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Forbes
6 days ago
- Business
- Forbes
How AI And Permanent Capital Are Reshaping Private Markets
Pierrick Bouffaron, Operating Partner for Entropia Capital , a global investor in technology with offices in Hong Kong, Luxembourg and NYC. getty A quiet yet profound transformation is reshaping private equity and late-stage venture capital: the convergence of AI, operational value creation and long-hold ownership models. At the core of this evolution are AI-fueled roll-up strategies and the rise of permanent capital vehicles, both of which appear to be increasingly favored by firms ready to move beyond the rigid timelines of traditional fund cycles. We are entering a new era where algorithmic leverage, not just capital, is driving the next wave of scalable, operational value creation. Over the past decade, I've worked at the intersection of deep tech investing, corporate innovation and startup acceleration, advising and co-building technology ventures across the U.S., Europe and Southeast Asia. I've seen firsthand how data infrastructure and operational control are becoming essential tools for private market outperformance. Roll-ups, where investors acquire and consolidate smaller businesses in fragmented sectors, have long been a private equity favorite. They can deliver efficiencies through scale, help negotiate better contracts, centralize functions and ultimately allow the group to be sold at a premium. But executing a roll-up is hard. It requires deep market knowledge, relentless due diligence and seamless post-deal integration. That's where AI is rewriting the playbook. Modern AI systems can crawl thousands of databases, parse regulatory filings and analyze web content to surface ideal acquisition targets using natural language processing. Machine learning models can flag customer churn risk, uncover margin levers and benchmark operational key performance before a term sheet is signed. After closing, AI can help facilitate faster onboarding, workflow automation, supply chain optimization and digital transformation across units. This is no longer theory. Thrive Capital, an investor behind OpenAI and Stripe, has been fundraising for Thrive Holdings, a $1 billion permanent capital vehicle to acquire and operate 'everyday' businesses, including homeowner associations and accounting firms, with AI as the operational backbone. The idea is to use algorithms and automation to drive improvements in margins and service across legacy sectors. And Thrive isn't an outlier. This playbook builds on a proven model seen in industries like dental chains and plumbing services: Standardize systems, share overhead and scale intelligently. What's new is that the engine now runs on code. The Acceleration Of AI In Private Equity AI in private markets may seem recent, but the data revolution has been gaining steam for decades. In the early 2000s, quantitative hedge funds like Renaissance Technologies led the way (paywall). Private equity generally followed with caution until firms like Two Six Capital began using data science to evaluate portfolio companies. Two Six participated in more than $27 billion worth of deals using these analytics. The pace accelerated in the 2020s, with some studies indicating that firms investing in data science capabilities outperformed their peers (paywall), highlighting a link between analytics and business success. One example is Paris-based Jolt Capital, which developed an AI platform that's been in use since 2016, according to the platform's website. It scans the web to spot under-the-radar investment opportunities in tech firms. It tracks patent filings, executive shifts, market sentiment and financial signals, which can offer an edge in sourcing and diligence, particularly in Europe's fragmented deep tech landscape. Another example is EQT, also in Europe, which uses its internal AI engine, Motherbrain, to help source investments. Shaping Long-Term Plays The other major trend I'm seeing reshape private markets is the rise of permanent capital vehicles (PCVs), investment structures without fixed exit deadlines. In my view, their popularity is likely increasing thanks to their compatibility with operationally intensive strategies like AI-led roll-ups. Traditional funds must return capital in seven to 10 years, in my experience. PCVs allow firms to take the long view, reinvest gains and build durable, cash-generating businesses over decades. It's a model tailor-made for transformations that take time, like deploying AI across dozens of acquired companies. Sequoia Capital helped pioneer this approach (paywall) in 2021 by launching The Sequoia Fund, a structure designed to hold public stocks indefinitely. Instead of being forced to exit positions in winners after an initial public offering, Sequoia now retains long-term upside and strategic optionality. Andreessen Horowitz took a similar approach in 2023 with its a16z Perennial Venture Capital Fund. No public tally exists for how many firms run PCVs, but I'm seeing the trend accelerating. From my observations, top-tier firms with operational muscle and AI ambitions are increasingly choosing flexible timelines over forced exits. Capital Meets Code: A Strategic Convergence Together, AI-powered roll-ups and permanent capital vehicles signal a structural shift in how investment firms deploy capital and build value. I believe the boundary between late-stage venture and traditional private equity is fading, as operational control becomes the new priority. Firms are hiring engineers as core team members, building proprietary tooling and behaving less like investors and more like operators. A new class of fund is emerging: They aggregate assets, standardize them with AI and create long-term cash flow engines. To me, this means the competitive edge is increasingly found in the data stack. This isn't a tactical update; it's a redefinition of what happens after the deal closes. For other firms looking to adapt to these shifts, start by embedding technical talent—such as data scientists, machine learning engineers and AI product leads—into your core deal and operations teams. Second, consider piloting internal tools that can track portfolio performance, not only financially but also operationally, and layer in data streams that surface risks and opportunities in real time. I believe those who adapt could not only see better internal rates of return but also build a compounding, self-improving edge that defines the next generation of value creation. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
Japan Times
18-05-2025
- Business
- Japan Times
Government capital is not just 'silly money'
Silicon Valley-minded venture capitalists (VCs) around the world tend to blindly criticize government capital for innovation as 'silly money.' For sure, there has been a global trend to replicate concepts from Silicon Valley with regards to the 'power law' of venture capital, 'move fast, break things' disruption, avoidance of government and the 'fake it until you make it' confidence, among others. Nothing could be more wrong — especially when Silicon Valley is fundamentally a sui generis culture and ecosystem. Unlike Silicon Valley's predominantly private-sector-driven ecosystem, many Asian societies exhibit greater risk aversion, necessitating proactive government involvement to stimulate entrepreneurial activity. Historically, government funding and industrial policy have played a pivotal role in fostering innovation and supporting startups across Asia, starting with Japan, followed by other countries like South Korea, Singapore and Taiwan, among others. And we must not forget that, even in the establishment of the Silicon Valley ecosystem, the U.S. government and military played a big role in the postwar years and the military even laid the foundation for the invention of the internet and the semiconductor chip. In particular, the commercialization of cutting-edge fundamental research at universities carries high risks and very long gestation periods that could be unpalatable to private-sector players. Further, deep-tech and life-science research from universities are often of strategic interest to governments, particularly from the angles of national security and economic development, which typical investors may not be attracted to. Indeed, government-backed VCs, including public university VCs are more inclined to invest in early-stage companies, particularly those emerging from academic or research institutions. On the other hand, independent VCs tend to focus on later-stage investments where the risk is lower and the potential for returns is clearer. This approach often leads to underinvestment in nascent technologies and startups that require more time and support to mature. A study by Iqbal Muhammad and Stephanie Serve analyzing 3,817 firms across nine Asian developing countries from 1991 to 2017 found that government-backed startups were more likely to receive early-stage financing compared to those backed by independent VC firms. And while government-backed VCs may have a lower likelihood of successful exits compared with independent VCs, which tend to follow more rigorous due diligence processes and market-driven strategies, government-backed startups perform better in the expansion and later stages thanks to early investments aimed at unlocking exponential innovation. As examples across Asia, Singapore's government actively supports startups through initiatives like the Startup SG Equity program. Last year, an additional $338 million was allocated to this program, increasing the investment cap per startup from $6 million to $9 million. Taiwan's government has invested approximately $211.6 million over five years to support local equipment and materials suppliers in building research and development capabilities. Meanwhile, mainland China exemplifies a robust government-led approach to innovation. In 2022, tax rebates for corporate R&D reached 1.3 trillion Chinese yuan (approximately $180 billion), marking a 28.8% annual growth rate since 2018. Additionally, in 2025, China launched a 1 trillion yuan ($138 billion) government-backed venture fund targeting emerging technologies like quantum computing and artificial intelligence. With this context, a key platform to commercialize fundamental research — especially from universities and research institutions — are government-backed university VCs and incubation programs. In the early stage deep-tech space, incubators turn basic research into commercializable ideas and found companies, while university VCs would invest when startups at the seed stage are ready to create products based on their intellectual property and beyond. In 2022, the Japanese government launched the University Fund of Japan, a ¥10 trillion ($68.5 billion) endowment aimed at revitalizing the nation's research capabilities and fostering innovation. This initiative addresses concerns over declining research performance and aims to position Japanese universities as global leaders in scientific research. Profits from the investments are distributed to selected universities, with a maximum annual allocation of ¥300 billion ($2 billion). The duration is suitably long for early stage deep-tech investments — the support is structured to continue for up to 25 years, providing long-term financial stability to recipient institutions. Universities are chosen based on their strategies for research excellence and organizational reform. Tohoku University was the first institution selected under this program. Public university VCs like Kyoto-iCAP (Kyoto University Innovation Capital), where the author works, are also designed to take high risks to commercialize fundamental university research through government funding alongside private-sector limited partners. Its funds, with a capital size of more than $220 million, have a duration of 12 to 15 years to reflect the high risks and long gestation periods. Indeed, according to Global University Venturing, Japan has one of the most advanced university VC ecosystems in Asia — 85% of its top universities have an investment vehicle to support its startups. Other notable Japanese university VCs are University of Tokyo Edge Capital Partners (UTEC) — which leads the pack with an approximate capital size of $594 million, University of Tokyo Innovation Platform, Osaka University Venture Capital and Tohoku University Venture Partners. More than 40% of European institutions and more than half of Australian campuses have funds too. In contrast, only about a third of U.S. universities maintain such investment vehicles, which goes back to the U.S. and Silicon Valley having a unique private-sector-dominated ecosystem that is backed by a highly entrepreneurial and risk-taking culture. Some of the successful exits that have emerged from the university VC ecosystem are Kyoto iCAP-funded Cuorips and Chordia Therapeutics, UTEC-funded PeptiDream and Spiber, National University of Singapore-incubated and Temasek-backed VC fund Vertex-funded PatSnap and Oxford Science Enterprises-backed Oxford Nanopore Technologies and Immunocore. Going forward, especially when deep-tech fields like semiconductors, materials, clean energy, AI and life sciences become more strategically important for Asian societies, further funding from governments and universities are crucial. This can eventually scale the early stage of a deep-tech startup ecosystem and encourage risk-sharing that could attract more private-sector players. Raymond Woo is the Singapore Office Representative of Kyoto-iCAP (Kyoto University Innovation Capital), Kyoto University's venture capital firm.
