Boring Business + AI = Strong returns ?
This thesis might suffice for VC, growth equity folks, and California angels, but it is not sufficient for your average boring PE LP.
AI should not be the thesis' core focus. AI is developing so much and so fast that most people can't keep up, let alone predict what it will do to a small business or where it will be in 5yrs. It's unproven, it's highly uncertain, competitors' aptitude to adopt AI is unknown, and an industry that can be disrupted by AI should probably be avoided.
In (standard) PE, you underwrite historicals and proven factors. You underwrite what you know, and avoid what you don't know. The deal must stand on its own and have a positive outlook, and not be threatened by AI disruption.
Opportunities to make the business more efficient and productive with AI are important, but only as a feature, not as a core transformational initiative. Real-life case studies in lower-middle market businesses remain rare and unquantifiable.
Good luck.
