In 2026, Venture Capital will eat Private Equity
It used to be that venture capital and private equity lived on two separate planets:
VC = San Francisco
PE = New York
They targeted completely different universes of companies:
--> PE - people heavy biz services, stable/low growth, predictable cashflows
--> VC - tech-forward, high growth, high risk, massive TAM
What was the playbook for B2B VC backed startups?
--> Grow to unicorn scale by selling to other early adopter tech companies, then Fortune 500s
XX> SMB and mid-market services - think field services, IT staffing,
accounting, construction, recruiting - were always tough to sell into for startups
Why?
-->Thin margins, high labor costs, and small IT budgets
>> But as AI eats labor, these businesses are suddenly in play <<
There are 3 ways where VC and PE are colliding:
1/ Private Equity funds will become channel partners for startups.
PE funds are focused on financial engineering and cost optimization. Startups building AI products and services can sell across their portfolio to automate the backoffice and uplevel sales and marketing. PE funds have made AI their #1 strategic priority and have hired central leaders to oversee their portfolio adoption efforts
2/ PE portfolio pages are a startup idea menu
Private equity will often buyout vertical software companies whose TAM didn’t allow venture scaled returns. As software evolves from data storage and collaboration to agents taking action and completing work, AI should massively expand the TAM for these categories. Founders will set their sights on unseating these legacy incumbents backed by private equity. All they have to do is look at their portfolio pages for category ideas
3/ AI Rollups
This is one of the most direct ways that VC is eating PE
VC backed AI platform businesses are not just selling software but acquiring legacy business services companies to own the value chain end to end.
As an example, our @speedrun company Agent Astra (sr005) is acquiring freight forwarding services businesses with mostly debt and integrating AI deeply into their operations.
These companies aim to increase margins by at least 2x and make them “AI native”
tl;dr - While the west coast, Patagonia-wearing VCs and the east coast, PE suits used to live in different universes, in 2026 with AI, I believe, those worlds converge
