This article originally featured in Baillie Gifford’s Spring 2019 issue of Trust magazine.
Riding an exercise bike, playing a game, having an ultrasound scan and sending a colleague a message are things that most of us will do without questioning how. But what if these routine tasks were transformed, and vastly improved, through technology?
Gary Robinson and Helen Xiong are looking for innovative, fast-growing US companies. The pair are increasingly finding these opportunities in the private arena. Their aim is to identify and own shares in exceptional growth companies in the US, regardless of whether they are public or private. “What’s changed over the last decade is that companies are staying private for longer. The average age of a company when it lists on a US stock exchange has doubled and the number of listed companies has halved,” Robinson says. This presents challenges for investors, because by the time these companies are listed, a proportion of their long-term potential may already have been realised. Fortunately, Baillie Gifford has a strong track record of investing in innovative private companies, as Scottish Mortgage has been active in this area for years.
Four of the managers' favoured unlisted opportunities
Pokemon Go, played by as many as 147 million people on smartphones, took the world by storm in 2016. It was made possible by Niantic’s technology.
Spun out of the team that developed Google Maps, Niantic came up with the augmented reality platform behind the mobile version of the Nintendo game. The company is also working with Warner Brothers to create a Harry Potter game, set to be released this year.
“What makes Niantic exciting is not the games that it’s building, but the technology platform that allows these games to be made. Niantic is creating a 3D map of the world by incentivising players to go outdoors and scan the outside world. Its platform is like an operating system that bridges the real world and the digital world,” Xiong explains.
This 3D map will provide a more interactive multiplayer experience where all players have a shared view of the game. The San Francisco-based company also intends to open up its platform to other game developers. “Niantic’s advantage will come from building a unique map that will be the platform for other companies to design games on,” Xiong says.
Beyond gaming, Niantic’s platform could have other real-world applications including autonomous vehicles.
Gamers at the Pokemon Go Safari Zone event, Tottori Sand Dunes, Japan. © The Asahi Shimbun/Getty Images.
We have had computing in our pocket for only a decade; now a pocket ultrasound machine has arrived. Butterfly Network has developed a handheld ultrasound machine that can connect to an iPhone, called the Butterfly iQ. While the product was being tested for regulatory clearance in the US, the chief medical officer of the company diagnosed his own cancer when he used the device on a lump in his throat.
Robinson says: “Butterfly Network is making ultrasound imaging as accessible as taking a blood pressure reading or a temperature. It has completely redesigned the technology and what that’s done is dramatically lower the cost, help miniaturise it and add greater functionality.”
Butterfly Network’s handheld machine, which sent its first delivery last year, will sell for about $2,000, compared with up to $100,000 for conventional models.
Artificial intelligence (AI) is built into the scanning software, providing essential guidance to non-specialists. “Butterfly is using AI to improve the functionality of the device, so it can be powerful in almost anyone’s hands. This really is a breakthrough innovation, rather than an incremental one,” according to Robinson.
© Butterfly Network, Inc.
With Peloton, you can have the energy, flashing lights and adrenaline of a spin class without having to leave the house.
The New York-based company sells internet-connected fixed bikes and treadmills that stream the very best personal trainers in the world to your own bedroom or study.
Peloton users spend $39 a month to receive streamed classes, which they take on a stylish fixed bike that costs about $2,000. If you don’t fancy any of the 14 hours of live classes a day, there is a long back catalogue of content to suit your mood.
Robinson says: “Here is a company that is leveraging tech to improve the product. Peloton is combining gaming and community and it is driving fun and engagement.”
Customer service is integral to Peloton, which is fast becoming one of the best-known brands in fitness tech in the US and is about to launch across Europe. The company owns its retail showrooms and delivers its bikes in its own vans.
“Peloton’s obsession with the customer experience is helping to drive viral growth through word of mouth and recommendations,” Robinson says. “Customers are borderline fanatical about it.”
© Peloton Interactive, Inc.
Sometimes described as the email killer, Slack is changing the way people interact at work.
When WhatsApp came along, it super-charged texting. Slack has the potential to shake up how we communicate at work in a similar way.
Launched in 2013, the software provides a chatroom-like service to reshape how people collaborate and work.
With the rise of cloud and mobile computing, Microsoft has arguably lost some of its grip on workplace tools. While these tools are individually powerful, they do not always fit and there is a need for an overarching system to pull everything together.
Slack, which has 8 million daily users, could be the system to do just that. “Slack is making collaboration easy and people are using it as the main interface through which they access other business applications,” Xiong says.
The software boasts phenomenal engagement figures. While there is competition from big tech firms, which are producing similar tools, Slack’s intuitiveness and ability to allow easy integration with third-party applications are winning fans. The fact that companies as diverse as IBM and BuzzFeed have been adopting it demonstrates its broad appeal.
The value of a stock market investment and any income from it can fall as well as rise and investors may not get back the amount invested.
The Baillie Gifford US Growth Trust and the Scottish Mortgage Investment Trust have a significant exposure to unlisted investments and their risk could be increased as these assets may be more difficult to buy or sell, so changes in their prices may be greater.
The views expressed in this article should not be considered as advice or a recommendation to buy, sell or hold a particular investment. The article contains information and opinion on investments that does not constitute independent investment research, and is therefore not subject to the protections afforded to independent research.
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Angela Jameson has written for The Sun and the Evening Standard. She is a foreign correspondent for UAE-based The National and writes a weekly Brexit column for The New European.