AI Roll Up opportunity
Does anyone have experience with one of these newly created groups? In the final stages with a group backed by a tier 1 VC, and the way it’s being pitched sounds more interesting than traditional buyouts like at my current firm. Is this just PE 2.0 with better marketing or are these platforms differentiated in the market with sellers?
Never came across an opportunity like this before. How did you hear about it - the standard PE headhunters?
Seems like a good way to take some risk and also leverage the PE skillset you have
Is this with the VC firm itself? Or just one of the roll up entities they created?
Have been connected with each through HHs. In the three I’ve seen (two directly interviewed with), it’s a separate team with resource backing and oversight from the venture / growth firm.
The people running the actual team are former execs / tech entrepreneurs as well as people with traditional deal backgrounds.
Would you be able to share which HHs are running these searches?
I left MM PE to join one. The intensity is equal or greater than trad PE in my opinion and the upside is obviously greater. Just expect to be challenged by peers smarter (in an absolute technical sense) than you and have to build the playbook live - eg the core motion of deals is the same, the actual execution playbook is being built in real time. And expect a chunky paycut from IB/PE and equal or greater hours.
The things we do for “upside”….
No worries if you're not comfortable sharing specifics, but generally speaking how is the upside structured for comp? It seems like many of these are being framed as perpetual / long duration holding companies so even if you're getting some equity component how do you actually get liquidity (beyond maybe in the distant future an IPO)? Also how does equity vesting compare v. carry vesting in traditional PE?
I was associate level when I left so I got an associate-equivalent level cash + equity comp offer. The equity is in the form of traditional VC-backed startup options that you can (or choose not to) exercise. Besides going to secondary markets (obviously this assumes your startup achieves some level of brand name success and market appetite) there really aren't many liquidity options besides IPO, acquisition or buybacks down the line at the discretion of the board (which is partly the point).
Fundamentally a different incentive structure vs carry vesting - but for me as an associate in PE, I viewed mandatory coinvest as too liquidity constraining personally (options are honestly worse in their own way re: tax treatment, but the point is it's optional vs mandatory) and reading so many threads in the PE forum about how hard it is to get meaningful carry allocation and then actually realizing it - I made a personal judgement call that the likelihood of realizing real carry bps was probably as hard if not harder than betting it on VC-backed startup options. The logic being that I have conviction in the AI rollup model and that I believe in the long-run it'll eat (at the least) undifferentiated JAMMBOs lunch over time.
what was your interview process like?
Thanks for sharing - at a similar juncture right now:
How are you feeling so far on whether it has been “worth it” in your opinion?
What was the interview process like?
It’s too early to call whether it was worth it.
I think you should first interview land the offer and then really sit hard with the paycut and uncertainty and decide if it could be worth it. If the answer is even 50-50 at that point I would definitely avoid. Your optimism and certainty will almost certainly only decay from there. I started with like 90-10 and only now am starting to understand just how uncertain the path forward is. But I am excited to wake up and go to work everyday and I definitely did not feel that when I was in IB/PE
What role/level of seniority? How much equity are they offering?
VP. Equity structured closer to what we thought of as phantom equity for platform investment, so definitely higher risk vs fund-level carry in PE.
Cash comp haircut is the biggest reason I’d pass. Number was essentially what 1st year senior associates at my firm now make. And we’re on the lower end lol.
Depends on if you're at a UMM/MF or not I guess. Is the cash comp around $300k? That's what most corp dev roles at PE backed roll-ups pay (like HVAC roll-ups)
How do you think about the equity for these things? Aren't you basically raising VC money at high flying valuations to then buy essentially a LMM business at a reasonable multiple? Assume VCs have some sort of liq pref?
Seems like the only way to personally make money is to grow from a LMM valuation to a VC valuation?
The AI rollups raising VC money get VC valuations from the start
Yeah that's my point. They are raising at VC valuations and then turning around to buy a sleepy LMM business at an EBITDA multiple. Huge disconnect in their own valuation vs. the assets they buy. So you have to really believe you can completely transform the business?
How do they find the people that actual build the AI systems in these companies?
VC employees? Portco employees? Or do they hire new ones?
Good AI rollups are usually founded by the AI guys. The M&A muscle comes after.
Eh not that straightforward
Clearly I'm living under a rock. What is a "AI roll up"? Based on the comment context, I'm assuming buying sleepy LMM businesses and implementing AI processes? What sort of valuations is the capital being raised at?
Ex-MBB, now in tech working on AI. I also have a couple friends building AI roll-up plays, so I think the idea is real, but the career implications depend a lot on where you sit.
For partners / founders, this can be a great opportunity if they know what they’re doing. The market is fragmented, many lower-middle-market service businesses still run on painful manual workflows, and AI can create real operating leverage in sales, support, reporting, compliance, implementation, and back office.
For junior talent, I’d be more cautious. The risk is that you don’t get clean traditional PE reps, but also don’t get real tech/product training. You could end up in a weird middle zone: sourcing small deals, chasing integration projects, and trying to make messy portfolio companies adopt tools they barely understand. Unless the team is exceptional and the economics/path are meaningfully better, traditional PE may still be the cleaner training ground
Agreed, but if the category grows, the reps compound even if your AI rollup fails so to your point, the real question is whether you're doing real reps (like it always is for our jobs)
But most PE fund will just use AI to drive value creation anyway...
Thanks. Do you have a resource to read-up more on these AI roll-ups? Currently in PE and would be interested to make a switch if the risk/reward is there.
Are you working in tech AI at a similar start-up or one of the bigger tech companies?
I am a data scientist at an investment firm that does similar. Feel free to ask anything
Are you at a traditional PE fund or AI holding co/rollup?
Given everyone is applying AI, or will eventually, what do you see as your differentiation? How do you view this upside (esp. given constant equity dilution from VC raises at high valuations) and career path vs joining an AI startup or fund in data science roles?
More akin to a PE fund but not a 'traditional' one.
On differentiation, firstly its identifying the highest value use-cases - we have seen execs focus on the entirely wrong thing and not necessarily thinking about value at stake quantitatively. Secondly, its designing workflows and systems that are self-reinforcing over time and not just singular AI-enabled workflows.
At my firm, the portco's we have worked with have realised significant measurable improvements. A few examples are in conversion rates for sales leads, large time savings through agentic workflows and on better cross-selling. So I think when done correctly with a clear plan to take a non-technical portco all the way to a firm that eventually captures, catalogs and makes decisions off their data then the upside is significant.
From a career perspective, cash compensation is lower than data science roles in hedge funds but I think there is a snowball effect at play where the PE funds who successfully use and implement data science/AI in their portco's will be able to generate better returns which in turn could lead to stronger fundraising, meaningful carry and internal promotion opportunities etc.
Both traditional PE and traditional VC are approaching it. Along with some former founders. It'll be interesting to see who executes best.
It's a good point. Hard to tell who will win today
Maybe a dumb question, but isn't everyone applying AI? Where is the differentiation between groups?
Non distinctio eveniet quia et. Ea in harum fuga est ad quo. Enim repellat magni omnis enim. Aliquid fugit occaecati perferendis. Inventore ut exercitationem nostrum sequi sunt. Quis qui esse corporis est perferendis ut sint sit.
Quisquam unde quam consequuntur eum libero. Eos laudantium sed praesentium quos. Enim voluptatem adipisci quisquam qui nihil.
Corporis aut voluptatum suscipit assumenda qui tempore cupiditate. Ad tenetur ipsam ut et vitae omnis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Sit voluptatem earum soluta illo veniam vel. Ut dolor qui et rerum sit. Corrupti expedita consequatur beatae. Earum quia facilis totam quas. Velit neque cumque eos qui.