A16z Investor Partner: By 2026, venture capital will merge with private equity, mainly because AI has achieved cost reduction and efficiency gains

A16z Partner Troy Kirwin mentioned in a recent video that venture capital and private equity have long been like living on two different planets: VC in San Francisco bets on technology, high growth, and huge TAM; PE in New York prefers stable cash flow and labor-intensive service industries. However, the rapid infiltration of AI is changing all of this.

In the past, B2B startups typically relied on early adopters and then expanded to the Fortune 500; but mid-market sectors like field services, IT outsourcing, accounting, construction, and recruiting have historically been difficult to penetrate due to thin profit margins, high labor costs, and limited IT budgets. The emergence of AI has suddenly made it possible to “do these industries over again.”

Kirwin pointed out that VC and PE are colliding along three paths:

1. PE funds are starting to become channel partners for AI startups, integrating AI across their entire portfolio;

2. The investment pages of PE portfolios are turning into “idea menus” for entrepreneurs;

3. AI platform companies supported by VC are no longer just selling software, but are acquiring traditional business service companies to achieve end-to-end integration, increase profit margins, and make them AI-native.

“West Coast VCs wearing Patagonia and East Coast suited PEs, originally belonged to two different universes. But with the push of AI, I believe they are rapidly converging.”