, what does that investment decision making process look like for you internally?

[Peter Singlehurst]

I guess the decision making process is always a manifestation of that funnel. If I look at last year, we met 1,000 companies, we looked at 600 private funds. How big is the teams? 10. But we work within a team of 170 public market growth equity investors and we're able to draw on that resource. But this is just as a team, Right? So just as a team, we met a thousand companies, we looked at 600 private financing rounds, we did 65 first cuts of our diligence process, we did 30 deep dives and we made 11 new investments on the companies that we put through our diligence process. We do our diligence that culminates in a 10Q which the note that I talked about, I mean if you were to see one of these, they look, I mean, we don't use PowerPoint. These look like essays. We sit down and we discuss the as a team. We do that on Thursday afternoons every week. Every week? Yeah. The whole team's there.

[Unknown]

How long do you set aside for it?

[Peter Singlehurst]

We're slowly increasing the amount of time that we set aside for them because we always get to the end of the discussion. We're always kind of hungry for more discussion. At the moment, they're an hour and a half stock discussions. The investment committee then meets on Friday afternoons. That's a pretty small investment committee. There's four of us and we decide what to do. Now, inevitably there'll be additional things you want to follow up on, but it's the core decision making group for our dedicated funds. There's four of us and check size.

[Unknown]

Range on the 11 is what's the range?

[Peter Singlehurst]

Yeah, so there's a large range because there are different pools of capital that we invest from, but they can range from $10 million to $150 million.

[Unknown]

And how does that change when you're making reinvestments? It's a different process in psyche. How does that change?

[Peter Singlehurst]

So when we're making reinvestments, we revisit the investment case, we do an updated 10Q, we re examine that 5 times upside case and I guess you then have like, broadly Speaking, there are three different decisions that you need to see.

[Unknown]

5X on the reinvestment.

[Peter Singlehurst]

Well, so this is where it slightly varies. Right. So if you're going to double down on a company, then Absolutely, yeah. You need to see a 5x on a reinvestment. If you're going to do a small pro rata check, I think then doing pro rata checks, if they're relatively small, can just be part and parcel of being a good investor, which we'll do, provided things are going in the right direction. And then of course there's the decision not to do pro ratio anything where we sort of decide not to take part in a round where either we're not seeing the execution that we need or we think the valuation just doesn't make sense.

[Unknown]

When did you not that with the benefit of hindsight, you're like, wow, we missed that.

[Peter Singlehurst]

Ah, so you mean like miss a new investment?

[Unknown]

No, wait, you invested and then it came back and you're like not feeling it so much.

[Peter Singlehurst]

Actually, I'll tell you, the round that we didn't take part in that we came very, very close to. So we first invested in Stripe at about a $30 billion, but we didn't take part in the down round that they did. Whenever that was 22, which was 12 because we invested at 30, it got up to about 90 and then I think it came back to about 50 and we didn't take part in that round. I think we should have done.

[Unknown]

Why did you not.

[Peter Singlehurst]

Oh, gosh, that's a. Asking me to kind of go back. I think that it was. I think at that particular time growth had come back and I think we had slightly more questions around the build out of a more sort of holistic software offering over and above the merchant acquiring own business. It was quite nascent on that. I don't think they quite made the progress that we would have hoped that they would have made. And so we just said, actually, we've got meaningful amounts of capital invested in this company, let's just see how this goes. I think that was a mistake. I think we should have put more in.

[Unknown]

Then you think it can be a $250 billion company. I think Patrick and John are amazing, but I'm. Is Adyen massively underpriced then?

[Peter Singlehurst]

At 40 stripe is priced even less than Adyen. You just look at it on a multiples basis and it's growing quicker.

[Unknown]

I mean that last round was what.

[Peter Singlehurst]

So I think they're doing one at the moment, aren't they, as sort of 91 and a half or something like that, which is double Adyen in terms of market cap. Yeah, I think it is, yeah.

[Unknown]

Does that mean Adyen's undervalued?

[Peter Singlehurst]

I don't know. You need to speak to my public market.

[Unknown]

Do you ever want to do public markets?

[Peter Singlehurst]

Well, I did public markets but like.

[Unknown]

Again, like go back.

[Peter Singlehurst]

I mean we continue to own a number of our companies after they go public. Right. So we're still big shareholders in affirm and Wise. Would I ever want to go back to just doing public markets? Look, I mean I am so lucky and privileged in what I get to do and I think the reason I love doing what I do is because you get to expand the map. At least expand the map for an organization like Baillie Gift. Of course we're not doing like Series A and series B, but when we're looking at companies within the private companies team, this will be the first time Baillie Gifford as an organization will have looked at these companies. And so you're starting with a blank sheet of paper and you get to discover these companies and you get to know these companies as people in a much more personal way than by and large you can in the public markets. And I think that's very special.

[Unknown]

You've mentioned Wise several times. Wise decided to list in the uk. The UK public market is not one that's filled with optimism right now. You know, I have many friends who are public market CEOs who say I wish I was not listed in the UK sadly. How important is a local liquidity market? 1. And do you share the sentiment that we're in a really dire state for the London Stock Exchange?

[Peter Singlehurst]

Yeah, I do share the sentiment that we're in a dire state for the London Stock Exchange.

[Unknown]

Why do you think that is?

[Peter Singlehurst]

I think it's a combination of there not being loads of amazing high growth companies in the UK and listed in the uk. So there's a supply problem and I think there's a demand problem as well. I think that UK invests investors perhaps as a function of there just not being that many really exciting growth companies listed in London. They're not as used to analyzing and investing in and their risk appetites are probably not as high as investors in the U.S. investing on the Nasdaq, for instance. So I think there's a demand problem and I think that there is a supply problem as well.

[Unknown]

If I were to put you in charge of the LSE today, what would you do?

[Peter Singlehurst]

That's a really hard question. So I think the problem starts before the lse. I think that if you're trying to diagnose it or trying to solve the problem, I don't think you would start at the.

[Unknown]

I mean, I respectfully disagree with you on the supply side. I could name you 10 companies that are over 300 million in revenue in London today that are phenomenal businesses. They just wouldn't list in London because it's a shit place to list.

[Peter Singlehurst]

But I think that is the problem. Right? You can name 10 and maybe you can name 20. Right. But you can't name 100.

[Unknown]

Well, never. That's because I'm in a small niche of technology. I'm sure if we went into bio and real estate and all the other markets, there would be way more.

[Peter Singlehurst]

I'm not saying that there aren't great companies, companies out there. There's just, I'm just not sure that there are enough at the scale that you would need to have to make for a very vibrant, diverse growth equity public market in the UK alone. I think that if you were to go around and you were to combine all the sort of growth stage companies in Europe, then I think you could have a really interesting.

[Unknown]

Do you think we should have a European public market?

[Peter Singlehurst]

Yeah, I think we probably should because.

[Unknown]

Everyone is struggling from the same year. Frankfurt is struggling from the same, the French are struggling from the same. We're struggling from this. How do you figure out when to sell? It's really hard. I mean, when you're public it's even harder because every day you have that permanent decision of I can sell when you're private. I mean, to a relative extent you're kind of stuck.

[Peter Singlehurst]

So you can look at it through like a binary decision of like when do you sell? But you can also think about it through the lens of like, well, when do you trim? Like when do you take some of your winnings? Look, this is where I think increasingly in the private market, secondary, secondary markets can be useful. So some of our large, high profile companies, we have trimmed in the private markets and we've recycle that capital into new, interesting, high growth private companies. For those companies that go public again in the funds where we can recycle capital. It's not easy. But there's an opportunity cost trade off that you make each time you're looking at a new company, which is I need to find some capital to invest in this company or where's that capital going to come from? Well, I'm going to get it from where I have liquidity, but also where I believe there is the greatest disparate between the returns I can make by continuing to own whatever the company is, that public company versus this new opportunity that I'm looking at. So it's an opportunity cost trade off question really.

[Unknown]

Will we have far more capital in venture in five years time than we do today?

[Peter Singlehurst]

I don't know about venture.

[Unknown]

I think we wrongly talk about that they've kind of merged. What is Series C? Venture growth?

[Peter Singlehurst]

Yeah, Series C is on the borderland, but Series D, Series E, that's clearly growth, right?

[Unknown]

Sure. Okay. But when we think about pre will we have. Because I think we're just seeing the precipice now and we're going to see sovereign wealth funds like we've never seen before, pension funds like we've never. And it's going to get much noisier.

[Peter Singlehurst]

Yes and no. I do still think we are seeing this trend of institutionalization and professionalization of the growth stages. And there are some high profile names in the growth stage. But I think there are fewer participants in the growth stage today than there was in 2020 and 2021. And you could say, well those are anomalous years. But I still think there has been consolidation within the growth stage of the private market. Will people kind of come in and go out? Yeah, of course. And so there'll be periods where there are more and periods where there are less. But I think we're already at the stage where there are a handful at the growth stage of let's call it 10, maybe you get to 20 of institutions that are consistent presences in this part of the market and I could probably name you those. Is that going to double or triple? I don't think it will.

[Unknown]

We mentioned stripe as the one where the reinvestment. Maybe you should should have made. Can you take me to a decision where you had it on first check and you could have done it and you pulled away for whatever reason and you shouldn't have done that. Most sticks out.

[Peter Singlehurst]

So Coinbase should have invested in Coinbase.

[Unknown]

Why did you not?

[Peter Singlehurst]

Oh, because I created a very elaborate spreadsheet where I was estimating all of the volume and liquidity that you would need to have in bitcoin to get to the kind of 5x returns. And it was a very clever model and I felt like I was being very clever and it's just wildly off.

[Unknown]

Do you worry that you can sometimes try and be too studious with all of the models?

[Peter Singlehurst]

Yeah, I mean, I think that can always be at risk. Right. And it's not just with models. Like sometimes you can over intellectualize things and sometimes the best investments, like they're quite obvious.

[Unknown]

What was the most obvious?

[Peter Singlehurst]

I mean, this is kind of going back to when I was doing public market investing, but for me, when we invested In Tesla in 2013, it was pretty obvious.

[Unknown]

It was obvious in 2013.

[Peter Singlehurst]

Yeah. I mean they'd sold tens of thousands, thousands of Model S's or they had pre orders where people put down real money for Model S's. They'd proven that they could make a car that people wanted to buy, they'd proven that they could make the roadster and then the question was execution and were they actually going to be able to make enough of these things? But you could look at the organization and there were people in there that had built car factories and had scaled the production of cars. So yeah, it felt kind of obvious at that time. And it was a $3 billion market cap.

[Unknown]

Listen, I want to do a quick fire. So I say a short statement. You give me your immediate thoughts. What do you believe that most around you? Disbelief.

[Peter Singlehurst]

That you can be a generalist and that you can be a globalist in how you invest and that you can still add real value for your clients by being specialist in growth equity investing.

[Unknown]

You can buy and hold one stock for the next 10 years. Which one and why?

[Peter Singlehurst]

Bending spoons.

[Unknown]

Wow. That's the one. Why?

[Peter Singlehurst]

Because I think that they have the most astonishing, astonishing business model culture and opportunity to be like an immune cell that kind of goes around gobbling up all of these slightly broken businesses, but that have great products and generating loads of profit and free cash flow from them.

[Unknown]

What is it about that business model that you love so much?

[Peter Singlehurst]

It's having these generalizable set of tools that can make any consumer digital application better from a user perspective, can grow the revenues and can be run way more efficiently. Their addressable market is the broken parts of the venture capital ecosystem, which is companies that are good products but really bad businesses. And they can take these good products and make them amazing businesses by virtue of being part of bending spoons.

[Unknown]

And so the core risk really is acquisition price sensitivity.

[Peter Singlehurst]

And can you continue to do it at ever Greater levels of scale.

[Unknown]

It was in shout. She spoke to one of their acquired company CEOs the other day. Day. He said the process was kind of fascinating. There's no negotiation. It's like, here's the deal. If you would like it, great. If you weren't, no worries. And it's very like black and white. And they were fantastic with the process and it was great and they did it actually. But I just love that, like there's no negotiation. Here you go. Love that. What would you do if you knew you couldn't fail?

[Peter Singlehurst]

Well, I think that if you knew that you couldn't fail, it would increase your risk tolerance to infinity, wouldn't it? I mean, you just, you'd go and you take the most absurd risks you possibly could because you knew you would get them, right? I mean, what would you do? Maybe you'd be like an early stage biotech investor because you would know that every company that you invested in at some super early stage would go on to become a blockbuster drug and your returns would just kind of be off the scale. Maybe that's what you do if you knew that you couldn't fail.

[Unknown]

Which public company CEO do you have most respect for and why?

[Peter Singlehurst]

I've got an enormous amount of respect for Christo at Wise. He's just a brilliant expert executor. He just has this deep care and passion about this very sort of niche thing of moving money cheaply and efficiently. He just cares deeply about his customers, his business. He thinks differently and orthogonally about how you go about creating a business and yeah, sort of seen that journey as the business has grown, but as he's sort of grown with the business as well.

[Unknown]

If you could change one thing about the Baillie Gifford investment decision making process, what would you, would you change?

[Peter Singlehurst]

I would like to have more time to invest in every decision I made. So rather than having, I don't know, however much time it is to digest all the work that the team has done to come to an investment decision. I would love it if I could have three, five, ten times the amount of personal time that I could put into thinking about those investment decisions. But we have to operate within the sort of number of hours there are the day. Right.

[Unknown]

OpenAI at 300, Grok at 50 or Anthropic at 60. Which one do you buy and which do you sell?

[Peter Singlehurst]

Oh, gosh, do I have to buy any of them?

[Unknown]

You don't. You can buy none of them.

[Peter Singlehurst]

I think at the moment I would say that I would buy none of them. I Don't know what the answer is to enduring competitive advantage at the large language model level. And I don't feel like I could tell you which one I would want to buy without a strong thesis on that.

[Unknown]

And you wouldn't say it's productization and brand. I would say brand, consumer touch points and brand.

[Peter Singlehurst]

Well, the one that I would say is distribution.

[Unknown]

Well, this is why actually I think Google is one of the most like unappreciated companies right now. When you look at the distribution endpoints that they have to consumers and what they can do with AI, they are by far one of the most exciting opportunities.

[Peter Singlehurst]

Well, if you went down that route, you'd say Microsoft, wouldn't you?

[Unknown]

You would as well. Yeah, I would have Microsoft and I do have Microsoft and Google. 100, 100%. What have you changed your mind on most in the last 12 months?

[Peter Singlehurst]

So many things. So we had this discussion about adding value to companies. Like, this is something that I was just so wrong on for so many years. I used to say, like, oh no, you don't get it. Like at the growth stage, the concept of value add doesn't apply. Companies should like know everything themselves. And that was true in the narrow sense, largely around like operational stuff. They should sort of know what they're doing themselves. But what I misunderstood was all the kinds of things that are specific needs to be a growth stage company. Yeah, we've already talked about them. How do you go public effectively? How do you be a public company? How do you create a great independent board, these sorts of things? I was just dead wrong on that. And I've come to realize over the last few years that there are so many things that growth stage companies do need help with and that we can be well positioned to help them with.

[Unknown]

Did becoming a father change your investor mindset, types of businesses you like approach?

[Peter Singlehurst]

I don't think it changed my investment approach. I think it changed my world.

[Unknown]

What did it change in your worldview?

[Peter Singlehurst]

When you become a parent, there is this sort of little being that starts off very, very small and very quickly they become much, much larger that you care about more than anything you can possibly imagine caring about, that you are deeply responsible for in a way that like, it's difficult to comprehend being as responsible for anything else as it is to be as responsible for your children, or in my case, child. I just have the one. It's amazing, but it's the good things become like, way better than like the good things before you have a kid and the difficult things become way more Difficult and way harder as well. So it' everything in life just becomes somewhat accentuated.

[Unknown]

Why does no one ever leave Baillie Gifford? You guys, don't you just stay Everyone in ventures like I'm out, I'm in tag teaming. I'm out. You guys. Nope, just stay. And you're in Edinburgh.

[Peter Singlehurst]

Yeah. Which is a lovely place to live. Why would anyone ever want to leave Edinburgh?

[Unknown]

Sorry, I did not mean that pejoratively to Edinburgh, but you know, it's not. Yeah.

[Peter Singlehurst]

So the firm, we've been around for 115 years. We're a partnership. We, we are an intergenerational unlimited liability partnership.

[Unknown]

So does that work from a carry perspective?

[Peter Singlehurst]

So carry goes to the firm.

[Unknown]

Carry goes to the firm.

[Peter Singlehurst]

And then we remunerate people through bonuses, which is of a synthetic carry, I suppose. But the way the firm operates is that there's this sort of continuous chain of partners who have been responsible for the firm and responsible for our clients and doing a good job for our clients. And the job of the partnership is to maximize value for our clients, but also make sure the firm is in a better place to hand off to the next generation of partners. And so I think there's this kind of deep care and responsibility that those of us who spent our entire careers at Baillie Gifford have for our clients, but also for this organization that we kind of get to be stewards of for parts of our lives and hopefully hand on to the next generation of partners better than we joined it.

[Unknown]

It's an amazing institution. I really love the story, but for me as a student of investing, it's one of the most incredible stories. So much respect for the team there. Final one for you. When we look forward to the next 10 years, what are you most optimistic about? I like to end on a note of positivity.

[Peter Singlehurst]

So I'm really excited and optimistic about the conditions under which companies are entering this stage of the market, at this kind of growth stage. So kind of going back to that framing that we had earlier of companies around about $200 million Mark de risked on the product side. There have never been so many venture backed companies that are sort of entering our part of the market. Like there's been a lot of spaghetti thrown at the wall and we get to see which bits stick. Which is a great place to be a growth investor because lots and lots of experiments and you can sort of see the ones that work and so back those ones that work. But then there have never been so many people with experience of trying to grow and scale Businesses. So that kind of human capital has never been better.

[Unknown]

And then can I interrupt you? What happens to that generation of companies that is maybe 200 million in revenue mid teens growth. So it's not good enough for you, it's not good enough for private equity, it's not good enough to ipo. What happens to that very large generation of companies that is low growth, not profitable, but quite large revenues.

[Peter Singlehurst]

I think this is the opportunity for bending spoons, right? This is the their market because they can take those companies and they can improve the products and they can, they can make them profitable and then they become really, really valuable. So those kind of companies, you're right, don't stand up as standalone businesses but in the hands of the right kind of capital allocator they can generate a lot of free cash flow.

[Unknown]

Would you be CFO of bending spoons?

[Peter Singlehurst]

Would I. I don't know.

[Unknown]

If Luke called you up, that'd be my cfo.

[Peter Singlehurst]

There's Davide, the CFO there does an amazing job. There's no way I'd be able to just go but to go back. The final thing that I think is really important for why now is an amazing time for growth equity investing is we're in this period of capital where there. And yes, taking the conversation we had earlier around, there are some parts of the market that are still quite exuberant. There is neither across the market I would argue an excess or a deficit. So you're kind of at this kind of golden mean, this Aristotelian mean of, of availability of capital which is providing enough capital to be able to invest but not so much capital that it detracts from the long term quality of those businesses. So I think that kind of amalgamation of lots of venture stuff being tried, lots of experiments, human capital and the right quantity of financial capital just makes me really excited to be deploying capital in this part of the market.

[Unknown]

Peter, I so appreciate the time today. I so appreciate you are incredibly, incredibly humble, incredibly different as a thinker, which is so lovely for me doing what I do. And I just really appreciate like the relationship and bluntly you being so open today.

[Peter Singlehurst]

It's been a pleasure to see you again Harry. Really enjoyed the conversation. So thank you very much for having me.

[Harry Stebbings]

I have to say I just think the world of Peter. Such a fantastic creative investing mind. If you want to watch the show, if you want to watch the show, you can find it on YouTube by searching for 20VC. That's 2020 VC on YouTube. But before we leave you today, here are two fun facts about our newest brand sponsor, Kajabi. First, their customers just crossed a collective $8 billion in total revenue. Wow. Second, Kajabi's users keep 100% of their earnings, with the average Kajabi creator bringing in over $30,000 per year. In case you didn't know, Kajabi is the leading creator commerce platform with an all in one one suite of tools including websites, email marketing, digital products, payment processing and analytics for as low as $69 per month. Whether you are looking to build a private community, write a paid newsletter or launch a course, Kajabi is the only platform that will enable you to build and grow your online business without taking a cut of your revenue. 20 VC listeners can try Kajabi for free for 30 days by going to kajabi.com20 that's kajabi.com K-A-A-A-B-I.com 20VC and after building your online empire with Kajabi, it's time to scale your global team with Remote Seamless Hiring Solutions. So every business is a global business in 2025. But how do you do payroll for your global business and team and comply with international labor laws? Well, Remote handles payroll, benefits, taxes, stock options and compliance to help companies of all sizes pay and manage full time and contract workers all over the world. No where your team lives or works. Remote's Global Employment solutions keep your team, your finances and your intellectual property secure. Remote never charges hidden fees, just best in class Global Employment solutions for a low flat rate. The world's top Remote companies love remote. GitLab, the world's largest all remote organization, trusts Remote to run their global team. Remote is funded by Index Ventures, Sequoia Capital, and the host of the greatest podcast ever, Harry Stebbings and 20VC. Ready to learn more? Head over to remote.com 20VC 20VC and begin hiring within minutes. Enjoy 10% off your first three months by using the promo code 20VC at checkout. And when it comes to scaling your business, having the right infrastructure is just as crucial as building the right team. That's why AWS is the perfect partner partner for startups and why they're proud to sponsor this Week's episode of 20 VC. The AWS startups team comprises former founders and CTOs, venture capitalists, angel investors and mentors ready to help you prove what's possible. Since 2013, AWS has supported over 280,000 startups across the globe and provided $7 billion in credits through the AWS Activate program. Big Ideas Feel at home on aws and with access to cutting edge technologies like generative AI, you can quickly turn those ideas into marketable products. Want your own AI powered assistant? Try Amazon Q Want to build your own AI products? Privately customize leading foundation models on Amazon Bedrock? Want to reduce the cost of AI workloads? AWS Trainium is the silicon you're looking for. Whatever your ambitions, you've already had the idea. Now prove it's possible on AWS. Visit awesome aws.Amazon.com forward/startups to get started. As always, I so appreciate all your support and stay tuned for an incredible episode coming on Friday with Elias Torres, founder of Drift and most recently agency.