Peter Singlehurst: Lessons from Turning Down Stripe, Coinbase and Losing Money on Northvalt

Peter Singlehurst 0:00 (instrumental music plays) 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 'cause we still are trying to define what we think competitive advantage will look like at the large language model level.

Harry Stebbings 0:31 Ready to go? (instrumental music plays) Peter, we last did this on Zoom. I'm so pleased that we get to do this in person. Thank you so much for joining me today.

Peter Singlehurst 0:49 It's a pleasure, Harry. Really nice to

Peter Singlehurst 0:51 see you again.

Harry Stebbings 0:51 It's so good to have you here. But listen, I actually scrapped the, like, "How did you get into venture?" question 'cause it was bluntly very obvious for a lot of people who went to Stanford and studied CS that they would then, you know, 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-

Peter Singlehurst 1:10 (laughs) .

Harry Stebbings 1:10 ... did you get into private company investing at Baillie Gifford? What was that moment?

Peter Singlehurst 1:14 Well, so, so the specific moment was, um, I was on a, 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 2014. I was working with, uh, three very senior investment partners within the firm, James Anderson, Mark Urquhart, Tom Slater. And we were starting to see these private companies, uh, of real scale, the sorts of companies that we'd always invested in. And back then, it was, like, you know, businesses like Airbnb and Spotify. And, uh, and Tom, and Mark, and James, like, 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, a room, and, uh, and, uh, James said, "Well, like, who, who's, 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, I'll do it." And, uh, that's sort of how it all started.

Harry Stebbings 2:00 Were you nervous?

Peter Singlehurst 2:01 Um, no. Maybe I should have been. If I'd known what I was letting myself in for, I would have been nervous.

Harry Stebbings 2:05 What would you advise yourself now, knowing all that you do, telling that younger self entering the position you were?

Peter Singlehurst 2:12 That's a really hard question because the, 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, the craft of investing because I, I, 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 and this offering to more of our clients, I would say to myself, "Be a little bit less purist." We, we were, um, you know, when we first started doing this, we were doing it from within these permanent capital vehicles, and we continued to do that. And it's amazing for being super long-term. Um, but the result of that was that we had a lot of our clients who wanted, uh, to be investing with us in the kinds of companies that we were investing in, these kind of high-growth, you know, 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 compromised, or not compromised, we'd been aware of some of those trade-offs earlier on.

Harry Stebbings 3:15 Why were you not?

Peter Singlehurst 3:16 I think often when you're investing, um, the things that give you some kind of, um, edge or capability are the things that are different from how other people go about things. Um, 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, like, how we recruit people, the kinds of people we bring into the organization. We're a bit different in terms of where we're based. You know, we're based in Edinburgh, in Scotland. Um, these are the things that 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

Peter Singlehurst 4:08 structures.

Harry Stebbings 4:08 You mentioned there the learnings from mistakes, and it's really the craft of investing that is learnt through mistakes. When you think back about the most painful mistake that caused the biggest learning, is there one that comes to mind?

Peter Singlehurst 4:21 Like, there, there's lots of investments we've made that have been painful experiences. Um, but ironically, I would say not all of our bad investments are necessarily mistakes. So w- w- when you invest, you, you are trying to, you know, predict what's going to happen in the future or estimate the probabilities of what will happen in the future. And, um, sometimes you take a r- take on uncertainty when you invest. And, and the, the negative outcomes go against you. That's part and parcel of investing. There are then other kinds of investments where there, they are mistakes 'cause there's something you should have seen, there's something that you didn't weight appropriately, and you lose money. And those are mistakes. So, like, I'll give you two examples of both camps.

Harry Stebbings 5:03 Mm-hmm.

Peter Singlehurst 5:03 Like, the first company we invested in that, that went bankrupt was a company called Intarcia. It was a, it was actually a biotech company that was developing a GLP-1. I mean, imagine if that company had managed to stay solvent. (laughs) 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, and yet quite topical today, Northvolt. Northvolt's been a very bad investment for us.

Harry Stebbings 5:42 Hmm.

Peter Singlehurst 5:42 Um, what was the mistake there? I think we, uh, were too enamored with the idea of a business like, uh, Northvolt needing to exist for, you know, all the, the reasons of, uh, energy sovereignty in, in, in Europe. Um, but what we got wrong was the team's ability to execute. They didn't execute properly. 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-

Harry Stebbings 6:12 Were there signs?

Peter Singlehurst 6:14 Um, (sighs) look, there's always signs with hindsight. Um-I think there were signs that we started to see over the course of our investment, and when we started to see those signs, um, we, uh, we pulled back on providing additional capital to the company.

Harry Stebbings 6:28 That would have, 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 sink more and more and, and cannot detach your emotions from that investment. Did you continuously double down?

Peter Singlehurst 6:40 The, 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, uh, 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, uh, we, we, we passed on putting additional capital

Peter Singlehurst 7:04 in.

Harry Stebbings 7:04 You mentioned Intarcia there. There's a lot of risk baked into that. There's like market timing risk, there's regulatory risk with kind of FDA approvals. That's a, a lot of risk that a lot of venture masters 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 7:22 Look, I, I, I think as ever when you're investing, you, you, you try over time to narrow down your area of focus and lean into those areas where you believe you have greater competitive advantage. So, today we probably wouldn't invest in a company like Intarcia. We're, we're, 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. Um, and so what you'll, what you've seen in our portfolios over the years is a continued refinement and a continued narrowing and a 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.

Harry Stebbings 8:07 It's funny. I had, uh, I, 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." (laughs) Like, and, 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 8:36 Yeah, so, so, so we, we, we think about what we, what we do in a quantitative and a qualitative way. So it, in, in the, in the qualitative sense, we're, 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, and I'll come to your, your, your, your question on like a tangible example, but if you look at the, 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, um, and is still very slightly loss-making, minus 14% EBITDA margins, but these are median stats, right? So some are already profitable, some are, some are, um, still loss-making. So, look, if a company's doing $200 million in revenue, the chances are it's got a product that, that works, that people want to buy. So we're not taking, you know, product market fit, fit risk.

Harry Stebbings 9:35 And that's your entry point?

Peter Singlehurst 9:36 Yeah, so that's when we first invest.

Harry Stebbings 9:37 Mm-hmm.

Peter Singlehurst 9:38 And th- where we've done a really good job for our clients in investing is 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, uh, t- to take an, an example that's, uh, close to home, um, Wise. Wise was actually a little bit smaller than that when we first invested. I think it was probably about $50 or $60 million in revenue. Um, it's now a multi-billion dollar revenue business. It's, uh, continued to grow in its core, uh, uh, consumer to consumer, um, FX market. It has this whole part of its business that didn't even exist when we first started investing, which is, uh, their, um, uh, sort of business FX transfer market. Um, and it's now a company that has a really high return on equity. But it was loss-making when we first invested, and, um, what we, what we got right there was like, yes, it was the, you know, the total bu- 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, this notion, this concept is, is almost, um, it's almost an anathema within the venture world.

Harry Stebbings 11:06 It really is.

Peter Singlehurst 11:06 And, 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, the, the question of return on equity is probably going to be somebody else's problem down the road. So it's, it's not necessarily a problem for their business model, but I think it is a problem for the quality of company formation. Um-

Harry Stebbings 11:27 Because it distorts the quality of company formation?

Peter Singlehurst 11:30 Because it leads to over-capitalization 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, uh, sort of mental image, but you know how they make foie gras?

Harry Stebbings 11:41 I d- I love this one.

Peter Singlehurst 11:43 Yeah.

Harry Stebbings 11:43 Yeah, we got the foie grasing of startups coming-

Peter Singlehurst 11:45 Yeah, exactly.

Harry Stebbings 11:45 ... the pipe down. (whooshing sound)

Peter Singlehurst 11:46 Yeah, 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, you know, the-... 2019, 2020, especially 2021. These companies just, were, were given too much capital.

Harry Stebbings 11:57 But I 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 gonna be a bill- a 10 billion. And so if I get in at two and a half, I'm still gonna get my four X, 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, the foie gras blows up.

Peter Singlehurst 12:30 Yeah. I, so I, I think it's happening in certain parts of the market today, but it's not universally true. Um, so li- I'm gonna use this as a slight kind of straw man schematic example, but like, if you want to invest in an AI LLM company, then, then like this, this challenge that you, that you, that you highlight certainly continues to persist. If you want to invest in an area or a sector that's, you know, it 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, you know, looked at, looking at other things, like if you want to invest in a fintech company today, like actually, a lot of these companies are making amazing strides towards profitability. They're not having, you know, everyone and their mother throwing capital at them. And you can find some really good businesses either already profitable or 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, um, and this is where I think, you know, for us,

Peter Singlehurst 13:23 we, we, we're globalists, we're generalists, so, you know, we, 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, um, you had Luca Ferrari, the founder of Bending Spoons, uh, on, on the show a little while back. I think that's an amazing example of this company that was largely bootstrapped, uh, has created the most amazing, scalable business model, uh, m- profitability like most companies would give an arm for. Um, and they did it by sort of circumventing, uh, that, that world of over-capitalization.

Harry Stebbings 14:00 Um, do you sit internally in Baillie Gifford and go, "We're gonna consciously not be a part of this new generation of AI companies because the pricing is just so out of whack"?

Peter Singlehurst 14:12 W- 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? Um, 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. Um, so yeah, we invest, we, 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 Tenstorrent, which is working-

Harry Stebbings 14:48 S-

Peter Singlehurst 14:48 ... um, at the, uh, 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, uh, 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, like, forces of commoditization within the LLM space, uh, you know, such as, uh, open source models, such as DeepSeek.

Harry Stebbings 15:26 I completely agree with this. I think everyone agrees there's 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 three, four, five 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 15:53 I don't think it necessarily... A disciplined investor mindset doesn't mean you should ever just not look at certain areas or not look at particular industries. Because if you can build conviction on 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'll, you, you lean into valuation too much. But the, the trick is not paying high prices. It's being judicious and selective about when you choose to h- pay a high price.

Harry Stebbings 16:32 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, we're invested in, which are not growing from two to 100 million in a year, they're 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 16:56 I think, I think there's a possibility of that, but I would say that there will still be companies that, that are from that sort of pre-AI era that will still be exceptional companies, because they have a particular way of, uh, 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, of those kind of companies is, you know, a lot of it is about, like, how you manage regulation and, like, will AI sort of have an impact here? Yes, I'm, I'm absolutely sure it will. Um, but there's still, like, 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.

Harry Stebbings 17:40 Can I ask you, when you think about, like, defensibility, when you think about trying to understand revenue quality, I look to Seven Powers by Hamilton Helmer. I think it's probably one of the best. I don't know if you've read it.

Peter Singlehurst 17:50 I have not, no.

Harry Stebbings 17:51 Oh my God, I'm gonna send it to you. It basically distinguishes, like, what makes a company defensible-

Peter Singlehurst 17:55 Mm-hmm.

Harry Stebbings 17:55 ... and it breaks it down into seven different factors. Um, h- do you have a framework for trying to understand sustainability of value in a company?

Peter Singlehurst 18:02 So, yes, we do. Um, 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. Uh, we call it our 10 questions framework. Uh, I won't run through all the 10 questions, but you, the questions basically break down into four areas. The first couple of questions are about, uh, the, the s- the, the growth opportunity over the next five years, but also over the next 10 years and beyond. So, we're trying to look really far out. The next set of questions are about the enduring determinants of success. Uh, 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 I think you could say the most important, which is organizational culture. And within that we would, of course, include your management team and their ability to execute. And I think the important thing to note here is that it's not about, like, good cultures or bad cultures. It's about the alignment and the integration of the culture of an organization with the particular, um, ambition or mission that that company has. So, those enduring determinants of success are the second camp. Third camp is financial analysis, like can this be a high return on equity business? Trying to look at precedence for high returning businesses in industries. What is it in a given industry that means a business versus... A, 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.

Harry Stebbings 19:42 You said about enduring competitive advantage. One thing that I think we're seeing today is the cannibalism of a lot 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 20:03 I think it depends whether the competitive advantage lies in product or in something else. Um, and I think often the most enduring competitive advantages don't lie in a particular project, p- p- product. You know, they don't lie in sort of, like, "This, my mug is better than your mug and I'll continue to be able to sell more mugs than you can." Um, and again, like, uh, at the risk of sort of overusing the example, what is the competitive advantage of bending spoons? It's not any of their particular applications, right? It's not-

Harry Stebbings 20:32 So it's a playbook for M&A.

Peter Singlehurst 20:33 It's, it's a business strategy, and it's, uh, 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, um, and the kind of organization that they built. So, like, 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, if we were saying, "Well, the competi- competitive advantage for business XYZ is, you know, their widget is better than somebody else's widget," well, could AI make a better widget? Well, maybe, yeah.

Harry Stebbings 21:22 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 had Paul Graham kind of eulogize this earlier this year, but I'm just intrigued, when you said about kind 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 21:41 Yeah. I mean, I, I think th- these numbers will be a little bit off, but it's something like nine out of... Nine 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, s- 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, um, non-founders. You know, I think Vinted is a good example of that.

Harry Stebbings 22:16 I was thinking the same. I was actually messaging Tom this earlier.

Peter Singlehurst 22:18 Yeah. So-

Harry Stebbings 22:18 He's in Project Europe with this amazing...

Peter Singlehurst 22:20 I know, yeah. He's transformed the business.

Harry Stebbings 22:20 You guys in Vinted?

Peter Singlehurst 22:22 Yeah.

Harry Stebbings 22:22 Oh, wow.

Peter Singlehurst 22:23 Yeah. I mean, y- yeah, a non-founder that's totally transformed that business, so-

Harry Stebbings 22:26 Unbelievable.

Peter Singlehurst 22:26 I don't think it's the... You can't-

Harry Stebbings 22:27 It's like a re-founding of Vinted, to be fair.

Peter Singlehurst 22:29 It sort of is, yeah.

Harry Stebbings 22:30 Yeah.

Peter Singlehurst 22:30 I think, I think that's a good way of putting it.

Harry Stebbings 22:31 Yeah, totally agree. I'm a podcaster, so you know, we're good at packaging.

Peter Singlehurst 22:34 (laughs)

Harry Stebbings 22:35 Uh, you mentioned growth as the number one. You know, when we look at, like, a, a Bending Spoons, you know, I think quite publicly there around was like $5 billion valuation. When you think about, like, 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 22:54 Yeah. So we, 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, uh, a longer tail, greater levels of upside in the companies that we're investing in. But the base modeling is always to that five times.

Harry Stebbings 23:26 And the probability that it'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... 'Cause obviously everything has, like, a 1% chance.

Peter Singlehurst 23:39 So, um, 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, in investment, like, you're probably, uh, deluding yourself in the levels of probability and confidence that you can have in a long tail or s- you know, high outcome scenario, like a five times return. So for us, if you... 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, uh, 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.... uh, 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.

Harry Stebbings 24:31 How do you think about duration? Your structure means that technically, oh, uh, 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 better somewhere else. How do you think about duration and the willingness to wait for that?

Peter Singlehurst 24:45 Yeah, so, um, it, it slightly depends what fund str- fund you're talking about. We have some funds where we're able to recycle capital. Um, and so within those funds, we are able to trim from companies that have gone public, that we first owned privately, and recycle that capital into new, uh, private businesses. And we do that when we think that there is greater upside to be made in whatever the new company is that we're investing in from continuing to, um, own that additional capital in that, that public company. In other, more traditional fund structures that we manage, uh, you know, they are more sort of traditional limited life fund vehicles. We can do a little bit of recycling. Um, but there, I think the, the important thing is (laughs) just about always keeping your buy h- bar high and being patient. So, the last fund that we raised, we, we, we did a... 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, uh, convertible notes and everybody sort of pretending that companies were still worth what they were in 2021. So we deployed very little in 2022 and 2023, 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 to deploy more in 2024.

Harry Stebbings 26:05 It doesn't feel like it's much better pricing, Peter. Maybe we're in different markets, but, uh, it does not feel like, oh, the, um, excessive excitement's gone and now we're back to a state of rationale and, and calm.

Peter Singlehurst 26:18 So it depends where you look. If you look at the data, um, multiples in series C and beyond in the US are below 2021-

Harry Stebbings 26:28 I mean this-

Peter Singlehurst 26:28 ... but still at elevated levels.

Harry Stebbings 26:29 I mean this nicely. I never care about these re- I'm so sorry... data reports that are always produced 'cause they count 1,000 C, uh, Cs.

Peter Singlehurst 26:37 Mm-hmm.

Harry Stebbings 26:37 And it's like, no one cares about 1,000 Cs. I care about the five Cs that are gonna be at 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 expansive five, $10 billion rounds for these series Cs and Ds.

Peter Singlehurst 27:02 I d- I think you're totally right. I think that there is, like, a herding into a much smaller number of names. And I think that's quite a, a sort of understandable, like, human psychology here, right? The, the industry is still digesting the trauma of 2021 and the pullback in 2022. Like, what happens when an industry or an ecosystem goes through a traumatic period? You look for safety, and you, you look for safety by not being too different from what your peers are doing. Like, it's psychological safety, isn't it?

Harry Stebbings 27:24 I think we've always been like that, though. That's why we did what we did in 2021 and '22.

Peter Singlehurst 27:28 It's a graduation. Yeah.

Harry Stebbings 27:29 It, it's a brilliant story of the boy and the teacher. Do you know this?

Peter Singlehurst 27:31 No.

Harry Stebbings 27:32 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 says, "No. What do you mean? You don't understand maths." And the boy goes, "No. You don't understand sheep."

Peter Singlehurst 27:50 (laughs)

Harry Stebbings 27:52 (laughs)

Peter Singlehurst 27:52 That's a great story. (laughs)

Harry Stebbings 27:53 It's a great story, right? (laughs)

Peter Singlehurst 27:55 Yeah. (laughs)

Harry Stebbings 27:55 And it's exactly that, which is like, we are the most herd cult-like people, and we just follow the herd. Which is exactly to your point, if you go to fintech, actually there may be... or Web3, I mean, I don't know if Web3's still a thing, but like, you know, th- I'm sure you can get bargain pricing.

Peter Singlehurst 28:09 Yeah.

Harry Stebbings 28:10 (laughs)

Peter Singlehurst 28:10 I, I think that's true. And so look, this is where I think tr- trying to have as broad a universe as you possibly can means that, where appropriate, you can kind of dip into, like, those, those, 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.

Harry Stebbings 28:29 Right.

Peter Singlehurst 28:29 Um, you know, as a team, we can cover that universe. Um, and if you look at what we did last year, we invested in six different countries. That's not 'cause we were, like, trying to be exotic. It's just that we were finding great businesses all over the world. And a lot of them, like, really off the beaten path. So, you know, obviously Fendi's based in Milan, but we invested in a Portuguese business last year. Invested in a Brazilian company, an Indian company, um, an Israeli company, like-

Harry Stebbings 28:52 That's really interesting. So when you look at the Brazilian and the Indian, um... (laughs) I'm gonna get a load of hate for this. But Brazil has not shown pathways to liquidity at scale. They've shown Nu Bank, and everyone says Nu Bank... It's one in 20 years. There's Dlocal and, and, and Bunny. They're not a tool at scale. India has continuously actually been the Europe of this technology ecosystem, and Now's the time, now's the time. We're still waiting. How did you guys think about that, like, macro market risk?

Peter Singlehurst 29:18 Yeah, look, so I think that we're... It would be naive to say there isn't more macro market risk, but you then need to make sure that you're being... you're paying a price that rewards you for taking that risk. And in a sense, that is our job as investors. It, it's, 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, the sort of path to exit and path to liquidity, look, I think this is where having a very long-term time horizon, like, you know, we, we are willing to take a little bit more risk there. Again, just provided we are being paid to take that risk.

Harry Stebbings 29:51 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 30:01 So yeah, we, we certainly plan aheads, think about what capital we should reserve for companies. Uh-

Harry Stebbings 30:06 But like an Uber, say, or a DoorDash, or an Instacart, are very cash consumptive businesses, versus a, uh, traditional enterprise SaaS company, which can be much less cash consumptive.

Peter Singlehurst 30:16 Yeah.

Harry Stebbings 30:16 Do you think about that?

Peter Singlehurst 30:17 Yeah, we d- we do think about it, and we want to make sure that we have an appropriate...... balance of, of kinds of capital needs. But, you know, last year, you know, quite a few of the companies we invested in, they were already profitable or they were, or turning profitable this year. And then the question of dilution becomes, you know, much less of a risk to the investment case because companies become self-funding.

Harry Stebbings 30:38 It's terrible. They're clearly not growing fast enough. Back into growth.

Peter Singlehurst 30:41 (laughs)

Harry Stebbings 30:41 We don't see these. In the black is always why-

Peter Singlehurst 30:43 I, I think this is the misnomer of our industry again, right? Like, everybody sort of talks about, like, this trade-off between growth or profitability. It should never be about growth or profitability. It should be about, it should be about incremental return on invested capital. It should be about long-run return on equity, uh, long-run free cash flow per share.

Harry Stebbings 31:01 Does Amazon play into what you're saying? Does Amazon play into what you're saying or not? Because obviously, Amazon, you know, for years, did not have profitability and they continuously reinvested in new products and R&D. Is that playing into what you're saying or not playing?

Peter Singlehurst 31:13 I mean, I think Amazon, for us as a firm, was a formative investment. You know, we, we, not like I can take any credit for this, but, uh, um, we first invested, uh, in Amazon as a firm in, I think, 2004. Um, 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. You know, 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, uh, we've been considered, in many cases, daft for owning those companies for really long periods of time. Um, but we've seen that scalability and that growth and those enduring competitive advantages manifest themselves into scale and

Peter Singlehurst 31:59 profitability.

Harry Stebbings 31:59 What company do you think you're considered daft for owning today that actually is a killer?

Peter Singlehurst 32:05 Bytedance.

Harry Stebbings 32:08 (deep exhale) Bold. (laughs) You want to go there?

Peter Singlehurst 32:15 No.

Harry Stebbings 32:15 Like, ch- ch- talk to me. Why, 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?

Peter Singlehurst 32:25 End it all. Shut down TikTok, doesn't make any difference for ByteDance. I mean, ByteDance is the most astonishing, uh, revenue and profit generation company in China. Uh, the, the users, the profit that they make in China is just off the charts. And so-

Harry Stebbings 32:41 Talk, talk to me about it. I don't know, and I, I'm, I have an incredibly Western view which makes me feel incredibly naïve. So what is the ByteDance business in China and why is it so good?

Peter Singlehurst 32:50 So, I mean, the, there are two main applications in China. Uh, uh, Toutiao. I don't know, there's not really a direct comparable, but like a better version of Apple News. And Douyin, which is like, uh, like TikTok in China. Um, they're the market leader in, uh, online advertising in China, and I think at the moment, they're about number three in e-commerce in China. It's, it's enormous. It's an absolute monster. And look, so TikTok has a big user base and it's, it's, you know, it's, you know, I don't want to sort of dismiss the, 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, you know, the, the, um, yeah, the quality of that business is, is quite something to behold.

Harry Stebbings 33:36 If TikTok US were banned or, you know, that was no longer part of the core ByteDance business, to what extent would it have an impact? Like, I'm, I'm so sorry, like, 5%? Like, 20%? Like, 25%?

Peter Singlehurst 33:46 I mean, like, our, 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.

Harry Stebbings 33:54 Wow, when did you get in?

Peter Singlehurst 33:57 Uh, 2019, I think. So we weren't super early in it, um, but it's grown astonishingly since we invested.

Harry Stebbings 34:05 How do you think about liquidity there? 'Cause I have, you know, many LPs that are also holders of ByteDance, either directly or through different funds that they're in, and they're all kind of going, "Uh, when's it coming?" How does that provide liquidity to its investors?

Peter Singlehurst 34:19 I think it'll be public at some point, I think either in the US or Hong Kong. Obviously, one of those is probably a little bit more likely than the other. Um-

Harry Stebbings 34:27 Do you think there's, I'm sorry, do you think there's any chance now with China and US relations that it could go public in the US?

Peter Singlehurst 34:32 I mean, (laughs) like-

Harry Stebbings 34:33 No.

Peter Singlehurst 34:33 ... can't rule anything out, out, out at the moment with, with US and the things that are happening there. But, um, I mean, the company's also, uh, you know, and I think this is sort of publicly reported, you know, they buy back their own shares. You know, they're so profitable.

Harry Stebbings 34:45 We, we mentioned kind of where you go public. The question I actually have to ask is, why go public? Like, 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 know, you should increase your margins, then maybe you actually don't have a great business. Why should companies go public anymore? Well, given the extended privatization windows we have for capital markets.

Peter Singlehurst 35:09 I'm not sure I particularly have a good question to that answer either, and that's why I'm a private company investor and invest in private companies on behalf of my clients. Um, but that being said, you know, I, I do this from within a large public market organization.

Harry Stebbings 35:19 Has that changed for you?

Peter Singlehurst 35:21 Um, so no, it's, it's, it's, I think it's just continued to accentuate.

Harry Stebbings 35:26 Yeah.

Peter Singlehurst 35:26 Um-

Harry Stebbings 35:27 Because of the excess supply of cash now, or the cash in private markets, meaning you don't need to-

Peter Singlehurst 35:31 I, I think it's, I think it's more subtle than that. I don't, um, I don't think it's necessarily about capital cycles within private markets that is leading these companies to stay private longer, though of course it matters. I think what people realize today is that you can build a better business by staying private for longer. And-

Harry Stebbings 35:48 Why do you think that is?

Peter Singlehurst 35:49 Uh,

Peter Singlehurst 35:50 focus. I mean, it's really hard to be a public company. It's really hard. Um, it's not just the reporting requirements that you have. It's the, um, it's, you, you can have people owning your shares for all sorts of reasons that are misaligned with what you're trying to do as a, as a company. Um, you have to do everything in the cold light of day. Uh, all your competitors get to know pretty much everything about your business 'cause you have to tell your shareholders pretty much everything about your business. It's just really hard. And I mean, I, I say this, I have the most enormous amount of respect for companies that-... that go public well, and are, and are able to flourish as public businesses 'cause it's really hard. So I think companies realize they can s- have greater focus by remaining private for longer. Um, I think there are some, some, some good reasons for going public. Um, I think it's right that, uh, employees should be able to get liquidity. But that's increasingly being served by these very large secondary, uh, private rounds. Um, 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, as a, as a public company. Um, the, um, I once, I was, uh, we're shareholders in Epic Games, um, and that, that's been private since 1992. Um, and I once asked, um, uh, Tim Sweeney, the, the founder of that company, like, you know, 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, uh, 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, can be need for liquidity, they can be, um, you know, if you need to be acquis- acquisitive or engaging with regulators, whatever. So these forces can, I think, become good reasons for becoming public.

Harry Stebbings 37:43 If we exist in this continued world of a standard private company being capitalized by, you know, large, large pools of capital, how do we get liquidity? 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 gonna hold?

Peter Singlehurst 38:04 I think y- you're starting to see the evolution of these, these very large, company facilitated, uh, secondary rounds. Um, 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 sort of exchanges for private companies. I think you just have too much complexity in the share class structures. You have, you know, things like Rofas, you have, like, company control. 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, for investors.

Harry Stebbings 38:40 Did you do the $60 billion Databricks round?

Peter Singlehurst 38:43 Um, 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.

Harry Stebbings 38:51 Do you see a 5X from 60?

Peter Singlehurst 38:53 Yeah. Yeah. But 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, we, we stood our hand, we put a small amount of extra capital into it, but we didn't double down in

Peter Singlehurst 39:05 the 60 round.

Harry Stebbings 39:05 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-

Peter Singlehurst 39:13 Mm-hmm.

Harry Stebbings 39:14 ... to this new IPO style, are they gonna get burned?

Peter Singlehurst 39:18 I don't know. So, the, 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, they all used to be public businesses. And the natural owners of them were public market organizations. It was Baillie Gifford, it was T. Rowe, it was BlackRock. Companies started staying private longer, so they, the natural owners and the long-term historic owners kind of got pushed out of owning those kind of companies. This created a vacuum. Into that vacuum, um, and I don't mean this in a pejorative sense, but y- the opportunists came into that vacuum. So you had hedge funds, you had traditional earlier stage investors spinning up these growth stage funds, um, and owning companies that they knew, but had never owned companies at that stage and 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 y- you want to have good owners of companies, right? Like, you want to be operating in a market where, like, you have rational investors making rational decisions, um, doing, you know, really solid analysis on companies, because you need that market to be sort of pricing efficiently. So,

Peter Singlehurst 40:34 I think there are examples of that. But I think what you're really seeing is more of, like, an institutionalization and a professionalization of this market. And so, to give you, like, one example of what that can look like, we, um, uh, we're shareholders in Anduril. Uh, we first invested in that company last year. Uh, the, 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, uh, 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.

Harry Stebbings 41:18 Can you talk to me about the rationale behind that one? I'm a big believer in Anduril, so I, I, I have many thoughts around why I'm excited for them, but why did you get so excited for them?

Peter Singlehurst 41:26 So I could go into the specifics of the company, but, uh, w- what Anduril sort of conjured in my mind was a pattern that we'd seen in two places before. Um, those two companies, uh, that it sort of conjured were Tesla and SpaceX. What Anduril have done is they have developed products that are largely software-enabled, but are still really hard technical hardware problems that they've solved. Um, 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, you know, clear water between them and their next nearest private competitor. That was true of Tesla in 2013, it was true of, uh, SpaceX in 2018, and, and I think that's true of Anduril today. So it's that combination of, you know, a really difficult hardware problem that they've solved, an industry that's largely not changed, and, and, and clear space between them and other private competitors.

Harry Stebbings 42:40 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, um, more than your LPs because of that exposure. Do you buy that, or do you think there is a fundamentally different mindset to manage a private book versus a public book?

Peter Singlehurst 43:04 So I- I don't think there is. Um, 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. Um, you have different sources of information, whether you're doing public or privates, but, like, you're still looking for the same characteristics, right? Like, 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- I think one of the big differences is in what it means to be a good owner, um, of a, of a growth-stage company. Um, and there are big differences here between not only private ownership and public ownership, but also kind of growth-stage ownership and venture ownership.

Harry Stebbings 43:51 You mentioned Anduril there. Two questions on the back of that. You compared it to SpaceX and Tesla, I think great, uh, analogies. Um, 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 44:08 Yeah, I worry about it. Um, the thing that people forget about SpaceX is that there's an amazing management team there that is not Elon Musk. You have-

Harry Stebbings 44:17 Gwynne Shotwell.

Peter Singlehurst 44:18 ... Gwynne Shotwell, who, um, keeps a, is- is able to keep a very low (laughs) profile, perhaps precisely because of the high profile that Elon Musk has. Um, so that gives us a lot of comfort, but is it a concern? Yeah, of course, it's a concern.

Harry Stebbings 44:31 But it doesn't matter about her low profile if you have whole states canceling SpaceX contracts. And that will continue in that, you know, Canada's their second-biggest market, Mexico is their third. At what point does it become a critical weakness?

Peter Singlehurst 44:47 I- I think that's a very... it's a big worry.

Harry Stebbings 44:49 When you look at the, your Andurils, your SpaceXs, your Teslas, and you're seeing more and more move to defense, to hard tech, to, to really challenging technical problems, I worry that this generation of investors, and, and potentially me included, is almost out of date in this new world of very challenging technical problems. No longer is it, you know, as we said, triple, triple, double, double enterprise investing. Have the heuristics changed on what it takes to be a venture investor?

Peter Singlehurst 45:18 So I've never thought of, uh, myself as, um, as an expert or an investor in technology. Um, I invest in companies, I invest in businesses. Um, and those businesses will often use technology to create these incredible business models that are very scalable and can be sort of high-returning. Um, but, um, I'm, I'm not a student of technology, I'm a student of businesses and business models. Now, there, there are people on my team who are much more interested in technology itself, and also love investing and love businesses. But my, my, 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, is trying to understand great businesses, not great

Peter Singlehurst 46:07 technologies.

Harry Stebbings 46:08 What do you worry about most today in the investing world?

Peter Singlehurst 46:10 Deglobalization. Um, we, we're global investors. You know, one of the things that's made us successful over the years is, is finding interesting companies all over the world. The, the very first investment, this is a story we love to tell our clients, the very first Baillie investment Baillie Gifford ever made was in a, in a Malaysian rubber plantation that was producing rubber, uh, for the tires that were going to be needed on the Model T Ford. We- we've always been global. The very first private investment we ever made was, 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. Um, and from an investment perspective, um, but also just, I mean, from a sort of, from the perspective of humanity, I worry about an era of, uh, more barriers, weaker ties between countries, because I think it's better for investing, I think it's better for us as people.

Harry Stebbings 47:11 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 47:19 I think it does. Yeah, I think it does remain a big opportunity. Now-

Harry Stebbings 47:22 Are you still actively investing in China?

Peter Singlehurst 47:24 So we, um, yeah, I mean, we, in the public markets, we have a, we have a team. Uh, in China, we continue to look at opportunities in China. Um, 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'll be, be greedy when everyone 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, um, I'm hoping to get out there over the summer after not being in far too long. Um, but yeah, we will continue looking for investments in China.

Harry Stebbings 48:05 Can I ask, if we peel back the curtain on, on Baillie Gifford's investment process, when we look at, like, private company investing, what does that investment decision-making process look like for you internally?

Peter Singlehurst 48:15 Mm-hmm. Um, so the process... I- I guess the decision-making process is always a manifestation of that funnel, right? So if I look at last year, we looked at, we met 1,000 companies, we looked at 600 private funding rounds-

Harry Stebbings 48:27 How big is the team?

Peter Singlehurst 48:28 Uh, 10.... tad. Uh, but we work within a team of 170 public market growth equity investors-

Harry Stebbings 48:34 Huh.

Peter Singlehurst 48:35 ... and, and we're able to draw on that resource. So as, but this is just as a team, right? So just as a team, we met 1,000 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, uh, we, we do our diligence. That culminates in a 10-Q, which the, 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. Um, uh, we sit down and we discuss them as a team. We do that on Thursday afternoons. Every week, yeah.

Harry Stebbings 49:09 Wow.

Peter Singlehurst 49:09 Uh, the whole team's there.

Harry Stebbings 49:11 How long do you set aside for it?

Peter Singlehurst 49:12 Uh, we're, we're, we're s- 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. Uh, at the moment, they're an hour and a half, stock discussions. Um, the investment committee then, uh, meets on Friday afternoons. Um, uh, that's a, you know, pretty small investment committee. There's four of us, um, and we decide what to do. Now, inevitably, there'll be additional things we want to follow up on, but it's, uh, the, the core decision-making group for our dedicated funds, uh, there's

Peter Singlehurst 49:42 four of us.

Harry Stebbings 49:42 And check the size range on the 11 is kind of, what's the range?

Peter Singlehurst 49:46 Yeah, so, so, it, there's a large range because there are different pools of capital that we invest from, um, but they can range from $10 million to $150 million.

Harry Stebbings 49:56 And how does that change when you're making reinvestments? It's a different process than Saiki. How does that change?

Peter Singlehurst 50:02 So when, when we're making reinvestments, we, we re- revisit the investment case. We do an updated 10-Q. Uh, we re-examine that five times upside case. And I guess you then have, like, these, broadly speaking, there are three different decisions that you need to make.

Harry Stebbings 50:16 Do you need to see 5X on the reinvestment?

Peter Singlehurst 50:19 Um, well, so this is where it slightly varies, right? So if you're gonna double down on a company, then absolutely, yeah, you need to see a 5X on a reinvestment. Um, if you're gonna do a small pro rata check, I think then, you know, doing pro rata checks, if they're relatively small, can just be part and parcel of being a good investor, which we'll do con- provided things are going in the right direction. And then, of course, there's the decision not to do anything, um, where we sort of decide not to take part in, in a round, where, where we are not seeing, either we're not seeing the execution that we need or we think the valuation just doesn't make sense.

Harry Stebbings 50:50 When did you not, that with the benefit of hindsight, you're like, "Wow, we missed that"?

Peter Singlehurst 50:55 Ah, so you mean, like, miss a new investment?

Harry Stebbings 50:59 No, where you invested and then it came back and you were like, "I'm not, I'm not feeling it so much."

Peter Singlehurst 51:06 Actually, I'll tell you the round that we didn't take part in yet. We came very, very close, too. So we, we first invested in Stripe at about a $30 billion valuation. Um, but we didn't take part in the, in the, the down round that they did, uh, whenever that was, 2022?

Harry Stebbings 51:25 Which was 12?

Peter Singlehurst 51:27 Uh, the down round?

Harry Stebbings 51:28 Yeah.

Peter Singlehurst 51:28 No, the, 'cause it got, we invested at 30, it got up to about 90, and then I think it came back to about 50.

Harry Stebbings 51:33 Oh, right, yeah.

Peter Singlehurst 51:34 Um, and we didn't take part in that round, and I think we should have done.

Harry Stebbings 51:37 Why did you not?

Peter Singlehurst 51:39 Oh, gosh, that's a, you're asking me to kind of go back. I think that it was, I think at that particular time, growth had come back, um, and I think we were, 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 business. It was quite nascent, and I don't think they'd quite made the progress that we would have hoped that they would have made. And so we just said, actually, like, "We've got, 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, we should have put more in then.

Harry Stebbings 52:12 You think it can be a $250 billion company? I think Patrick and John are amazing, but I'm just like, is Adyen massively underpriced, then, at 40?

Peter Singlehurst 52:21 Yeah, well, I mean, um, Stripe is, um, priced even, even less than, uh, than Adyen, if you just look at it on a multiples basis. And it's growing quicker.

Harry Stebbings 52:31 I mean, their last round was what?

Peter Singlehurst 52:33 So I think they're doing one at the moment on there sort of 91 and a half or something like that which is-

Harry Stebbings 52:37 Which is double Adyen?

Peter Singlehurst 52:38 Uh, in terms of market cap, yeah, I think it is, yeah.

Harry Stebbings 52:41 Does that mean Adyen's undervalued?

Peter Singlehurst 52:44 I don't know. You'd need to speak to my public market colleagues.

Harry Stebbings 52:45 (laughs) Do you ever want to do public markets?

Peter Singlehurst 52:49 Well, I did public markets.

Harry Stebbings 52:50 But like, again, like, go back.

Peter Singlehurst 52:52 I mean, we continue to own a number of our companies after they go public, right? So we're still big, you know, shareholders in Affirm and Wise. Would I ever want to go back to just doing public markets? Um, um, look, I mean, I, I am so lucky and privileged in what I get to do, and I think that the reason I love doing what I do is because you get to expand the map, or at least expand the map for an organization like Baillie Gifford. 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. Um, and so you're starting with a blank sheet of paper, and you get to, uh, discover these companies, and you get to, you get to know these companies as, as, 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.

Harry Stebbings 53:49 You've mentioned Wise several times. Wise decided to list in the UK. Um, the UK public market is not one that's filled with optimism right now. And, 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, one, and do you share the sentiment that we're in a really dire state for the London Stock Exchange?

Peter Singlehurst 54:17 Yeah, I do share the sentiment that we're in a dire state for the London Stock Exchange. And I, I think-

Harry Stebbings 54:21 Why do you think that is? I had the CEO on the show.

Peter Singlehurst 54:24 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, there's a supply problem, and I think there's a demand problem as well. I think that, I think the UK investors, uh, by and large, um, perhaps it's a function of them, there just not being that many really exciting growth companies listed, uh, in, in London. They're not as used to, uh, analyzing and investing in, and their risk appetites are probably not as high as investors in the US investing on, you know, on the NASDAQ, for instance. So I think there's a demand problem and I think that there is a supply problem as well.

Harry Stebbings 55:04 If I were to put you in charge of the LSE today, what would you do?

Peter Singlehurst 55:07 That's a really hard question. So, um, I think the problem starts su- like 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 LSE level.

Harry Stebbings 55:21 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 55:33 But, 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. Um-

Harry Stebbings 55:38 Well, no, but that's 'cause I'm in a small niche of technology. I'm sure if we went into bio and real estate and, and all the other markets, there would be way more.

Peter Singlehurst 55:45 I'm, I'm not saying that there aren't great companies out there. There's just, I'm just not sure that there are enough at the scale, uh, that you'd need to have to make for a very vibrant, diverse, uh, 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-

Harry Stebbings 56:09 Do you think we should have a European public market?

Peter Singlehurst 56:12 Yeah, I think we probably should.

Harry Stebbings 56:13 'Cause everyone is struggling from the same thing. Frankfurt is struggling from the same-

Peter Singlehurst 56:16 Yeah.

Harry Stebbings 56:16 ... 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 'cause every day you have that permanent decision of, "I can sell." When you're private, I mean, to a relative extent, you're kinda stuck.

Peter Singlehurst 56:31 So, like, there, there is a, 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? Um, look, this is where I think increasingly in the private market secondary, secondary markets can be useful. Uh, so some of our large, high-profile companies, like, we have trimmed in the private markets, and we've recycled that capital into new, interesting, high-growth private companies. Um, for those companies that go public, again, in the funds where we can recycle capital, it's, like, it's not easy, but the, there's an opportunity cost trade-off that you, that you make, right? Each time you loo- you're looking at a, a new company, which is, you know, "I need to find some capital to invest in this company." Well, where's that capital going to come from? Well, I'm gonna get it from, you know, where I have liquidity, but also where I believe there is the greatest disparity 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,

Peter Singlehurst 57:35 really.

Harry Stebbings 57:35 Will we have far more capital in venture in five years' time than we do today?

Peter Singlehurst 57:39 I don't know about venture. Um, I- growth-

Harry Stebbings 57:42 I think, I think we wrongly talk about, like venture, they've kind of merged. I mean, like, what are series C? Venture or growth?

Peter Singlehurst 57:49 Yeah, series C is, like, on the borderland, but, like, series D, series E, like, that's clearly growth, right?

Harry Stebbings 57:53 Sure. Okay, but when we think about, like, pre, like, will we have the... 'Cause I think we're just in the, like, precipice now, and we're gonna see sovereign wealth funds like we've never seen before, pension funds like we've never, and it's gonna get much noisier.

Peter Singlehurst 58:06 Mm-hmm.

Harry Stebbings 58:06 Do you agree?

Peter Singlehurst 58:07 So, yes and no. Like, I, I, I do still think we are seeing this trend of institutionalization and professionalization of the growth stages, and there are some, 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 were anomalous years," but I actually s- 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, there'll be periods where there are more and periods where there are less. But, you know, I, I think we're already at the stage where there are a handful at the growth stage of, you know, 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. I, is that gonna double or triple? I, I don't think it will.

Harry Stebbings 59:02 We mentioned, um, Stripe as one where the reinvestment maybe you 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?

Peter Singlehurst 59:15 So, Coinbase, I should've invested in Coinbase.

Harry Stebbings 59:19 Why did you not?

Peter Singlehurst 59:20 Uh, oh, 'cause I created a very elaborate spreadsheet where I was, you know, estimating all of the, you know, the volume and liquidity that you'd need to have in Bitcoin to get to the kind of 5X returns, and my, it was a very clever model, and I felt like I was being very clever, and I was just wildly off mark.

Harry Stebbings 59:37 Do you worry that you can sometimes try and be too studious?

Peter Singlehurst 59:40 Um-

Harry Stebbings 59:40 With all of the models and...

Peter Singlehurst 59:42 Yeah, I mean, I think that can always be a risk, right? Like, and it's not just with, with models. Like, it's, um, you know, you, you, sometimes you can over-intellectualize things. Um, and sometimes the best investments, like, they're quite obvious. That's not to say it's always obvious, but-

Harry Stebbings 59:57 What was the most obvious?

Peter Singlehurst 59:59 I mean, th- this is kind of going back to when I was doing public market investing. Um, but, you know, for me, um, when we invested in Tesla in 2013, like, it was pretty obvious.

Harry Stebbings 1:00:11 It was obvious in 2013?

Peter Singlehurst 1:00:13 Yeah, I mean, th- they'd sold tens of 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 would, that people wanted to buy. Uh, they'd proven that they could, you know, make, uh, the, the Roadster. And then the question, like, was execution, and like, were they actually gonna be able to make enough of these things? But you could look at the organization and there were, um-... you know, there were people in there that had built car factories and, like, had scaled the production of cars. So, yeah, it sort of felt kind of obvious at that time and it was a, you know, $3 billion

Peter Singlehurst 1:00:44 market cap.

Harry Stebbings 1:00:45 Listen, I want to do a quick fire. So I say a short statement, you give me your immediate thoughts. So what do you believe that most around you disbelieve?

Peter Singlehurst 1:00:52 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.

Harry Stebbings 1:01:08 You can buy and hold one stock for the next 10 years. Which one and why?

Peter Singlehurst 1:01:14 Bending Spoons.

Harry Stebbings 1:01:16 Wow. That, that's the one? Why?

Peter Singlehurst 1:01:19 'Cause I think that they have the most 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 they have great products and generating loads of profit and free cash flow from them.

Harry Stebbings 1:01:35 What is it about that business model that you love so much?

Peter Singlehurst 1:01:37 It's having these generalizable set of tools that can make any consumer digital application better, uh, from a user perspective, can grow the revenues, and can be run way more efficiently. And their addressable market basically is the, 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.

Harry Stebbings 1:02:11 And so the core risk really is acquisition price sensitivity?

Peter Singlehurst 1:02:14 Yeah. And, and can you continue to do it at ever greater levels of scale?

Harry Stebbings 1:02:19 It was interesting actually. I spoke to one of their acquired company CEOs the other day and 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. And if you won'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. (laughs) Love that. Um, what would you do if you knew you couldn't fail?

Peter Singlehurst 1:02:45 Well, I think that if you knew that you couldn't fail, you would, it would, it would increase your risk tolerance to infinity, wouldn't it? (laughs)

Harry Stebbings 1:02:53 Yeah.

Peter Singlehurst 1:02:53 I mean, you just, you'd go and you'd take the most absurd risks you possibly could because you knew you would get them right. I mean, what would you do? M- maybe you'd be like a, 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'd do if you knew that you couldn't fail.

Harry Stebbings 1:03:14 Which public company CEO do you have most respect for and why?

Peter Singlehurst 1:03:18 I've got an enormous amount of respect for Christo at, uh, at Wise. He's, um, he's just a brilliant executor. He, uh, he cares, he just has this deep care and passion about this very sort of niche thing of, of moving money cheaply and efficiently. And he's, he just cares deeply about his customers, his business. He thinks differently and orthogonally about how you go about creating a business. Um, and yeah, sort of seeing, seeing that journey as, as, as the business is growing but as he's sort of grown with the business as well.

Harry Stebbings 1:03:53 If you could change one thing about the Baillie Gifford investment decision-making process, what would you change?

Peter Singlehurst 1:04:00 I would like to have more time to invest in every decision I made. So, so, you know, rather than, you know, having I don't know however much time it is to, uh, digest all the work that the team have done, uh, to come to an investment decision, I would love it if I could have three, five, 10 times the amount of personal time that I could put into, into thinking about those investment decisions. But we have to operate within the, the sort of, you know number of hours there are in the day, right?

Harry Stebbings 1:04:32 OpenAI at 300, Grok at 50, or Anthropic at 60. Which one do you buy and which do you sell?

Peter Singlehurst 1:04:40 Oh, gosh. Do I have to buy any of them?

Harry Stebbings 1:04:42 You don't. You can buy none of them.

Peter Singlehurst 1:04:45 I think at the moment I would say that I would buy none of them. And it's not because I have a particular... And it's not because I- I'm critical of those businesses. It's because I don't know what the answer is to enduring competitive advantage, um, 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.

Harry Stebbings 1:05:07 And you wouldn't say it's productization and brand? Now, I would say brand. Like, consumer touchpoints-

Peter Singlehurst 1:05:12 Maybe.

Harry Stebbings 1:05:13 ... and brand.

Peter Singlehurst 1:05:13 Well, the one that I would say is distribution.

Harry Stebbings 1:05:15 Well, this is why actually I think Google's one of the most, like, uh, 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 1:05:26 Well, if you went down that route, you'd say Microsoft, wouldn't you?

Harry Stebbings 1:05:28 You would as well.

Peter Singlehurst 1:05:29 Yeah.

Harry Stebbings 1:05:29 Yeah. What have you changed your mind on most in the last 12 months?

Peter Singlehurst 1:05:33 Oh, so many things. Um, so we, we had this discussion about, um, adding value to companies. Like, this is something that, like, I was just so wrong on for so many years. I used to say, like, "Oh, no, you don't get it. Like, at, at the growth stage, like, the concept of value add doesn't apply. Companies should, like, know, 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 being a growth stage company. You know, we've already talked about them. How do you go public effectively? How do you be a public company? How do you, you know, 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, you know, we- we can be well-positioned to help them with.

Harry Stebbings 1:06:20 Did becoming a father change your investor mindset? Types of businesses you like, approach?

Peter Singlehurst 1:06:28 I don't, I don't think it changed my, um, my investment approach.... I think changed my world. (laughs)

Harry Stebbings 1:06:36 What did it change in your worldview?

Peter Singlehurst 1:06:38 Well, uh, the, the, 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, um, that you care about more than anything you can possibly imagine caring about. And 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. Um, and it's, uh, it's amazing but it's, uh, it's, um, ev- everything, the, the, 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's like everything in life just becomes somewhat accentuated.

Harry Stebbings 1:07:23 Why does no one ever leave Baillie Gifford?

Peter Singlehurst 1:07:25 (laughs) Um-

Harry Stebbings 1:07:27 You guys don't, you just stay.

Peter Singlehurst 1:07:29 (laughs)

Harry Stebbings 1:07:29 Everyone in venture's like, "I'm out, I'm in, tag teaming, I'm out." You guys, nope, just stay, and you're in Edinburgh.

Peter Singlehurst 1:07:36 Yeah, uh, which is a lovely place to live. Why would anyone ever want to leave Edinburgh?

Harry Stebbings 1:07:40 Sorry, I did not mean that pejoratively to Edinburgh.

Peter Singlehurst 1:07:42 (laughs)

Harry Stebbings 1:07:42 But, you know, it's not a, yeah.

Peter Singlehurst 1:07:44 Um, so the firm has been around for 115 years. We're, we're a partnership. Um, we are a intergenerational unlimited liability partnership. So, so there's-

Harry Stebbings 1:07:53 How does that work from a carry perspective?

Peter Singlehurst 1:07:56 Uh, so carry goes to the firm.

Harry Stebbings 1:07:58 Carry goes to the firm.

Peter Singlehurst 1:07:59 And then we, we remunerate people through, through bonuses, which is a synthetic carry, I suppose. Um, but the, the way the firm, the firm operates is that there's this sort of continuous chain of partners who have been responsible for the firm and responsible for the, 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, um, have for our clients, but also for this, this organization that we kind of get to be stewards of parts of our lives and hopefully hand on to the next generation of partners better than when we, than when we joined it.

Harry Stebbings 1:08:50 It's an amazing institution. I, I really love this story about it. For me as in, like, a student of investing, it's one of the most incredible stories. Uh, so much respect for the team there. Um, final one for you. When we look forward to the next 10 years, what are you most optimistic about? I like to end on, like, a note of positivity.

Peter Singlehurst 1:09:07 So I'm, I (laughs) I'm really excited and optimistic about the conditions under which companies are sort of entering this stage of the market, this kind of growth stage. So kind of going back to that framing that we had earlier of, you know, companies, you know, around about $200 million mark, you know, 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. Uh, 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. Um, 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. And then-

Harry Stebbings 1:09:52 Can I, can I interrupt you and just ask, 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 1:10:12 I think this is the opportunity for Bending Spoons, right? Like, this, this is 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.

Harry Stebbings 1:10:33 Would you be CFO of Bending Spoons?

Peter Singlehurst 1:10:37 Uh, would I wh- I don't know, I'm not sure.

Harry Stebbings 1:10:38 If Luca called you up and said, "Be my CFO."

Peter Singlehurst 1:10:41 There's a, Davide, the CFO there, does an amazing job. There's no way I'd be able to do as good a job.

Harry Stebbings 1:10:45 (laughs)

Peter Singlehurst 1:10:47 But there's, going back, the, the final thing-

Harry Stebbings 1:10:48 Yeah.

Peter Singlehurst 1:10:48 ... that I think's really important for, like, why now is an amazing time for growth equity investing is we- we're in this period of, um, uh, capital where there ... And yes, taking the, the conversation we had earlier around, um, there are some parts of the market that are still quite exuberant. Um, 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 kind of 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, the long-term quality of those businesses. So I think that kind of amalgamation of, like, lots of venture stuff being tried, lots of experiments, human capital, and the right quantity of financial capital just makes me, like, really excited to be deploying capital in this part of the market.

Harry Stebbings 1:11:36 Uh, Peter, I so appreciate the time today. I so appreciate ... You, you're 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, and bluntly you being so open today.

Peter Singlehurst 1:11:51 Well, it's been a pleasure to see you again, Harry. Really enjoyed the conversation. So thank you very much for having me.