How is private equity currently being disrupted, and what is the new playbook to creating value in a much more competitive, fast-moving, global environment?
We've worked with numerous Private Equity investment funds, their portfolio companies, the startups they acquire, and the Fortune 500 strategics they exit to over the last three decades.
The standard playbook for Private Equity has been financial engineering, perhaps some profit sharing, a few acquisitions, increasing cross-sell / up-sell, accelerating product development velocity, and exiting in about 5 years to the next Private Equity buyer or a strategic Fortune 500 buyer.
3 Disruptive Problems
But the world has changed due to three major disruptive forces:
- Higher Interest Rates: ZIRP has been over for a while, hold periods are getting a little long in the tooth, there's too much dry powder sitting on the sidelines due to a lack of quality businesses, and the higher interest rates messed up financial models, requiring higher hurdle rates to get similar returns. Secondaries were developed to assist, but these aren't buyouts; they're minority interests, so they merely patch the problem, rather than solving it. Private credit stepped in, but that's a different business model.
- Artificial Intelligence: The big question on everyone's mind is the ChatGPT Risk. Are they going to eat your lunch and take the business you're about to buy to zero? Funds are walking away from deals or investing heavily in new AI Stories for existing PortCos to get their businesses back in the game. Unfortunately, few of these companies have the in-house skill or the product in production that's driving real revenue growth, so it's a narrative, not a fact.
- Slowing Growth: Across the board, Enterprise SaaS growth rates aren't what they used to be. Companies are pouring more time, money, and energy into existing growth channels (paid, organic, inside/outside sales, influencers, webinars, events, cold outreach) trying anything to squeek out new logos and improve closed-won rates. The same effort is getting lower returns.
The businesses that are exiting are achieving a Rule of 50 to Rule of 90 performance and have been utilizing vast amounts of data (public or private), as well as artificial intelligence, to commercialize that data into a product, and updating their brands and positioning to align with modern market needs.
AI Defensibility is top of mind for Private Equity investors, while AI moats are a recurring topic in the startup community. Meanwhile, F500s are implementing AI to empower all employees and stay competitive.
This means that the demand for skilled experience in Emerging Tech product development and commercialization is at an all-time high, and the bar for achievement is even higher.
Companies simply do not have the skills, resources, or capabilities to compete in-house anymore. They are forced to look outside. The problem is that everyone is looking outside and competing for the same talent. It's why Meta is paying $100M compensation packages to these new "pro athletes".
Meanwhile, AI-first startups are growing from $0 to $100M in ARR in 12 months. Thus, the opportunity for building the right AI Product has been proven. But you're not building it.
So the question remains, why would someone with decades of experience building high-growth Emerging Tech products want to work for your business instead of someone else's, or their own?
One of the reasons is core values. People can sniff out when they've been developed by a whiteboard committee rather than a single owner who said, "No, this is what we stand for. And I don't care what the world thinks about it."
It simultaneously attracts and repels the right talent and customers.
So what are you going to do now that you're in one of the toughest competitive environments that has ever existed? You're competing against vibe-coded and AI products that launch and scale weekly, you're competing against people who have been refining their skills for decades, and your financial results are in an existential crisis.
You'd better figure it out, because it's not getting easier. You need to get in the game and start crashing the boards.
Defensibility is not Offense. You don't win games playing defense or cutting costs. You win games by putting more points on the scoreboard than your competitor.
We help companies win.
Fortune 500 (Public Equity): How to Win
- TSR: Drove Total Shareholder Returns over decades for hundreds of Fortune 1000 companies using incentive compensation design for base, bonus, and equity for the Board, executives, and the sales team.
- Efficiency: Built an AI-first platform for collecting all AI in the company and developing an AI for BI app that increased total employee usage, saved total employee time, and decreased third-party costs.
Private Equity (Tier 1): How to Win
- Turnaround: Turned around a $100M global enterprise SaaS company over years by flying around the world, fixing and integrating previously acquired products, acquiring and integrating an AI product, and inventing and building a new API-first platform.
- New Logo Revenue: Drove $3M in new logo revenue by improving the user interface of an Enterprise SaaS app.
- AI Strategy & Execution: Prepped multiple portfolio companies for exit by setting a new vision, expanding the valuation and total addressable market, developing new AI-first roadmaps and narratives, and a resource/cost plan for achieving it during a hold period.
- $B Exits: Drove billions of dollars in exit value by assessing the technology and product of a portfolio company and how it accelerated the value of the Fortune 500 strategic acquirer's combined business.
- 10x ROI: Drove 10x ROI by developing AI use cases and implementation strategies for a fund owner.
Startups (VC Private Equity): How to Win
- New Logo & Revenue Growth: Drove $6M in new revenue from a Silicon Valley company using a sales deck and zoom call.
- Free Media: Drove $2M in free, earned media for a consumer product by improving positioning and naming of a key product feature, and aligned it to a simplified product mechanic/interface, which differentiated it from all other competitors in the market.
- Zero to One Products: Built multiple zero-to-one products to realize a non-technical founder's vision, and then found product-market fit to generate revenue.
- Ecosystem Growth: Drove 50% in quarterly revenue growth by developing a software developer and system integrator ecosystem, creating a packaged solution subscription model, and increasing sell-through vai channel and reseller relationships.
There are plenty more value creation case studies we can share that have worked across industry, size, time horizon, and budget.
You set your own ROI:
- Small budget, small outcomes, small ROI.
- Big budget, big outcomes, big ROI.
But it starts with how big you think. Think small, stay small. Think big, grow big.
The choice is yours.
