The future of Private Capital funding

Tariff turmoil over the past month seems to have jolted financial markets into a moment realignment and recalibration. Coupled with the “blurring” of boundaries between public and private markets that was already underway, it was an opportune time for SEC Newgate to host a panel discussion (in partnership with NOTWICS) on the evolving landscape for private equity and venture capital funding. 

Our panellists debated a range of issues that are transforming how investment firms identify emerging opportunities and help start-ups raise capital – marked by technological innovations (broadly under the “artificial intelligence” umbrella) as well as shifting macro conditions and investor dynamics.

Whilst there was broad agreement that automation and AI tools have enhanced productivity and research analyst efficiency, like any saturated market, there remain concerns about "AI washing" where firms might overstate their AI capabilities.

Conversely, proactive and experimental use of agentive AI might afford smaller investment firms an edge over larger players constrained by compliance and regulatory challenges in the implementation of “new” technologies. Certainly, the integration AI technology in investment strategies has certainly made it easier for investors such as family offices to manage and analyse large volumes of data, enhancing their ability to identify lucrative opportunities in private markets.

This growing sophistication and selectivity of family offices also prompted a fascinating discussion around the implications of the US dollar potentially entering a period of structural decline. The period of US exceptionalism, where the US market consistently outperformed other markets, is believed to be over. This shift is predicted to increase engagement with investment opportunities outside the US, as investors seek better returns elsewhere.

Anecdotally, this trend is already underway with family offices in the US, who appear to be diversifying their investments beyond the domestic market into pockets of opportunity in Europe and elsewhere. This is particularly true in the technology, healthcare and renewable energy sectors, which offer high-growth potential and align with the strategic interests of many family offices.

Zooming out, despite periodic ebbs and flows in wider market sentiment, there was positive consensus on the long-term outlook for the quality (and sources) of investment opportunities available for private capital. As one panellist noted, now is not a good time to exit but to accumulate. 

Inevitably, this has led to a rise in industry competition for access to high quality companies – with PE investors appearing more often in earlier fundraising rounds that were previously the reserve of venture capital players. This competition is likely to play out in several arenas – including talent acquisition within firms, or negotiated fee structures and preferential deal terms for investors. 

Ultimately, dislocation creates opportunity. Whilst the future of private capital (and fundraising in particular) is heavily reliant on liquidity cycles and global debt levels are set to rise, there is a growing imperative for investors to anticipate not market cycles but also the interconnected dynamics that drive these trends. 

As such, developments in private markets are set to keep us on our toes, no less than the upheaval in public markets that has been driving the news cycle lately. Watch this space.