Private equity faces a growth and valuation reckoning

Deal-by-deal versus community-led. Rising Tide Partners embeds itself within specialized talent communities in aerospace and energy to identify founders before they seek formal capital (Neal Bloom from Rising Tide Partners). This strategy contrasts with the traditional institutional model, where firms wait for companies to reach Series A or later to secure validation through broader syndication. Rising Tide Partners utilizes special purpose vehicles to allow limited partners to participate in individual deals, a structure that shifts the investment burden from a single fund to deal-by-deal selection.

The growth-stage funding squeeze. Software companies now require 10% to 12% annual EBITDA growth to match the returns a 2015 deal achieved with 5% growth, as rising interest rates increase financing costs (TLDR Founders). Golub Capital reports that revenue growth at its software borrowers has dropped from 9% to under 3% over the last two years, complicating the outlook for mature software buyouts. While firms like Sequoia Capital and CapitalG continue to deploy capital into AI-native infrastructure, such as the $600 million round for Bedrock Robotics or the $150 million round for Serval, the bar for profitability is rising as renewals become harder to bank on (Jonathan Hodson-Walker from Silverwood Weekly Technology Market…).

The disagreement centers on whether the current venture-backed outcomes in AI reflect a sustainable shift in productivity or a temporary valuation bubble. While private equity firms struggle with the math of mature software exits, venture investors continue to command high valuations, such as the $40 billion valuation for Kalshi's Series G round (Parsers VC from Parsers Venture Capital Insights). These divergent realities suggest that capital is increasingly concentrating in AI-native infrastructure while traditional software buyouts face a fundamental performance correction.