Jul 15, 2022 · 52m · news
Peter Singlehurst: The Most Powerful Investor You've Never Heard of | 20VC #907 · 20VC with Harry Stebbings
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In this episode of the 20VC podcast, host Harry Stebbings interviews Peter Singlehurst, Head of Private Companies at Baillie Gifford, to discuss the firm's unique long-term partnership structure, their rejection of the traditional public-private market divide, and their distinctive, process-driven approach to late-stage growth investing.
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 27.9% of the talking time here. How this is scored →
Harry as informed peer 5.4 Guest teaching 4.7 Guest disagreement 1.7 Harry pushing back 3.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:36 Rejecting 'cheapest on first check' doctrine
Peter directly rejects Harry's assertion that investors should grab all ownership upfront because it will never be cheaper, explaining that probability-adjusted returns improve as scale de-risks the asset.
Hardest push from Harry ▶ 11:58 Challenging competitive advantage vs founder executionHarry explicitly breaks from agreement, rejecting academic concepts of competitive moats in favor of asking simply whether the founder is 'a fucking machine'.
Biggest teaching moment ▶ 28:58 Reframing IPO strategy as investor filteringPeter educates Harry that going public should primarily be an exercise in repelling unaligned investors to curate a long-term shareholder base rather than trying to please the broad market.
Harry holds his own ▶ 21:58 Roleplaying team critique on risk-takingHarry demonstrates sharp VC insight by adopting the persona of a precocious young team member to challenge Baillie Gifford's single bankruptcy in ten years as potential evidence of risk aversion.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Baillie Gifford's Philosophy and Training Scheme | 2 | 2 | 0 | 0 | Harry opens with standard background questions about Peter's path to Baillie Gifford. Peter explains his philosophy background and how the firm expanded into private growth markets via the Scottish Mortgage Fund. | |
| Growth Investing and Converging Markets | 4 | 4 | 2 | 3 | Harry uses off-air remarks to ask why Peter doesn't consider himself a VC and why he rejects separating public and private markets. Peter reframes venture as early-stage seed work and describes the public-private divide as an artificial artifact. | |
| Misalignments in VC and Probabilistic Valuation | 6 | 4 | 1 | 2 | Harry demonstrates strong industry knowledge by elaborating on fund misalignments, like managers artificially keeping dying companies alive to raise new funds. Peter explains Baillie Gifford's probabilistic valuation framework. | |
| Dynamic Competitive Advantage and Investment Agony | 7 | 5 | 3 | 8 | Harry directly challenges the premise of predicting moats, arguing that he only evaluates whether a founder is a relentless machine. Peter responds by reframing competitive advantage as a dynamic, evolving essay rather than a static state. | |
| Portfolio Construction and Low Loss Ratios | 7 | 6 | 4 | 6 | Harry pushes standard venture doctrines like maxing out ownership on the first check and high concentration limits, citing Brian Singerman. Peter explicitly disagrees with buying max ownership upfront, arguing probability-adjusted upside improves as companies scale. | |
| Risk Management, Crossover Funds, and Downturns | 7 | 5 | 3 | 7 | Harry plays devil's advocate by roleplaying a young team member asking if having only one bankruptcy in ten years proves they aren't taking enough risk. He also cites Doug Leone's quote calling crossover funds 'tourists'. | |
| VC Value-Add and Public Market Preparation | 6 | 6 | 2 | 5 | Harry probes whether VC firm services are genuine value-add or fee justification, and asks why scale companies would ever go public given abundant private capital. Peter explains the IPO process should serve to turn away unaligned investors. | |
| Team Leadership and Long-Term Partnership Trust | 6 | 3 | 1 | 2 | Harry shares his personal management principles on giving team members room to think and compartmentalizing external stress. Peter outlines how Baillie Gifford's long-term partnership structure fosters deep internal trust. | |
| Dealing with Setbacks and Focusing on Inputs | 4 | 6 | 0 | 1 | Harry uses self-deprecating humor regarding his own bankruptcy count to prompt Peter on handling failure. Peter gives a detailed case study of Intarsia's phase 3 trial failure and lessons on misjudging extreme probabilities. | |
| High-Trust Decisions, Tesla, and DoorDash Lesson | 5 | 6 | 1 | 3 | Harry notes the difficulty of holding liquid public stocks through massive drawdowns when you have the freedom to sell. Peter reflects on early Tesla volatility and admits missing DoorDash by overanalyzing market moats instead of backing founder zeal. |
Statements from this episode (28)
Singlehurst: Scottish Mortgage Fund is a century-old permanent pool
“We started, we set off doing that from within a permanent pool of capital that we've managed for the last 114 years. Called the Scottish mortgage funds, confusingly named. It's got nothing to do with mortgages. It's a hundred year plus permanent pool of capita…”
Singlehurst: Baillie Gifford hires non-finance backgrounds to avoid narrow worldviews
“And so the reason we hire from a range of academic backgrounds is because we bring in people with lots of different perspectives. Perspectives on the world rather than hiring people who grew up dreaming of being fund managers where you might well end up with a…”
Singlehurst: The public-private market divide is an artificial financial construct
“I really think that the public private divide is an artifact of the financial universe rather than anything that you would come up with if you were thinking about investment or company formation from first principles.”
Singlehurst: Private investing gives public market managers a 5-10 year advantage
“They basically get a window into the future. They get to see the businesses that will be in the public markets over the next five or 10 years and just get insight and understanding and relationships with those companies that you could never get if you weren't …”
Singlehurst: Carried interest and fixed fund lifecycles force misaligned exits
“When you get into the tail years of limited life funds, I worry that you start to get misalignments of interests. I also worry that traditional carried interest structures can drive misalignments of interest because of the value that can flow to individual inv…”
Stebbings: VC managers keep failing startups alive to raise new funds
“I also see managers keeping businesses alive artificially to allow them to raise new funds. New funds are raised and then allow companies to die.”
Singlehurst: Baillie Gifford evaluates deals via probability-tested upside scenarios
“We create scenarios in which we are deliberately contrived where a company can be a very high returning business and a high returning investment for our clients. We think about the probabilities or the things that would have to come to pass for that to be the …”
Singlehurst: Baillie Gifford's moat analyses look like dynamic meditative essays
“We are not trying to accurately nail down what a company's competitive advantage is or will be. Actually, if you look at the reports we write, the analysis that we do on competitive advantage, it looks more like a meditative, meditative essay than a set of ass…”
Singlehurst: Baillie Gifford usually leans toward continuing support during ambiguous struggles
“I think we probably fall more often on the side of continuing to back businesses and sometimes those are the best decisions we ever make, and sometimes they're the worst decisions we ever make but Founders and companies will more often find us leaning on the s…”
Singlehurst: Investors can only truly understand a company by becoming shareholders
“You only really ever understand a business by being a shareholder, and so we feed that into our, you know, to our portfolio construction, and of course then we don't add to those companies where we're not building that conviction.”
Singlehurst: Probability-adjusted upside can grow as companies scale and execute
“I think that the probability adjusted upside of companies can often grow as they become larger. And so even though ostensibly the price, yes, might be lower in the previous round, As I said, I think sometimes the probability of outsized returns can grow as com…”
Singlehurst: Diversification should focus on capturing outliers rather than mitigating downside
“Diversification is normally thought of in terms of downside risk mitigation. We would think about it much more in terms of diversifying to maximize the probability of capturing outliers.”
Singlehurst: Baillie Gifford deployed $10B across 100 private companies with one bankruptcy
“Over the last 10 years, we've deployed something like ten billion dollars into about a hundred private companies. We've had one bankruptcy of a company which is nothing to be proud of for sure, but I think we thought it was going to be much higher than it was.”
Singlehurst: Baillie Gifford avoids investing in M&A-focused companies
“Very few of our investments get acquired. And that's partly because we steer away from any company where we get a whiff of them potentially being bought.”
Singlehurst: Rapid 2021 funding rounds prevented proper due diligence
“I mean, I think the way it really changed things, particularly last year, was it changed the time frames that rounds were happening in. So we were seeing rounds happening last year at speeds that certainly wouldn't have enabled us to do our necessarily diligen…”
Singlehurst: Uninformed investors will create hardship for startups in downturns
“I think the sad thing about that is the people that will suffer from that is, is the companies themselves, because they will have ended up with shareholders who don't fully understand what it is they've invested in. And that's kind of fine when everything's go…”
Singlehurst: VCs use operational services as air cover to justify high fees
“There's a sort of industry of using that as kind of air cover to carry out quite a lot of window dressing around sort of so-called value creation in order to justify very high fees”
Singlehurst: Going public should aim to deter misaligned investors
“They should actually treat the process of going public as much as an exercise of trying to put off the wrong kind of investors.”
Singlehurst: High turnover prevents investment teams from developing true trust
“I think that just gives rise to a kind of level of trust and a level of working together that we couldn't have if this was a sort of organization where kind of people came in for a couple of years and then left. And if it was more of a kind of high turnover so…”
Singlehurst: Baillie Gifford investment teams do not use Bloomberg terminals
“You won't see a single Bloomberg terminal on the desks of investment teams.”
Singlehurst: Baillie Gifford's one bankruptcy was late-stage diabetes company Intarsia
“So that company that I mentioned, the one that went bankrupt, was a business called Intarsia. It was a company that was developing a therapy for type two diabetes, and when we invested in it was a very, it was late stage in this, in the sense of being in phase…”
Singlehurst: High-Probability Investments Carry Far More Risk Than Investors Assume
“And that the things which appear to be low probability actually often have a much higher probability than you might think. And the things which you think have a very high probability, sometimes actually have a much lower probability than you might think.”
Singlehurst: Baillie Gifford began researching and buying Tesla stock in 2012
“I was working on Tesla in 2000 and 12, and we went on to buy that for various strategies.”
Singlehurst: Long-term investors will inevitably look foolish during winning investments
“If you are sufficiently long-term even in your most successful investments, there will always be a time when you look and feel really stupid.”
Singlehurst: 10-year public equity investments should be treated as illiquid assets
“If we're investing in a company with a 10 year view, You probably shouldn't be doing anything two or three years into that investment journey. You should really be thinking of it as being pretty much as illiquid as any private holding.”
Singlehurst: Baillie Gifford passed on multiple private investment rounds in DoorDash
“One of the ones we really missed was DoorDash. We had a few opportunities to invest in that privately.”
Singlehurst: Founder zeal matters more in growth investing than competitive analysis
“The thing that I should have placed a much greater weight on. Was the founder of DoorDash and, you know, why he'd started the business and the level of commitment that he had to these small businesses that he was wanting to help and kind of bring online and he…”