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<p><strong>Your capital is at risk. Past performance is not a guide to future returns.</strong></p>
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<p><strong>Katie Shepardson (KS): </strong>Hello everyone, and welcome to our first quarter private companies discussion. I'm Katie Shepardson, Client Relationship Manager on our US Intermediaries Team, overseeing our clients across the East Coast. I'm thrilled to be joined by Dale Ledbetter, who's an Investment Specialist on our Private Companies Team. </p>
<p>Dale, welcome. Pleasure to have you.</p>
<p><strong>Dale Ledbetter (DL):</strong> Thanks for having me.</p>
<p><strong>KS:</strong> To set the stage, it's worth noting that we're going to keep this conversation topical, discussing the broader growth equity landscape, as well as our experience investing in the space. Please keep in mind that the investments discussed herein may vary across vintages. </p>
<p>We'd love to keep this conversation as interactive as possible, so please do feel free to drop any of your questions that arise into the Q&A chat and we will address them as we go along. </p>
<p>For those of you less familiar with our firm, Baillie Gifford is a $270bn growth equity manager based in Edinburgh, Scotland, with one sole focus over the last 118 years: and that is deeply researching and identifying growth companies on the verge of their inflection point. </p>
<p>For much of our history, these companies were found in public markets. So, we invested in Amazon in 2004, Tesla in 2013, and NVIDIA in 2016. With an acknowledgment that many of our best growth ideas were staying private for longer, we made our very first private investment in Alibaba in 2012 upon being approached by Jack Ma. Since, we've invested over $10bn across 167 private companies, of which 67 have gone public or through an M&A transaction.</p>
<p>Notably, we remain top-10 shareholders across 29 percent of these IPOs. Our history clearly demonstrates a deliberate scaling of our private equities platform. With early investments made through institutional separate accounts for those mandates which allowed private investments, we launched our first fully dedicated private equity fund in 2019, Fund 1. This was followed by Fund 2, launched in 2021, which was our first drawdown vehicle. </p>
<p>So Dale, turning to you, one question that often comes up in client conversations is that many late-stage growth equity investors are allocating to the same mega cap companies. I think it would be helpful if you could expand on how we differentiate, and where do you see our edge?</p>
<p><strong>DL: </strong>Oh, great question, Katie. I think if you think about public and private growth markets, you're seeing concentration in public markets, but you're also seeing concentration in private markets and well-sought-after names. And I think a big misconception is that there's only value in those well-sought-after names. </p>
<p>One of our points of differentiation, it really starts with our inputs of being sector-agnostic and being global. What that enables us to do is to identify market leaders that you see on the left-hand side of the chart, such as SpaceX, ByteDance and Anthropic. But then also on the right-hand side of the chart, you see the breadth of opportunities that we see across both geographies and sectors.</p>
<p>So, our strategy is not just about accessing well-sought-after names, but about underwriting businesses where we see substantial value can still be created after our entry.</p>
<p><strong>KS: </strong>Absolutely. I found it striking that CB Insights' model achieved about a 70 percent success rate in identifying venture-backed, successful private company investments using just four metrics. But in private markets, as we all know, it's not just about identifying the winners, it's about gaining access which is truly paramount. </p>
<p>So how do we effectively source and gain access to our very best ideas?</p>
<p><strong>DL:</strong> I think access is one of our key points of differentiation. Our sourcing is a key differentiator. Over 80 percent of our investments are sourced through our unique network that has been built through our reputation, initially in public markets, but has been reinforced by our reputation in private markets, which we've invested in since 2012. </p>
<p>So if you think back, we were long-term owners of Tesla in public markets that lend itself to being long-term owners of SpaceX in private markets. And it's really- What Baillie Gifford is is the partner of choice for growth-oriented businesses, regardless of size. If you're a smaller company, having Baillie Gifford on your cap table signals that you graduated from product-market fit, that you're on the journey to being a larger private business. And if you're a larger business, such as a ByteDance or a Databricks or Stripe, it signals that you're closer proximity to public markets. </p>
<p>If you look at the reverse inquiry on that chart on the slide, you will see that those larger names, such as ByteDance, Databricks, and Stripe, reached out to Baillie Gifford directly to have us be on their cap table. So, the most important takeaway from this slide is really that we can source opportunities outside of the intermediary channel.</p>
<p>And when we do find opportunities in the intermediary channel, they're really very selective. We have one very close relationship in the intermediary channel who has shown us some very attractive opportunities. We're not very much, you know, working with broad bulge bracket banks. And so this kind of sourcing really improves our access, it really improves our quality of information, and oftentimes it also can impact our entry point discipline.</p>
<p><strong>KS: </strong>Absolutely, that's fascinating. As global generalists, some of our very most successful ideas have been in companies that are headquartered outside of the United States, truly reflecting our strength in our international network. </p>
<p>So, can you highlight some of the private investments abroad that may be less familiar to our US audience?</p>
<p><strong>DL: </strong>Sure, the private portfolio is not just a US-centric portfolio over our two dedicated vehicles. We've historically done 70 percent in the US and 30 percent outside of the US. More recently, that split has been 60/40, and I'll come to the reason for that a little bit later. </p>
<p>But what we do is really immerse – in addition to our proprietary network in terms of sourcing, as we discussed in the previous slide – we immerse ourselves in these ecosystems to really try to understand the entire investment ecosystem in a particular region. And the question we're trying to answer is, are there growth-oriented businesses that fit our criteria in a certain region?</p>
<p>More recently, that's been Latin America or Singapore and South Korea, where we've identified companies such as Mottu, which is a fintech business, or bolttech, which is an embedded insurance business, or Toss, which is a financial super-app. And why this matters is that some of the most attractive growth businesses emerge outside of the largest and most crowded markets. What we're trying to do is identify businesses that can compete on a global scale. </p>
<p><strong>KS: </strong>Absolutely. So I'll go up to this next slide.</p>
<p><strong>DL:</strong> Just turning to Europe specifically, we noticed in our last dedicated vehicle that prices, global prices, were capitulating quicker to the new environment than the US.</p>
<p>The valuations globally were quicker to recognize that interest rates were higher and that the pricing of these assets was less attractive than it was in the previous environment. And in the back half of 2023, we identified companies such as Bending Spoons and Oddity, which were both profitable and met our top-line growth criteria of 35 percent. In addition to that, they were both single-digit multiples, Bending Spoons being six times price-to-sales and Oddity being four times price-to-sales. </p>
<p>And if you look at the companies on this side in particular, their average revenue growth is almost 60 percent. Three out of the four businesses are profitable with 29 percent EBITDA [earnings before interest, taxes, depreciation, and amortisation] margins. And the price-to-sales multiple is a single digit price-to-sales. </p>
<p>So, this combination supports the case that Europe in particular can offer both quality assets and valuation discipline versus growth at any cost, which you might see more likely in the US because of the abundance of capital, in terms of what's available in terms of funds that can invest in these companies.</p>
<p><strong>KS:</strong> Sure. You just mentioned the strong revenue growth we're seeing across these European businesses. So, how does the company think about revenue growth and other key characteristics when underwriting the initial valuation?</p>
<p><strong>DL: </strong>I think in this environment, revenue growth will really drive returns. If you look at previous environments, returns were driven by multiple expansion or leverage or some combination of revenue, leverage and multiple expansion.</p>
<p>But I think in the current environment, it will really be revenue that drives the returns going forward. And this is really core to our underwriting philosophy, is that long-term returns are driven more by businesses compounding over time then by getting short-term valuations exactly right.</p>
<p>So, if you look at the left-hand side of the chart, it shows how revenue can compound much faster than cost, which allows early losses to flip substantially into profits over time. And if you look at the right-hand side of the chart, or the right-hand chart, it looks at valuation multiples compressing materially, but strong revenue growth can still drive effective, attractive investment returns. So, the four main messages are: that diverging rates of compounding drive profits; it still works even if revenue growth slows over time; revenue growth can offset multiple compression; and initial valuations can look much cheaper on future earnings than any near-term metrics.</p>
<p><strong>KS: </strong>Maybe discussing the valuation differential between the public and private landscape could help expand on this point a bit.</p>
<p><strong>DL:</strong> Sure, so this chart looks at comparing high-growth public companies to high-growth private companies in which we've invested. And really you wanna be on that far right-hand side of the chart because those are high revenue growth percentages. </p>
<p>What this slide is really trying to show is that revenue growth, the alarming valuations that you see in the news should be taken in the context of revenue growth. If you look at the average public revenue growth of the companies on this slide, it's 15 percent at an entry point of around eight times. If you look at the private companies that we've invested in, the average revenue growth is 145 percent at a multiple of 13 times.<br>Yes, the multiple is higher, but the growth rate is 10 times higher. So if you're looking for a revenue growth which, as I said in the previous slide, will drive returns in this environment, you're going to find it in private growth. </p>
<p>So, many of the private opportunities that we're identifying still look attractive when you factor in that revenue growth versus a market being overheated. This explains why we continue to see, on a selective basis, compelling entry points in private markets versus public markets.</p>
<p><strong>KS:</strong> Sure. So it's become a common phrase that companies are staying private for longer, and I think we'd all agree that this is the case. But the forward-looking opportunity set is far more attractive than that simplified statement suggests. So, would you share your thoughts on the broader landscape and potentially the emergence of the mega-cap private company?</p>
<p><strong>DL:</strong> If you think back, Amazon went public after 10 years of being private. SpaceX is on the verge of going public after 20 years-plus of being private. And that's the dynamic which we're currently living in. Public markets are shrinking, they're 50 percent declined since 1996. </p>
<p>Secondly, the time [until] IPO is getting much longer. And that's really because growth equity has been able to fund companies in private markets much more efficiently than they did in the past. This innovation, funding innovation, used to happen in public markets in both small-cap and mid-cap, but currently that funding of innovation is happening in private markets.</p>
<p>Thirdly, more companies can scale and create value before listing, which is increasingly benefiting more private investors than public investors. And even if you look at the companies that have gone public last year, they're much smaller in comparison to even the companies that are still private today. And so, the idea of private for longer is entrenching, we don't see it going anywhere anytime soon, and private growth is no longer a niche access point to pre-IPO companies – it's increasingly a large portion of when the growth journey actually happens.</p>
<p><strong>KS: </strong>Yeah, thanks, Dale. That's very helpful.</p>
<p>So looking ahead, where are you and the team seeing the most compelling opportunities today, and how is the pipeline shaping up?</p>
<p><strong>DL:</strong> We're seeing several compelling opportunities, particularly those that fit within our definition of growth, which is a $50mn revenue top line going at 35 percent, profitable or on the path to profitability, and that tends to be also companies that are $500mn valuation or higher. </p>
<p>In reality, we're investing in companies much larger than that. The valuation can range anywhere from $500mn to $240bn. In terms of growth rates, the median growth rate is typically around 70 percent, and the median revenue is around $200mn. </p>
<p>From a sector perspective, we're prioritising companies that can beat infrastructure in their markets across fintech, hard tech, AI platforms, etc. And then from a regional perspective, we continue to have a global focus. In India, we're maintaining relationships because of our strong access. Valuations continue to be somewhat high there, but as we said before, we immerse ourselves in these ecosystems to continue to attract companies in those regions. </p>
<p>We're also visiting Brazil this year to continue to understand both the macro and the political landscape. And we continue to explore opportunities in China on a select basis. What we're really trying to understand there is Chinese robotics and learning more about that local ecosystem. </p>
<p>From an AI perspective, which is no conversation can go without mentioning AI, we're conducting research across the full stack, and that really comes down to chips, energy, infrastructure, and models. Currently today, the main focus has been large language models and chips. Where we're spending more time is looking at the application layer We're looking at companies that are maybe one or two stages from our stage of investment, but you can no longer continue to ignore companies that have $100mn in annual current revenues. We have enough cohort data to recognise that these companies will potentially have value once they do reach our stage. </p>
<p>And if you think back to our transition to the cloud versus the current technological transition we're having where artificial intelligence in the cloud, ultimately the revenue, if you think about it, the inverted triangle, the revenue really accrued to applications. Currently, the triangle is the opposite, where the revenue is really being accrued to the picks and shovels. So, NVIDIA and public markets would be an example of that. I think over time, you'll start to see that application layer also benefit in terms of the artificial intelligence transition in which we're currently undergoing. </p>
<p>So overall, our pipeline really reflects a strategic pattern of looking for businesses that become infrastructure in their markets, whether it be in payments, whether it be in manufacturing, whether it be in AI systems or commerce enablement or consumer ecosystems. And we're most interested in where software meets the real world, where platforms can become sticky network dynamics, and where new technology capabilities can unlock business innovation.</p>
<p><strong>KS: </strong>Certainly a lot to be excited about. Thanks, Dale, that was a fantastic overview.</p>
<p>If you'd like to explore any of these topics in more detail, please don't hesitate to reach out to your Baillie Gifford Relationship Manager, as we'd be delighted to continue the conversation. </p>
<p>This session does mark the start of our quarterly webinar series, and we'd love for you to join us for the upcoming sessions across our public equity suite, all commencing at 8 am Pacific Time, 11 am Eastern Time.</p>
<p>We know your time is valuable, so thank you for spending part of your morning with us. Wishing you all a wonderful end to the week, and we look forward to seeing you next time.</p>
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<h3>Risk factors</h3>
<p>This communication was produced and approved in April 2026 and has not been updated subsequently. It represents views held at the time and may not reflect current thinking.</p>
<p>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.</p>
<p>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.</p>
<p>All information is sourced from Baillie Gifford & Co and is current unless otherwise stated. </p>
<p>The images used in this communication are for illustrative purposes only.</p>
<h3>Important information</h3>
<p>Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.</p>
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