Key points
- Private growth offers asymmetric upside with lower risk compared to venture capital
- Private companies such as SpaceX, Bending Spoons and Tekever illustrate rapid exceptional business models and culture that supports rapid revenue growth
- Our public-private integration helps us recognise transformational growth potential and access leading companies with ambitions to IPO
As with any investment, your capital is at risk.
Baillie Gifford made its first private growth investment in 2012. At a recent investor forum, Baillie Gifford’s Peter Singlehurst, Rob Natzer and Brian Kelly discussed the opportunity in private growth investing.
The private markets landscape
Kelly noted that buyouts and venture capital still dominate private markets, but said private growth is now “too significant to overlook” as high-quality companies stay private for longer.
Kelly contrasted the returns from buyouts and growth. In buyouts, control lets investors change “costs, staffing and strategy”.
Using EBITDA as shorthand for operating profit, he said that at about 10x EBITDA, a 10 percentage point improvement in EBITDA margin could, broadly, double a company's valuation if the multiple stays the same. Buyout investors can also use more leverage than “any public market rational investor would tolerate”.
In growth investing, value creation “is driven by exceptional management and product-driven growth”. Kelly said Baillie Gifford believes it has an edge here, with a record “going back decades across public markets and private markets”.
He highlighted the power of compounding: at roughly 60 per cent annual revenue growth for five years (his cited average), revenue can end up around ten times higher.
Growth can complement buyouts because “it can give you something very special that you can’t get with buyout.”
Asymmetry as a return driver
A second theme was asymmetry. Kelly said venture capital invests at “the most asymmetric point of a company’s life cycle”, but argued private growth can still deliver “a very similar type of asymmetry… It just might take a little bit longer.”
He summed up the trade-off as: “You get a very similar asymmetry to venture, you get less risk, and you can deploy more capital into growth.”
SpaceX was his flagship illustration of later-stage asymmetry. Kelly said Baillie Gifford first invested when SpaceX was valued at about $30bn and that its valuation has since risen to around $800bn.
He added that SpaceX was profitable for much of that journey, which in his view reduced risk and enabled larger follow-on investments.
Baillie Gifford’s private growth capabilities
Singlehurst described what private growth looks like on the ground. The Private Companies Team backs businesses with meaningful revenues and “proven product market fit” that are “growing really quickly.”
He described the ‘average’ company the team invests in as generating around $200m of revenue and growing about 70 per cent year over year – “big companies,” rather than fragile start-ups.
Investing edge
Singlehurst outlined four attractions regarding the private growth asset class: attractive risk/reward dynamics, business quality, relative valuations and Baillie Gifford’s “scope for competitive advantage as investors”.
On what sustains the long-term compounding that creates that asymmetry, he stressed that “competitive advantage is what drives a business’s ability to continue to grow and compound over long periods of time.”
He also argued that because public markets have constant price discovery while private markets do not, “There is better scope for mispricing of business quality and business growth within the private markets.”
Access, however, is decisive in private growth investing. Singlehurst said Baillie Gifford meets about 1,000 companies a year but invests in roughly 10, and that the firm has spent 13 years building, “A pipeline, a reputation, a sourcing muscle that gives us access to the best businesses in the world.”
Natzler explained how the private capability evolved from bespoke public-private mandates in the 2010s to pooled structures launched in 2019 and 2021.
He said Baillie Gifford has deployed about $10bn of client capital across more than 150 private companies, with more than 50 going on to IPO.
Lessons from Tekever and Anthropic
Natzler introduced Tekever, a Portuguese defence business building autonomous drones for Nato aligned militaries, to illustrate why companies might choose Baillie Gifford as a shareholder.
When we invested, it was already profitable and growing quickly. After the company received a $1bn buyout offer, Baillie Gifford counter-offered with a lower valuation, enabling it to support a founder who wanted to “keep it independent and one day take it to IPO.”
Natzler said Baillie Gifford took its time to get to know Anthropic and the broader AI landscape, investing “at an eye-watering enterprise value of $180bn, which represents about 20 times projected year-end annual recurring revenue.”
He noted the team initially struggled to judge whether AI lab companies were “growth-stage” businesses or “early-stage companies with growth-stage numbers and valuations”.
But, over the course of roughly three years of engagement, the Private Companies Team saw “the [Anthropic] team really grow in maturity, build out product and financial forecasting functions, and build actual relationships with real customers who were willing to go on the record and give feedback to us.”
The case for private growth
Overall, the speakers argued that private growth aims for venture-like upside through compounding in more established businesses, with a return engine distinct from buyouts.
Words by Gillian Christie
Hungry for more?
If you enjoyed this bite-sized recap, you can watch a video of the full session.
Risk factors
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in February 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
Potential for Profit and Loss
All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.
All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.
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