Most of the mutual funds and asset managers that have flocked to the venture capital ecosystem over the past decade have set out to amass big stakes in fast-growing startups that will later go public.
But Baillie Gifford, a 114-year-old Scottish firm that invests in venture capital-backed companies from several evergreen vehicles, claims to be a more patient private market investor than many of its peers.
“By virtue of having permanent capital, we really don’t care whether companies go public or not,” said Peter Singlehurst, head of the private companies team at Baillie Gifford. “We don’t particularly need or want cash. We don’t view IPOs as access. The only reason we’re interested in IPOs is because it’s an opportunity to put more capital to work.”
(Courtesy of Baillie Gifford)
With this approach in mind, Baillie Gifford struck a series of deals with high-risk, capital-intensive, and in many cases still no-revenue startups.
The company’s portfolio includes Psi Quantum, a quantum computing company; Solugen, which works to decarbonize the chemical industry; and several battery and electric vehicle recycling companies.
One of the latest additions to the company’s portfolio is Upside Foods, a pre-product cultured meat company formerly known as Memphis Meats. Despite raising a $400 million Series C, it may be years before Upside Foods generates meaningful revenue, said Alex Frederick, an agribusiness analyst at PitchBook.
Chris Evdaimon, an investor in Baillie Gifford’s private markets team, met with five or six major cultured meat and vertical farming companies around the world.
“Chris looked at these [categories] not because we need to invest in something like vertical farming, but because those are areas that could be transformative,” Singlehurst said.
The company’s private enterprise group has a culture of taking time, sometimes years, to seek out cutting-edge areas of business, Evdaimon said, adding, “We measure one opportunity against another. It there are no geographical restrictions or industrial or sectoral restrictions”.
Although Baillie Gifford has a large portfolio of emerging technologies, the majority of his investments are in more mature, revenue-generating companies such as Stripe, ByteDance and Epic Games.
On Thursday, the company announced that it had co-led with T. Rowe Price a $160 million Series E equity investment in Convoy, the Seattle-based operator of a digital freight network and marketplace that expects to generate more than $1 billion in revenue this year. .
Since launching its private markets strategy, Baillie Gifford has invested $10 billion primarily in mid-to-late-stage companies, and deployed an additional $40 billion in a subset of those companies that have eventually become public, according to Evdaimon.
The asset manager has backed 101 companies and recorded 33 exits, including Airbnb, Wise, AllBirds and Ginkgo Bioworks, according to data from PitchBook.
Despite the decline in valuations now affecting pre-IPO companies, the company does not plan to change its investment approach. Still, Evdaimon acknowledged that valuations have fallen, and the company is even seeing deals with convertible notes for companies that are struggling to raise another round at a stable or higher valuation.
Baillie Gifford’s private company team has seven dedicated investors and writes checks ranging from $2.5 million to $250 million, with the happy medium between $40 million and $150 million.
While the firm may have built a portfolio of some of the hottest venture-backed companies, Evdaimon said it prides itself on a “boring and consistent” approach to investments.
Singlehurst said Baillie Gifford’s location and history are an important part of the company’s ethos, adding: “When you’ve been based in Edinburgh for over 100 years, you don’t evolve in the same way. than a city. [of London]- or an investment company based on Wall Street or in Silicon Valley. You end up with a very different culture, a different way of doing things, different time horizons.”
Featured image by Joe Daniel Price/Getty Images
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