Mar 19, 2025 · 1h 12m · 20vc
Peter Singlehurst: Lessons from Turning Down Stripe, Coinbase and Losing Money on Northvalt · 20VC with Harry Stebbings
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In this episode of 20VC, host Harry Stebbings interviews Peter Singlehurst, Head of Private Companies at Baillie Gifford, exploring the evolving dynamics of late-stage private market investing, growth-stage underwriting discipline, and the strategic management of capital. Peter shares candid lessons from high-profile mistakes like Northvolt and missed opportunities like Stripe and Coinbase, while outlining Baillie Gifford's long-term framework for evaluating AI, defensibility, and capital efficiency.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 24.9% of the talking time here. How this is scored →
Harry as informed peer 4.5 Guest teaching 3.0 Guest disagreement 1.0 Harry pushing back 2.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:04:39 Refusing the premise on foundation model AI investments
When Harry forces a choice to buy OpenAI, Grok, or Anthropic, Peter explicitly rejects the choice, stating he would buy none of them because LLM-level moats remain unproven.
Hardest push from Harry ▶ 26:29 Harry dismissing generic valuation reportsHarry forcefully pushes back against industry valuation reports, arguing that aggregate market statistics are irrelevant because venture capital performance is entirely driven by rare power-law outliers.
Biggest teaching moment ▶ 32:41 Peter detailing ByteDance's domestic China dominanceAfter Harry admits a naive Western-centric view on ByteDance, Peter educates him on the immense scale and profitability of Toutiao and Douyin inside China, demonstrating why the core investment thesis holds even if TikTok US is banned.
Harry holds his own ▶ 11:57 Harry laying out the mechanics of startup overcapitalizationHarry demonstrates deep expertise in growth stage market dynamics, arguing that excess supply of growth capital inflates growth expectations and distorts company formation like stuffing startups for foie gras.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Episode Hook and Highlights | 2 | 1 | 0 | 0 | Harry opens with an easy conversational setup, skipping standard origin questions to ask specifically about Peter taking on private company investing at Baillie Gifford. Peter explains putting his hand up in 2014 under senior partners. The tone is entirely welcoming and light. | |
| Advice to Younger Self and Structural Lessons | 3 | 2 | 1 | 2 | Harry asks a prompt question about advice to Peter's younger self, then follows up with 'Why were you not?' when Peter notes overestimating permanent capital structures. Peter reflects on distinguishing core competitive edges from minor differences. | |
| Learning from Painful Mistakes: Intarsia and Northvolt | 4 | 3 | 1 | 3 | Peter delineates between acceptable statistical downside risk (Intarsia GLP-1 trial failure) and genuine analytical mistakes (Northvolt execution failures). Harry probes into whether there were early warning signs and if Baillie Gifford kept doubling down. | |
| Evaluating Investment Risks and Growth Stage Focus | 5 | 3 | 1 | 2 | Harry demonstrates industry knowledge by bringing up Lead Edge's 8 investment principles and jokingly comparing ideal deal criteria to wanting to marry Mila Kunis. Peter outlines Baillie Gifford's quantitative growth criteria (200M revenue, 70% growth) and explains why return on equity (ROE) is neglected in early-stage venture. | |
| The 'Foie Gras' Problem of Overcapitalization | 6 | 2 | 2 | 6 | Harry actively challenges Peter on whether overcapitalization is still rampant, arguing that growth investors are stuffing startups with cash and blowing them up like foie gras. Peter counters that while this happens in AI LLMs, sectors like fintech and companies like Bending Spoons show disciplined capital efficiency. | |
| AI Investment Strategy and LLM Commoditization | 5 | 3 | 1 | 3 | Peter explains staying away from foundation model LLM rounds due to rapid open-source commoditization. Harry agrees with the commoditization thesis but asks how disciplined growth investors can handle exorbitant pricing at the application layer where scaling speed is unprecedented. | |
| Has Rapid AI Scaling Misled Traditional Enterprise Startups? | 6 | 2 | 1 | 4 | Harry voices a detailed worry that unprecedented AI growth curves have misled traditional enterprise startups on what growth rate is required for Series C and D rounds. Harry references Hamilton Helmer's 'Seven Powers', while Peter walks through Baillie Gifford's 10-questions underwriting framework. | |
| Predicting Competitive Advantage Amid AI Cannibalization | 4 | 3 | 1 | 2 | Harry asks if predicting enduring competitive advantage is even possible when AI tech is shifting so fast. Peter explains that true moats lie in business strategy, culture, and founder execution rather than product specs. | |
| Upside Modeling and Probability in Underwriting | 4 | 4 | 1 | 2 | Peter educates on probability modeling in growth investing, noting that a 30-50% chance of a 5x return represents strong odds compared to public market base rates of 5%. Harry asks about duration and capital recycling across different fund vehicles. | |
| Pricing Outliers and Herd Mentality in Late-Stage Rounds | 6 | 2 | 1 | 5 | Harry forcefully rejects aggregate market valuation data reports, insisting venture is solely a game of outliers where capital concentrates into top names. He tells a parable about sheep to highlight herd mentality among venture investors, which Peter strongly endorses. | |
| Pricing Macro and Liquidity Risks in Emerging Markets | 6 | 3 | 2 | 5 | Harry challenges investing in emerging markets, pointing out that Brazil lacks liquidity track records and India has underdelivered on exit promises. Peter responds that taking on macro risk is acceptable if entry prices properly compensate for liquidity uncertainty. | |
| The Geopolitics and Unseen Scale of ByteDance | 3 | 6 | 1 | 3 | Harry admits having a Western-centric view on ByteDance and asks Peter to explain why the Chinese domestic business is so strong. Peter schools Harry on the immense scale of Toutiao and Douyin, explaining that ByteDance's underwriting case holds even if TikTok US is banned. | |
| Why Stay Private and Build Better Businesses | 4 | 3 | 0 | 2 | Harry asks why companies should go public given private capital availability, quoting Patrick Collison. Peter explains that remaining private allows founders to maintain focus away from short-term public market pressures and disclosures. | |
| Solving the Liquidity Challenge in Extended Private Markets | 5 | 3 | 1 | 3 | Harry asks how liquidity will be generated without traditional IPOs and asks whether late-stage private crossover investors will get burned. Peter explains the institutionalization of late-stage growth rounds, citing Anduril's cap table strategy. | |
| The Rationale Behind Anduril: Replicating the Tesla and SpaceX Pattern | 4 | 4 | 0 | 2 | Peter lays out the thesis for backing Anduril, comparing its hardware-software execution model in legacy markets to early Tesla (2013) and SpaceX (2018). Harry asks whether managing a private book requires a fundamentally different mindset than public markets. | |
| Managing Political and Leadership Risks in Hard Tech | 5 | 2 | 1 | 5 | Harry pushes on key person and political risk regarding Elon Musk's public antics impacting SpaceX and Tesla state contracts. Peter acknowledges Gwynne Shotwell's leadership at SpaceX while conceding that political overhang is a valid concern. | |
| Main Worries: De-globalization and the Contrarian Opportunity in China | 4 | 4 | 1 | 2 | Peter highlights de-globalization as his primary macro concern, citing Baillie Gifford's 115-year global investment history. He outlines a contrarian case for China investing when mainstream narrative considers it uninvestable. | |
| The Rigor and Psyche of Reinvestments and Pro Rata Decisions | 4 | 3 | 1 | 2 | Peter explains the internal hurdle rates required for follow-on checks versus pro rata decisions. He openly admits that passing on Stripe's valuation reset round was an analytical error. | |
| Transitioning from Private to Public Market Ownership | 6 | 3 | 2 | 5 | Peter argues that the London Stock Exchange suffers from both supply and demand shortages for growth tech. Harry pushes back on the supply argument, asserting he could easily list 10 scale UK tech companies that simply avoid London due to poor market conditions. | |
| Capital Recycling and Opportunity Cost Trade-Offs | 4 | 3 | 0 | 1 | Peter explains capital recycling mechanics and how opportunity cost trade-offs dictate trimming public holdings to fund new private entries. He notes that the overall count of true growth stage players has consolidated since 2021. | |
| Missed Opportunities: Over-Intellectualizing Coinbase and the "Obvious" Tesla Bet | 5 | 3 | 1 | 2 | Peter shares a mistake where an overly complex financial model led him to pass on Coinbase's private round. He contrasts this with Tesla in 2013, which he views as an obvious winning investment. | |
| Quick Fire: Risk Tolerance, Respected CEOs, and LLM Investing Caution | 5 | 3 | 2 | 2 | In the quick-fire segment, Peter selects Bending Spoons as his 10-year single stock hold. When asked to pick between OpenAI, Grok, and Anthropic, Peter rejects the options entirely, refusing to buy any due to unproven LLM moats. | |
| Quick Fire: Growth Stage Value-Add and the Worldview of Fatherhood | 4 | 4 | 1 | 1 | Peter reflects on being wrong about growth-stage value-add, admitting investors can help with governance and public readiness. He also details Baillie Gifford's 115-year partnership structure where carry goes back to the firm. | |
| Positivity, Low-Growth Tech, and the CFO of Bending Spoons | 5 | 3 | 1 | 2 | Harry asks what happens to the massive tier of mid-growth, low-margin $200M revenue startups. Peter highlights them as the prime buyout market for consolidators like Bending Spoons and expresses optimism about current growth market equilibrium. |
Statements from this episode (55)
Singlehurst: Intarsia Was Baillie Gifford's First Portfolio Company Bankruptcy
“Like, the first company we invested in that went bankrupt was a company called Intarsia. It was a, it was actually a biotech company that was developing a GLP-I. I mean, imagine if that company had managed to stay solvent, it would have been an astonishing inv…”
Singlehurst: Baillie Gifford's Investment in Northvolt Failed Due to Execution Issues
“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, you know, all the reasons of energy sovereignty in, in, in Europe. But what we got wrong wa…”
Singlehurst: Baillie Gifford Passed on Later Capital Requests for Northvolt
“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 belie…”
Singlehurst: Baillie Gifford takes business model risk over product risk
“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.”
Singlehurst: Baillie Gifford's median initial investment target has $200M revenue
“The median company in our portfolios is doing about two hundred million dollars in revenue, is still growing at about 70% year over year and is still very slightly loss making, -14% EBITDA margins”
Singlehurst: Wise grew from $50M-$60M revenue at initial investment to multi-billions
“Wise was actually a little bit smaller than that when we first invested. I think it was probably about 50 or sixty million dollars in revenue. It's now a multi-billion dollar revenue business.”
Singlehurst: Return on equity is critical at scale, yet anathema in VC
“One of the single most important factors is the return that you make on equity. And this notion, this concept is, is almost it's almost an anathema within the venture world.”
Singlehurst compares overcapitalizing startups to force-feeding foie gras
“Because it leads to 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 you know how they make foie gras.”
Singlehurst: Fintech offers prime investment opportunities at reasonable valuations today
“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 busin…”
Singlehurst: Bending Spoons achieved high profitability by avoiding overcapitalization
“I think that's an amazing example of this company that was 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, that world of over capi…”
Baillie Gifford is a shareholder in chip developer Tenstorrent
“We are shareholders in business, a company like Tens Torrents, which is working at the sort of the chip and the infrastructure layer.”
Singlehurst: Investor discipline means selectively paying high prices for breakout companies
“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,…”
Singlehurst: Pre-AI companies with hard-to-replicate products will remain exceptional
“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 building a product that is just very difficult …”
Singlehurst: AI tools will not completely disrupt core fintech complexities
“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 kinds of companies is, you know, a lot of it is about like how you manage regulation. And like, will AI so…”
Singlehurst: Baillie Gifford Employs Public Valuation Methods for Private Investments
“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 tha…”
Singlehurst: Bending Spoons' moat is M&A integration and shared services
“It's a business strategy, and it's, ah, 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…”
Singlehurst: Nine of Baillie Gifford's Top 10 Investments Are Founder-Led
“I think these numbers will be a little bit off. It's something like nine out of nine of our 10 biggest investments are still founder led.”
Singlehurst: Baillie Gifford models a 5x base upside for every investment
“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.”
Singlehurst: Expecting an 80% probability of a 5x return is delusion
“If you think that there's an 80% chance of making a five times return in investment, like, you're probably deluding yourself in the levels of probability and confidence that you can have in a long tail or, you know, high outcome scenario, like a five times ret…”
Singlehurst: Random stock selection yields a 5% probability of 5x returns
“The probability of any given company going up five times, if you were just picking randomly, is something like five percent.”
Singlehurst: Baillie Gifford will always invest at 30-50% chance of 5x
“If something is in the range of 30 to 50% probability of going up fivefold, well then we'll take those bets every time.”
Baillie Gifford paused 2021 fund deployment through 2023 over inflated valuations
“So the last fund that we raised, we did a, we closed it in 20, 21. We deployed very little in 20, 22 and 20, 23, because valuations were still too high. There were all kinds of games being played with convertible notes and everybody sort of Pretending that com…”
Singlehurst: US Series C+ valuation multiples remain elevated despite post-2021 drop
“If you look at the data multiples in series C and beyond in the U.S. Are below twenty-twenty-one, but still at elevated levels.”
Singlehurst: Post-2021 trauma drives venture investors to herd into safe consensus deals
“I think that there is like a herding into a much smaller number of names. I think that's quite a sort of understandable, like, human psychology here, right? The industry is still digesting the trauma of twenty-twenty-one and the pullback in twenty-twenty-two. …”
Stebbings: Brazil has failed to show scaled tech liquidity over 20 years
“Brazil has not shown pathways to liquidity at scale. They've shown new bank and everyone says new bank. It's one in 20 years.”
Singlehurst: Baillie Gifford accepts liquidity risk if compensated on entry price
“On the sort of path to exit and path to liquidity, I think this is where Having a very long-term time horizon, like, we are willing to take a little bit more risk there, again, just provided we are being paid to take that risk.”
Singlehurst: Many 2024 Baillie Gifford Investments Were Already Profitable
“Last year, you know, quite a few of the companies we invested in, they were already profitable, or they were all turning profitable this year.”
Singlehurst: Evaluating Tech Companies Should Focus on Return on Capital
“Everybody 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.”
Singlehurst: ByteDance leads online ads and ranks third in Chinese e-commerce
“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.”
Singlehurst: Baillie Gifford expects 5x ByteDance return despite US TikTok ban
“I mean, like, our base case is that it does get banned, and we still see a path. After making at least five times our money, even with TikTok not being part of that investment case.”
Singlehurst: ByteDance will eventually go public in Hong Kong or US
“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.”
Singlehurst: Private company secondary exchanges will not work
“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 rofers, you have like company control. I can't see those exch…”
Baillie Gifford maintained pro rata in Databricks' $60B round without doubling down
“Remember we did our pro rata in the sixty 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.”
Singlehurst: Public and Private Growth Investing Share Core Analytical Questions
“The core analytical questions I think are pretty similar. You have different sources of information, whether you're doing public or private, but like you're still looking for the same characteristics, right? Like if you make it very simple, you're still lookin…”
Singlehurst: SpaceX has an amazing management team beyond Elon Musk
“The thing that people forget about SpaceX is that there's an amazing management team there that is not Elon Musk.”
Singlehurst: Understanding business models over tech suits growth over venture
“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 inv…”
Singlehurst: China remains a massive investment opportunity
“I think it does. I think it does remain a big opportunity.”
Baillie Gifford reviewed 600 private rounds and made 11 investments last year
“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.”
Singlehurst: Baillie Gifford requires 5x upside to double down on follow-ons
“So if you're going to double down on a company, then absolutely. Yeah. You need to see a five X on a reinvestment.”
Singlehurst: Baillie Gifford passed on Stripe's $50B down round
“We first invested in Stripe at about a thirty billion dollar valuation but we didn't take part in the down round that they did whenever that was, 20, 22?”
Singlehurst: Passing on Stripe's down round was a mistake
“I think that was a mistake. I think we should have put more in them.”
Singlehurst: Stripe trades at a lower multiple than Adyen while growing faster
“Stripe is priced even, even less than Adyen. If you just look at it on a multiples basis, and it's growing quicker.”
Singlehurst: The London Stock Exchange is in a dire state
“Yeah, I do share the sentiment that we're in a dire state for the London Stock Exchange, and I think.”
Singlehurst: LSE suffers from dual supply and demand crises
“I think it's a combination of there not being loads of amazing high growth companies in the UK, enlisted in the UK, so there's a supply problem, and I think there's a demand problem as well.”
Stebbings: The London Stock Exchange is a terrible place for tech listings
“They just wouldn't list in London because it's a shit place to list.”
Singlehurst: Europe should establish a unified growth stock market
“Yeah, I think we probably should.”
Baillie Gifford trims large private holdings to fund new growth investments
“So some of our large high profile companies that we have trimmed in the private markets and we've recycled that capital into new interesting high growth private companies.”
Singlehurst: Active growth-stage private market participants have consolidated since 2020-2021
“But I think there are fewer participants in the growth stage today than there was in 2020 and 20 21. And you could say, well, those are anomalous years, but I actually, I still think there has been consolidation within the growth stage of the private market.”
Singlehurst: Consistent institutional growth investors won't double or triple in number
“But, you know, 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. …”
Singlehurst: Bending Spoons targets broken VC-backed businesses
“And their addressable market basically 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 o…”
Singlehurst: Baillie Gifford wouldn't buy OpenAI, Grok, or Anthropic currently
“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'm critical of those businesses. It's because I don't know what the answer is to enduring competitive advantage at the large langua…”
Stebbings: Google is one of the most unappreciated AI opportunities
“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.”
Singlehurst: Baillie Gifford Directs Carry to the Firm, Paying Partners via Bonuses
“So Cary goes to the firm. And then we remunerate people through, through bonuses, which is a synthetic carrier, I suppose.”
Singlehurst: Growth-stage venture-backed companies are at an all-time high
“There have never been so many venture backed companies that are sort of entering our part of the market.”
Peter Singlehurst: Growth equity capital availability is in an optimal golden mean
“But the final thing that I think is really important for like 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 …”
Shorts cut from this episode
▶ The Most Genius Wrong Answer Ever 🐑 · 20VC with Harry Stebb (@27:29)
▶ Why we still invest in China 🇨🇳 · 20VC with Harry Stebbing (@47:25)
▶ “What we learned from losing £100M+ on Northvolt” 😬 · 20VC (@5:47)
▶ The INSANE Business of ByteDance 🤯 · 20VC with Harry Stebbi (@32:27)
▶ “Sometimes it’s better to stay a Private Company” 📈 · 20VC (@0:00)
▶ “Not all bad investments are mistakes” 👀 · 20VC with Harry (@0:00)