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

23:33Yeah, I mean, 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 let. So overwhelmingly, we still skew towards founder let 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 term before you're even kind of getting to our stage And then we're still like selecting very positively towards businesses that are found are led That doesn't mean there aren't some great businesses out there that are led by Non -founders.

24:04You know, I think Vinted is a good example of that. I was seeing the same. I was actually matching Thomas earlier Yeah, so I've seen project Europe and amazing. Yeah, you guys in vintage. Yeah. Oh wow I'm a non -founder that's totally transformed to that business. Unmally or... It's like a re -founding event to be fair. Sort of is, yeah. I think that's a good way of putting it. No, totally. I'm a podcaster, saying it, we're good at packaging. You mentioned growth as the number one. When we look at a bending spoons, I think quite publicly the round was like $5 billion valuation. When you think about upside requirements on entry, do you do outcome scenario planning and think, well, if X and Y happens, then it's a $25 billion company and then we've got of 5X.

24:45Yeah, so we are very consistent in how we model upside. For every company we look at, we try to model to a 5X upside. So we're being consistent in the levels of upside in our modelling. But then what we are testing is the probability and assumptions that you need to make to get to that level of outcome. And that's so that you can kind of have a mental, you can have a mental comparability across investment cases. Of course, we are also looking at longer tail, greater levels of upside in the companies that are investing in. But the base modelling is always to that five times. And the probability that's assigned to that five times, what is an acceptable probability?

25:19Is it like we feel there is an 80 % chance and if it's above 80%, then we will write the check and if it's not, because obviously everything has like a 1 % chance. So no, it's certainly not as high as that. And if you think that there's an 80 % chance of making a five times return in investment, like you're probably deluding yourself in the levels of probability and confidence that you can have in a long tail or high outcome scenario, like 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, the probability of any given company going up five times, if you were just picking randomly, is something like 5%.

25:56So if you can find a company where you think there is something like a 30 or 40 % probability of it going up fivefold, well, actually, there's really good odds. And so we're not looking for 80 % probability of a company going out five fold. If something is in the range of 30 to 50 % probability of going out five fold, we'll then take those bets every time. How do you think about duration? Your structure means that technically, oh, you know, open -air and every day, 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?

26:29It slightly depends what fund you're talking about. We have some funds where we're able to recycle capital. And so within those funds, we are able to trim from companies that have gone public, that we first own privately, and recycle that capsule into new 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 own that additional capsule in that public company. In other more traditional fund structures that we manage, they are more of traditional limited life fund vehicles. We can do a little bit of recycling.

27:00But there, I think, the important something is just about always keeping your bar high and being patient. So the last one that we raised, we did a closer than 2021. We deployed very little in 2022 and 2023 because valuations were still too high. There were all kinds of games being played with convertible notes and everybody sort of pretending that companies were still worth what they were on 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.

27:40And so we started to play more in 2024. It doesn't feel like it's much better pricing, Peter. Maybe we're in different markets, but it does not feel like, oh, excessive excitement's gone and now we're back to a state of rational and calm. So it depends on what you look. If you look at the data, multiples in series C and beyond in the US are below 2021. I mean, still elevated. I mean, there's nicely, I never care about these. I'm so sorry, data reports that are always produced because they count 1 ,000 C at C's. And it's like, no one cares about 1 ,000 C's. I care about the five C's, they're gonna be the 25X.

28:17And it's like, this is the 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 it's more quickly and we see those prices go way up, which is why you have unbelievably expansive $5, $10 billion for these series season weeks. I think it's totally right. I think that there is like a herding into a much smaller number of names. I think there's quite a sort of understandable like human psychology here, right? 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?

28:52You look for safety and you you look for safety by not being too different from what your peers are doing I think we've always been like that. That's why we did what we did in 2021 and 22 Yeah, it's a brilliant story of the boy and the teacher. Do you know this? No, 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 boys the only one to go? None and the teacher's no, what do you mean? You don't understand maths and the boy goes, no, you don't understand cheap. It's a great story, right? And it's exactly that, which is like we are the most heard cult -like people and we just follow the hurt, which is exactly to a point if you go to FinTech, actually there may be, or Web 3, I mean, I don't know if Web 3 is still a thing, but like, you know, I'm sure you can get bargain pricing.

29:42Yeah. I think that's true. And so, look, this is where trying to have as broad a universe as you possibly can means that where appropriate you can kind of dip into like 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 two to three thousand companies. Yeah, as a team we can cover that universe and if you look at what we did last year we invested in six different countries. That's not because we were 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.

30:13So obviously, many space men are there, but we the best in a Portuguese business last year, the best in a Brazilian company, an Indian company, and is really company. That's really interesting. So when you look at the Brazilian and the Indian, I don't know, we get a lot of hate for this, but 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. There's D local and bunny, they're not at 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.

30:42How did you guys think about that, like macro market risk. Yeah, look, so I think that when it would be naive to say that isn't more macro market risk, but you then need to make sure that you're paying a price that rewards you for taking that risk. And in a sense, that is our job as investors. It's to price risk appropriately. And as growth investors, we're trying to price the risk and uncertainty around companies becoming many times their current size. On the sort of path to access and path to liquidity, I think this is where having a very long -term time horizon like you know we are willing to take a little bit more risk there again just provided we are being paid to take that risk.

31:16Do you proactively plan ahead in terms of capital requirements of business will need and do you really think about the dilution that will be impacted on you? So yeah we certainly plan ahead to think about what capital we should reserve for companies. But like in the Ubersay or Adored Ashrenans, they got a very cash -and -sumptive businesses versus This is a traditional enterprise -science company which can be much less cash from something. Do you think about that? We do think about it. We want to make sure that we have an appropriate balance of kinds of capital needs. But last year, quite a few of the companies we invested in, they were already profitable or they were all turning profitable this year.

31:53And then the question of dilution becomes much less of a risk to the investment case because companies become self -funding. Terrible, clearly not growing fast enough. Back into growth. We don't see these in the black as always, right? I think this is the misnomer of our industry again, right? Like 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. There's Amazon playing to what you're saying. Does Amazon play into what you're saying or not?

32:24Because obviously Amazon, you know, for years did not have profitability and they continuously reinvested in new products in R &D. Is that playing into what you're saying or not playing? I mean, I think Amazon for us as a firm was a formative investment. We first invested in Amazon as a firm in I think 2004 and we saw the growth of that through many many years of unprofitability and then into many years of profitability. Tesla, another example of that, we first invested in Tesla in 2013. We've been on the journey of these companies that have not been profitable when we first invested, where we've been considered, in many cases, draft for owning those companies for a really long period of time, but we've seen that scalability and that growth, those enduring competitive advantages manifest themselves into scale and profitability.

33:09What company do you think you're considered daffour only today that actually is a killer? Byteants. Bold. Talk to me. Why do you say that? How do you get comfortable in the knowledge that bluntly there is a invisible hand being the US administration that could end it all? and it'll shut down TikTok, doesn't make any difference with bite dance. I mean, bite dance is the most astonishing revenue and profit generation company in China. The users, the profit that they make in China is just off the charts. I have an incredibly Western view which makes me feel incredibly naive. What is the bite dance is in China and why is it so good?

33:48So, I mean, there are two main applications in China. Tautiale, there's not really a direct comparable, but like a better version of Apple News and doyan, which is like TikTok and China. They're the market leader in online advertising in China, and I think at the moment they're about number three in e -commerce in China, it's enormous. It's an absolute monster. And so TikTok has a big user base, and I don't want to dismiss the impact it could have on the investment case if it were to remain in the US and go on to become very successful, but our investment in buydances predicated on the business in China.

34:22And the quality of that business is quite something to behold. If TikTok, US, were banned, or that was no longer part of the core -bite dance business, to what extent would it have an impact? Like, I'm too late, about 5%, like 20%, like 25%. I mean, our base cases that it does get banned, and we still see it path to making at least five times our money, even with TikTok not being part of that investment case. Wow, when did you get in? 2019, I think. So we weren't super early in it. but it's grown astonishingly since we invested. How do you think about liquidity there? Because I have many LPs that are also holders of bite -dance, either directly or through different funds that they're in.

35:00And they're all kind of going out, ones that coming, how does that... Provide liquidity to its investors. I think it'll be public at some point, either in the US or Hong Kong. Obviously, one of those is probably a little bit more likely than the other. Do you think there's any... I'm sorry, she has any chance now with China and US relations in the Republic in the US? I mean, I got ruined anything else that held out at the moment with US and the things that are happening there But I mean the company is also this is sort of publicly reported you know they buy back their own shares Yeah, they're so profitable We're managing kind of where you go public the question I actually have to ask is why you're public when you look at the Colossum Say said very rightly anything on the 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, given the extended privatization windows we have for capital markets?

35:52I'm not trying particularly have a good question to that answer either and that's why I'm a private company investor and investing private companies on behalf of my clients. But that being said, yeah, I do this from within a large public market organiser. Has that changed for you? So, no, it's, I think it's just continued to accentuate. Because of the excess supply of cash now or the cash in private markets, many you don't need to. I think it's more subtle than that. I don't think it's necessarily about capital cycles within private markets that is leading to companies to stay private longer, but of course it matters.

36:21I think what people realise today is that you can build a better business by staying private for longer. And why do you think that is? Uh, focus. I mean, it's really hard to be a public company. It's really hard. It's not just the reporting requirements that you have. It's you can have people owning your shares for all sorts of reasons that are misaligned with what you're trying to do as a company. You have to do everything in the cold light of day, all your competitors get to know pretty much everything about your business because you have to tell your shareholders pretty much everything about your business.

36:50It's just really hard. I mean, I say this is, I have the most normal amount of respect for companies that go public well and are able to flourish as public businesses because it's really hard. So I think companies realize they can have greater focus by remaining private for longer. Now I think there are some good reasons for going public. I think it's right that employees should be able to get liquidity, but that's increasingly being served by these very large secondary private rounds. I think if you're in a positive business having a public currency can be helpful. I think that if you're a business that operates in a regulated environment, I think it can be helpful for regulators to see you as a public company.

37:27We're shareholders in Epic Games and that's been private since 1992. And I once asked Tim Sweeney, the founder of that company, you're how he thinks about that. And you're quite an interesting answer to this. He said that, well, at some point, it will be easier to be public than it is to be private. At the moment, it's much easier to be private than it is to be public. But at some point, the various forces that exist within your business mean that actually the easier option is to be public. And those forces can be needful liquidity. They can be, if you need to be a positive or engaging with regulatory levels.

37:59These forces can, I think, become good reasons for becoming public. If we exist in this continued world or extended private company being capitalized by 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 Stripes can estate private for another 10 years. We're just going to hold. You're starting to see the evolution of these very large company -facilitated secondary rounds. Stripe Databricks. I can see those starting to become more of a feature. I don't think we'll end up in a world where you have sort of exchanges for private companies.

38:37I think you just have too much complexity in the share class structures. You have things like rofers, you have like company contrived. Can't see those exchanges really working. But maybe we'll also get into a world where these companies become by profit or they continue to grow and they start paying out dividends as private businesses. Maybe that becomes a source of liquidity for investors. Did you do the $60 billion data bricks round? I try 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. Do you see a five X from 60?

39:06Yeah. Yeah. Remember we did our pro rata in the 60 billion round, which is a little bit different from saying we're doubling down. Right. So it's we we stood our hand, we put a small amount of extra capital into it, but we didn't double down in the 60 round. Do you think a lot of these private investors who are putting billions of dollars to work now? and we're seeing them move from venture to this new IPO style, I think you're going to get burned. The trend that we've seen in growth stage private company investing over the last 10 years looks a little bit like this. These companies, these kinds of companies, they all used to be public businesses.

39:40And the natural owners of the more public market organizations, it was fairly gifted, it was T -Rex, it was BlackRock. Companies started staying private longer. So the natural owners and the long term historic owners kind of got pushed out of opening those companies. It's created a vacuum. Into that vacuum, and I don't mean this in a pejorative sense, but their opportunists came into that vacuum, so you had hedge funds, you had traditional, earlier stage investors spinning up these growth stage funds, and owning companies that they knew but had never owned companies at that stage and scale before.

40:12Post -21 I think a lot of those guys got pushed out, but some have remained and some have remained at really scale. My hope is that they're developing real expertise of what it means to own companies at this stage and scale because you want to have good owners of companies, right? You want to be operating in a market where you have rational investors making rational decisions, doing really solid analysis on companies because you need that market to be sort of pricing efficiently. 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.

40:45To give you like one example of what that can look like, wish I helped us in Andrew, we first invested in that company last year. The round that we took part in, there were the insiders in it, but then other than the insiders, the only new investors that came into that round were investors that were traditional public market investors, but could also do some private investing. And that's because what the company needed was investors that are used to owning companies at that stage of growth and that scale, and over time can help them transition into the public markets. Can you talk to me about the rationale behind that one?

41:17I'm a big believer in Android, so I have many thoughts around why I'm excited for them, but why did you get so excited for them? So I could go into the specifics of the company, but what Android - like conjured in my mind was a pattern that we'd seen in two places before. Those two companies that it's sort of conjured were Tesla and SpaceX. What Android have done is they have developed products that are largely software enabled but are still really hard, technical hardware problems that they've solved. They have proven that the products work and the people want to buy them. There's no question about product market theft or do they work or anything like this.

41:52And then they are operating in very, very large markets that have largely not changed in decades. And where there is clear water between them and their next nearest private competitor, that was true of Tesla in 2013. It was true of SpaceX in 2018 and I think that's true of Vandrill today. So it's that combination of your really difficult hardware problem that they've solved, an industry that's largely not changed and clear space between them and other private competitors. Especially on the clear space. Palmer isn't wonderfully eloquent speaker. I'm brilliant at having a podcast. He is, and he's amazing, but the thing that people forget about, and Juryl is you've got Branch, Yempth, CEO, Matt Grimm, amazing, amazing, amazing, yeah.

42:36Totally agree with you. You mentioned that. They wanted of people who were public, but also did private. We've seen, you know, it's a quality that evergreen funds are actually believed that actually you have asymmetric information because it being a private investor and then you should be able to manage the book more efficiently than your public markets more than your LPs because of that exposure. Do you buy that? What do you think there is a fundamentally different mindset to manage a private book versus a public book? I don't think there is. There are big differences, right? Like how you go about sourcing opportunities is obviously totally different in the private markets compared to the public markets.

43:09The core and a litical question, I think, are pretty similar. You have different sources of information, whether you're doing public or private, but you're still looking for the same characteristics, 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 higher return on equity. I think one of the big differences is in what it means to be a good owner of a growth stage company. And there are ownership and public ownership, but also kind of growth stage ownership and venture ownership. You mentioned Andrew Aura, two questions on the back of that.

43:42You compared it to SpaceX and Tesla, I think, great analogies. We're seeing SpaceX and Tesla both be hit by Elon's stance and political activity. How do you think about that as a risk? Oh, I worry about it. The thing that people forget about SpaceX is that there's an amazing management team there that is not Elon Musk. You have... Gwynne Shaw, right? ...who keeps up... ...is able to keep a very low profile, perhaps precisely, because of the high profile that Elon Musk has. So that gives us a lot of comfort, but is it a concern? Of course it's a concern. But it doesn't matter about her low profile if you have whole -state, counseling, space, sex, contracts, and that will continue in their, you know, Canada's that second biggest market, Max goes to their third.

44:26at what point does it become a critical weakness? It's a big worry. You know, let's head you right. Well, when you look at the new Anderls, your spaces, your testers, and you'll see more and more move to defense, to hard -tactor, to really challenging technical problems, I worry that this generation of investors and potentially me included, is almost out of date in this new world of a very challenging technical problems. No longer is it, as we said, triple, triple, double, double enterprise investing, have the heuristics changed on what it takes to be a venture investor. So I've never thought of myself as an expert or an investor in technology.

45:05I invest in companies, I invest in businesses, and those businesses will often use technology to create these incredible business models that are very scalable and can be sort of high -returning. But I'm not a student of technology, I'm a student of businesses and business models. Now, there are people on my team who are much more interested in technology itself, and also love investing, love businesses. But my focus, and I think this is a focus that perhaps makes me better at say, growth age investing than I would be at venture stage investing, is trying to understand great businesses, not great technologies.

45:36What do you worry about most today in the investing world? De -globalization. We're global investors. One of the things that's made us successful over the years is finding interesting companies all over the world. The very first investment is a story we love to tell our clients. So the very first investment paid to give for Debra Maid was in a Malaysian rubber plantation that was producing rubber for the tyres that were going to be needed on the Model T -Ford. We've always been global. The very first private investment we ever made was not in the US, it was in China. Sitting in Edinburgh and Scotland, there's not that many companies to invest in there.

46:08So our remit, our investments and our client base has always been global. And from an investment perspective, but also just from a perspective of humanity, I worry about an era of more barriers we could ties between countries because I think it's better for investing and I think it's better for us as people. 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? I think it does. I think it does remain a big opportunity. Are you still actively investing in China? Yeah, I mean, in the The public markets, we have a team in China, we continue to look at opportunities in China.

46:47Is 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 setting, sort of be greedy when others are fearful and fearful when others are greedy and everyone is fearful of China right now. If everybody is saying one thing, which is China's not investable, you would be daft not to be questioning that and saying, well, how long have I been there? Like, is that actually the case? Maybe I should go and have a look. So I'm hoping to get out there over the summer of not being in far too long, but yeah, we'll continue looking for investments in China.

47:17Can I ask if we peel back like on Bailey Gifford's investment process, when we look at like private company investing, what does that investment decision making process look like for you internally? I guess the decision making process is always a manifestation of that funnel, right? So if I look at last year, we met a thousand companies, we looked at 600 private private companies. We worked within a team of 170 public market growth equity investors and we're able to draw on that results. But this is just as a team. So just as a team, we met a thousand companies. We looked at 600 private financing rounds.

47:51We did 65 first cost for diligence process. We did 30 deep dives and we made 11 new investments. On the companies that we put through our diligence process, we do our diligence that culminates in a 10Q, which the note that I talked about. I mean, if you were to see one of these, they look, I mean, we don't use PowerPoint. These look like essays. We sit down and we discuss them as a team. We do that on Thursday afternoons every week, every week. The whole team's there. How long do you set aside for it? We're slowly increasing the amount of time that we set aside for them because we always get to the end of the discussion.

48:20We're always kind of hungry for more discussion at the moment. They're an hour and a half stock discussions. The investment committee then meets on Friday afternoons. That's a pretty small investment committee. There's four of us. And we decided what to do. Now inevitably there'll be additional things you want to follow up on, but it's the core decision making group for our dedicated funds. There's four of us. And check the size range on the 11 is what's the range? Yes, so there's a large range because there are different pools of capital that we invest from, but they can range from $10 million to $150 million.

48:53And how does that change when you're making reinvestments? It's a different process and psyche. How does that change? So when we're making reinvestments, we revisit the investment case, we do an updated to thank you, we re -examine that five times upside case. I guess you then have like, broadly speaking, there are three different decisions that you need to see five X on the reinvestment. Well, so this is where it's slightly various, right? So if you're gonna double down on the company, then absolutely, yeah, you need to see a five X on the reinvestment. If you're gonna do a small pro -rata check, I think then you're doing pro -rata checks, if they're relatively small, can just be part and parcel of being a good investor, which we'll do can provide the things are going in the right direction.

49:31And then of course, there's a decision not to do and I think, whether we sort of decide not to take part in around well, well, either we're not seeing the execution that we need, or we think the valuation just doesn't make sense. When did you not that with the benefit of hindsight, you're like, wow, we missed that? Ah, so you mean like miss a new investment? No, anyway, you invested and then it came back and you're like, ah, not, not feeling so much. Actually, I'll tell you the round that we didn't take part in that we came very, very close to. So we first invested in Stripe, but of our 30 billion dollar valuation.

50:05But we didn't take part in the down -round that they did, whenever that was, 22. Which was 12? Because we invested 30, it got up to about 90, and then it came back to about 50. And we didn't take part in that round. I think we should have done. Why did you not? Oh gosh, that's a good... Asked me to come to go, but I think that it was... I think at that particular time, growth had come back, And I think we had slightly more questions around the build out of a more sort of holistic software offering over and above the merchant acquiring business. It was quite nascent on that. I don't think they quite made the progress that we would have hoped that they would have made.

50:42And so we just said, actually, like we've got meaningful amounts of capital invested in this company. Let's just see how this goes. I think that was a mistake. I think we should have put more in them. You think it can be a 250 billion dollar company? I think that's really not an amazing. but I'm like is Adyen massively underpriced then? Ford? Stripe is priced even less than Adyen. You just look at it on a multiple space, and it's great, quicker. I mean, their last round was what? So I think they're doing one of the moment on this, sort of 91 and a half or something like that. Which is, I think, double Adyen.

51:12It turns a market cap, I think it is, yeah. Does that mean Adyen's undervalued? I think I need to speak to my public market. Do you ever want to do public markets? I did public markets, but again, I go right. I mean, we continue to own a number of our companies after they go public right. So we're still big shareholders in a firm and wise. Would I ever want to go back to just doing public markets? Look, I mean, I am so lucky and privileged in what I get to do. And I think the reason I love doing what I do is because you get to sort of, you get to expand the map, at least expand the map for an organization like Billy Kiff.

51:48Of course, we're not doing like series A and series B. But when we're looking at companies within the private companies teams will be the first time Bayley Gifford as an organization will have looked at these companies And so you're starting with a blank sheet of paper and you get to discover these companies and You get to know these companies as people that are much more personal way than By and large you can in the public markets. And I think that's very special You've mentioned why several times why is decided to list in the UK The UK public market is not one that's filled with optimism right now I have many friends who have public market CEOs who say, I wish I was not listed in the UK.

52:25Sadly, how important is the local liquidity market one? Do you share the sentiment that we're in a really dire state for the London Stock Exchange? Yeah, I do share the sentiment that we're in a dire state for the London Stock Exchange. And why do you think that is? I think it's a combination of then not being loads of amazing high growth companies in the UK and listed in the UK. So there's a supply problem and I think there's a demand problem as well. I think that UK investors perhaps as a function of them they're just not being that many really exciting growth companies listed in London, they're not as used to analysing and investing in and they're risk -appetite.

53:04They're probably not as high as investors in the US investing on the NASDAQ for instance. So I think there's a demand problem and I think that there is a supply problem as well. If I were to put you in charge of the LSEs, what would you do? That's a really hard question. So I think the problem starts to like before the LSC, 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 LSC level. I mean, I respectfully disagree with you on the supply side. I get named 10 companies that are over 300 million in revenue in London today, that are phenomenal businesses.

53:34They just wouldn't list in London because there's a shit place to list. 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. Well, no, that's because I'm in a small niche of technology. I'm sure if we ran into bio and real estate and all the other markets, there would be way more. And 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 that you would need to have to make for a very vibrant, diverse growth equity public market in the UK alone. I think that if you were to go around and you were to combine all the sort of growth stage companies in Europe, then I think you can have really interesting.

54:11Do you think we should have a European public market? Yeah, I think we're probably should. Because everyone is struggling from the same, and Frank is struggling from the same, the front is struggling from the same worst, they're arguing from this. How do you figure out when to sell? It's really hard. I mean, when you're public, it's even harder. Because every day you have that permanent decision of I can sell. When you're private, I mean, to a relatively extent, you're kind of stark. So you can look at it to 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?

54:39Like when do you take some your winnings? Like this is where I think increasingly in the private market, secondary markets can be useful. 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. For those companies that go public, again in the funds where we can recycle capital, like it's not easy, but there's an opportunity cost trade -off that you make, right? Each time you're looking at a new company, which is, I need to find some capital to invest in this company, or where's that capital going to come from.

55:12Well, I'm going to get it from 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 really. Well, we have far more capital in venture in five years time than we did today. I don't know about venture. I think we wrongly talk about that. Venture, they've kind of merged. What a series see. Venture growth. Yeah, series sees like on the borderland, but like series D, series D, like that's clearly growth, right?

55:44Sure. Okay, but when we think about like pre, like will we have, because I think we're just seeing the like precipice now, and we're gonna see sovereign wild funds like we've never seen before, pension funds like we never, and it's gonna get much noisier. Yes or no, like I do still think we are seeing this trend of institutionalization and professionalization of the growth stages. And there are some high profile names in the growth stage, but I think there are fewer participants in the growth stage today than there was in 2020 and 2021. And you could say, well, those are enormous years, but I actually still think there has been consolidation within the growth stage of the private market.

56:18Will people kind of come in and go out? Yeah, of course. And so there'll be periods where there are more and periods where there are less. But I think we're already at the stage where there are a handful of the growth stage of, you know, let's call it 10, maybe you get 20 of institutions that are consistent presences in this part of the market. And I can probably name you those. Is that going to double triple? I don't think it will. We mentioned Stripe as the one where the reinvestment maybe you should have made. Can you take me to a decision where you had it on the first check and you could have done it?

56:51and you pulled away for whatever reason and you shouldn't have done. That most sticks out. So Coinbase? I should have invested in Coinbase. Why did you not? Oh, because I created a very elaborate spreadsheet where I was estimating all of the volume and liquidity that you'd need to have in Bitcoin to get to the kind of five extra turns and was a very clever model. And I felt like I was being very clever. I'm just wildly off. Do you worry that you can sometimes try and be too studious? With all of the models? Yeah, I think I can always be at risk, right? Like, and it's not just with models. Like, sometimes you can over -intellectualize things.

57:26And sometimes the best investments, like, they're quite obvious. What was most obvious? I mean, this is kind of going back to when I was doing public market investing. But, you know, for me, when we invested in Tesla in 2013, it was pretty obvious. It was obvious in 2013. Yeah, I mean, they'd sold tens of thousands of model assets 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 the people wanted to buy. They'd proven that they could make it that the roadster. Then the question was execution, and were they actually able to make enough of these things.

58:00But you could look at the organization, and there were people in their hood built -off factories and could scale the production of cars. So it felt kind of obvious at that time, and it was a $3 billion market cap. 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 disbelief? 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. You can buy and hold one stock for the next 10 years, which one and why?

58:38Then experience. Wow, that's the one why? because 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 What is it about that business model that you love so much? It's having these generalizable set of tools that can make any consumer digital application better from a user perspective, can grow the revenue and can be run way more efficiently. Their addressable market is the broken parts of the venture capital ecosystem, which is companies that have 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.

59:28And so the core risk really is that acquisition price sensitivity. And can you continue to do it at greater levels of scale? It was in Shant, she spoke to one of their acquired companies, the other day. And he said the process was kind of fascinating. There's no negotiation. And it's like, here's the deal. If you would like it, great. If you wouldn't, no worries. And it's very like black and white. And then, when I'm asked it, was the process, and it was great. And they did it, actually. But I just love that. Like, there's no negotiation. Here you go. Love that. What would you do if you knew you couldn't fail?

59:59Well, I think that if you knew that you couldn't fail, it would increase your risk tolerance to infinity, wouldn't it? I think 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? Maybe you'd be like an early stage biotech investor because you would know that every company that you invested in at some super early stage would go on to become a blockbuster drug and your returns would just kind of be off the scale. Maybe that's what you do if you knew that you couldn't fail. Which public company CEO do you have most respect for and why?

1:00:29I've got an enormous amount of respect for Christo at Wise. He's just a brilliant executor. He just has this deep care and passion about this very niche thing of movie money, cheaply and efficiently. He just cares deeply about his customers, his business. He thinks differently and orthogonally about how you go about creating a business. And yeah, sort of seen that journey as the business is growing, but as he's sort of grown with the business as well. If you could change one thing about the Bayley gift and investment decision making process, what would you change? I would like to have more time to invest in every decision I made.

1:01:07So rather than having, I don't know, how much time it is to digest all the work that the team has done to come to an investment decision, I would love it if I could have 3, 5, 10 times the amount of personal time that I could put into thinking about those investment decisions. but we have to operate within the sort of numbers that are in the day, right? Open AI at 300, GROC at 50 or Anthropic at 60. Which ones do you buy in which do you sell? Oh gosh, they'll have to buy any of them. You don't, you can buy none of them. I think at the moment I would say that I would buy none of them. I don't know what the answer is to enduring competitive advantage at the large language model level.

1:01:49And I don't feel like I could tell you which one I would want to buy without a strong thesis on that. And you wouldn't say it's productization and brand. I would say brand consumer touch points and brand. Well, the one that I would say is distribution. Well, this is why I actually I think Google's one of the most like unappreciated companies right now. When you look at the distribution end points that they have to consume as a model, they can do with AI. They are by far one of the most exciting opportunities. Well, if you went down that route, you'd say Microsoft wouldn't you? You would as well.

1:02:16Yeah. I would have Microsoft and I do have Microsoft and Google. 100%. What if you changed your mind on most in the last 12 hours? There's so many things. So we had this discussion about adding value to companies. Like this is something that I was just so wrong on for so many years. I used to say like, oh no, you don't get it like at the growth stage, the concept of value I doesn't apply, companies should like know everything themselves. And that was true in the narrocents largely around like operational stuff. They should know what they're doing themselves. But what I misunderstood was all the kinds of things that are specific needs to be in a growth stage company.

1:02:52Yeah, we already talked about them. How do you go public? In fact, how do you be a public company? How do you create a great independent board? These sorts of things. I was just dead wrong 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 them that we can be well positioned to help them with. Did becoming a father change your investor mindset? Types of businesses you like approach? I don't think it changed my investment approach. I think changed my world. What did it change in your world view? When you become a parent, there is the sort of little being that starts off very, very small and very quickly they become much, much larger, that you care about more than anything you can possibly imagine caring about, that you are deeply responsible for, in a way that like it's difficult to comprehend being as responsible for anything else as it is to be as responsible for your children.

1:03:42Or in my case, child, I just have the one. It's amazing, but it's the good things become way better than 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. Why does no one ever leave Bailey Gifford? You guys don't you just stay Everyone in ventures like I'm out I'm in tag teaming I'm you guys nope just stay and you're in Edinburgh. Yeah, which is a lovely place to live Why would anyone ever want to leave it? Sorry, it did not mean that. It's grossively to Edinburgh, but you know, it's not a...

1:04:15So the firm would be around for 115 years. We're a partnership. We are an intergenerational, unlimited liability partnership. So this is... How does that work from a carrier perspective? So, a carrier goes to the firm. Carriers to the firm. And then we remunerate people through bonuses, which is obviously a synthetic carrier, I suppose. But the way the firm operates is that there's this sort of continuous chain of partners who have been responsible for the firm and responsible for our clients and doing a good job for our clients. And the job of the partnership is to maximize value for our clients, but also make sure the firm is in a better place to hand off to the next generation of partners.

1:04:54And so I think there's this kind of deep care and responsibility that those of us who spend our entire careers at Bayley Gifford have for our clients, but also for this organization that we get to be stewards of parts of our lives and hopefully hand on to the next generation of partners better than when we joined up. It's an amazing institution. I really love the story, but for me as a student of investing, it's one of the most incredible stories, so much respect for the team there. Final one for you. When we look forward to the next 10 years, what are you most optimistic about? I like to end on a note of positivity.

1:05:28So I'm really excited and optimistic about the conditions under which companies are entering this stage of the market, this kind of growth stage. So kind of going back to that framing that we had earlier of companies, you know, around about $200 million mark, do you risked on the product side? There have never been so many venture -back companies that are sort of entering our part of the market. There's been a lot of spaghetti thrown at the wall and we get to see which bit stick, which is a great place to be a growth investor because lots and lots of experiments and you can sort of see the ones that work and so the back of those ones that work.

1:06:00But 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 my interruption sauce, 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? I think this is the opportunity for bending spoons, right? This is their market because they can take those companies and they can improve the products and they can make them profitable and then they become really, really valuable.

1:06:40So those kind of companies, you're right, don't stand up as stand -alone businesses, but in the hands of the right kind of capital allocator, they can generate a lot of free cash flow. Would you be CFO of bending spoons? Well, I don't know. If you could call you up, that'd be my CFO. So there's David A. the CFO there, does an amazing job, there's nowhere to be able to do it. But to go back to the final thing. I think it's really important for why now is an amazing time for growth equity investing. We're in this period of capital where there, and yes, taking the conversation we had earlier around, there are some parts of the market that are still quite exuberant.

1:07:16There 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 availability of capital, which is providing enough capital to be able to invest, but not so much capital that it detracts from the long -term quality of those businesses. So I think that kind of amalgamation of 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. Peter, I so appreciate the time to say, I so appreciate.

1:07:50You're incredibly humble, incredibly different as a thinker, which is so lovely for me doing what I do. And I just really appreciate the relationship and plenty of you being so open to stay. It's been a pleasure to see you again. I really enjoyed the conversation. Thank you very much for having me. I have to say, I just think the world of Peter, such a fantastic creative investing mind. If you want to watch the show, you can find it on YouTube by searching for 20VC. That's 2 -0VC on YouTube. But before we leave you today, here are two fun facts about our newest brand sponsor, Kajabi. First, their customers just crossed a collective $8 billion in total revenue.

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