Private Capital’s AI Opportunity Is Bigger Than Productivity

Nicholas Domnisch is CEO / Managing Partner at EE Solutions, a technology operating partner for private capital firms and enterprises.

There are more private equity funds in the United States than McDonald’s restaurants.

KKR partner Alisa Wood made the comparison last year when she noted that there were “19,000 private equity funds in the US” versus roughly 14,000 McDonald’s restaurants. The point isn’t that there are 19,000 private equity firms. One sponsor can manage multiple funds across different strategies and vintages. The comparison shows the scale of capital and investment activity inside the industry.

That scale matters for AI because private equity also sits behind thousands of operating businesses. The American Investment Council says more than 13,000 U.S. companies are currently backed by private equity. Few industries have the same ability to test new operating capabilities across such a broad base of businesses and carry forward what works.

Much of the AI conversation so far has centered on productivity: faster diligence, automated reporting, lower support costs and more productive teams. All of that creates real value, but productivity may only be the first-order effect.​

Wei Li, BlackRock’s global chief investment strategist, described AI in three phases: “The first phase is build-out, second phase is adoption and the third phase is broader productivity gain.” Her view is that the economy is still early in that progression, with evidence of gains in individual use cases but the broader effects still ahead, as she explained in an S&P Global interview.

For private capital, the important question is what that third phase actually looks like.

The economics of what is possible are changing.

That distinction matters because companies make strategic decisions around constraints.

Those decisions may have been rational when they were made, but the underlying economics are changing.