Private Capital's AI Revolution: Finding True Value

In Brief:

In a recent panel discussion led by Jamie Montgomery at The Montgomery Summit, venture capital and investment leaders Matt McIlwain (Madrona), George Mathew (Insight Partners), and Monica Adractas (CPP Investments) examined how AI is reshaping private capital markets in 2025. Despite recent market turbulence, the panelists agreed we're in a definitive "risk-on" environment where investors are prioritizing growth potential while carefully assessing which AI-driven opportunities can deliver sustainable value.

Big Picture Drivers:

• Risk-on environment: Despite recent volatility, the investment landscape favors growth over profitability

• AI acceleration: Companies are scaling faster but face questions about revenue sustainability

• Capital abundance: Despite limited exits, funding remains available for quality opportunities

• Execution challenges: Small teams can drive incredible growth, but many underestimate operational complexities

Key Topics Covered:

• Valuation frameworks: Early-stage versus growth-stage investment approaches in AI

• Market dynamics: How capital flows are shifting in private markets

• Exit opportunities: The state of IPOs and the preference for remaining private longer

• AI applications: Where the most sustainable value will be created in the AI stack

Key Insights:

• Founder-market fit: Early-stage success depends on teams answering why the problem exists, why now is the time to solve it, and why they're uniquely positioned to succeed

• Infrastructure to applications: Investment focus is shifting from AI infrastructure to applications as platforms mature

• Capital efficiency: AI-native startups can reach significant scale with much smaller teams than previously possible

• Private advantages: Companies are staying private longer due to capital availability and operational flexibility

By The Numbers:

• $12.5 billion: Size of Insight Partners' Fund 13, showing continued strong fundraising despite limited exits

• $70 billion: Total raised by venture funds last year, with top 15 funds capturing 60% of capital

• 75%: Average one-year performance of IPOs in 2023-2024, suggesting market readiness for quality offerings

Memorable Quotes:

• "We think we're kind of at that moment around AI where the infrastructure is there and now you can start to build this next generation of applications at scale." - George Mathew

• "Investors underestimate execution risk... ultimately a lot of these AI native companies are going to have to build and execute at excellence." - Monica Adractas

The Wrap:

The panel revealed an optimistic yet cautious outlook for private capital in 2025. While AI is creating unprecedented opportunities for rapid scaling with capital efficiency, investors are increasingly focused on durability and execution excellence. The next year will likely reveal clearer winners as AI-native companies prove their ability to sustain growth and incumbents struggle to adapt beyond "sprinkling AI pixie dust" on existing products.