How VC, PE And Entrepreneurship Are Collapsing Into One New Model

Mitt Mehta | CFO/COO | Supporting PE firms, family offices and founder-led businesses.

The tectonic plates of investing are shifting. The distinct domains of venture capital (VC), private equity (PE) and pure-play entrepreneurship are converging, forging a powerful new model for value creation in the post-artificial intelligence (AI) economy. This isn’t just evolution; it’s a revolution, ushering in the third wave of private capital investing: entrepreneurial platform building at institutional scale.

PE’s Journey: From Financial Engineering To Operational Rigor

To understand where we’re heading, we need to appreciate the journey. Private equity’s first wave, prominent in the 1980s, was largely defined by financial engineering. Leveraged buyouts (LBOs) were the primary tool, utilizing significant debt to acquire mature companies, often addressing agency problems between management and shareholders, with the goal of restructuring balance sheets and capturing value through financial leverage. The key skill set revolved around deal structuring and finance, often honed in investment banking.

As markets matured and competition intensified, the limitations of relying solely on leverage became apparent. This led to Wave 2: operational excellence, gaining prominence from the 1990s onward and accelerating in the wake of financial crises. The focus shifted decisively toward improving the underlying performance of portfolio companies. PE firms began building internal operating teams or partnering with external experts.

Value creation became synonymous with streamlining operations, cutting costs, enhancing management, implementing strategic add-on acquisitions (the “buy-and-build” or roll-up strategy) and driving earnings before interest, taxes, depreciation and amortization (EBITDA) growth. Operational improvements, including digital transformation, became a dominant source of returns, significantly outpacing financial engineering’s contribution in recent decades.

The Convergence: Blurring Lines And Blended Skills

Simultaneously, the traditional boundaries between investment stages began to blur. PE firms, seeking higher growth trajectories, increasingly moved into the growth equity space, investing in later-stage technology companies that were once the exclusive domain of VC. Growth equity itself represents a hybrid, targeting established companies needing capital to scale rapidly, often taking minority stakes with less leverage than traditional buyouts.

Conversely, VCs started holding investments longer and participating in later funding rounds. The rise of hybrid funds, blending strategies and structures from both PE and VC, further signaled this convergence, driven by market volatility, technological disruption and the search for diversified returns.

This convergence reflects a fundamental truth: Sustainable value creation in today’s market requires a synthesis of skills previously siloed within distinct disciplines.

Venture Capital: Taught the importance of speed, identifying disruptive potential and capturing nascent markets.

Private Equity: Mastered the art of scaling businesses, implementing robust structures and driving operational discipline.

Entrepreneurship: Provided the blueprint for creating novel products, building passionate communities and defining entirely new market categories from the ground up.

Wave 3 Arrives: Entrepreneurial Orchestration

We are now entering Wave 3, an era defined by entrepreneurial orchestration. This isn’t just about optimizing existing assets or funding early-stage ideas; it’s about actively building and orchestrating large-scale, integrated platforms by blending the agility and innovation of venture capital and entrepreneurship with the scale and discipline of private equity.

“Entrepreneurial orchestration” involves the strategic coordination and deployment of diverse resources—capital, talent, technology, processes—across this blended model to sense, shape and seize market opportunities. It requires not just identifying value but actively constructing it through dynamic capabilities and decisive “entrepreneurial execution”—the ability to transform vision into reality by mobilizing resources and navigating uncertainty.

The hallmarks of this third wave include:

AI-Driven Platform Ecosystems

Artificial intelligence is no longer just a tool for efficiency; it’s a foundational enabler of Wave 3. AI is transforming every stage of the investment life cycle, from deal sourcing and due diligence (analyzing vast datasets to uncover hidden opportunities and risks) to portfolio management (real-time monitoring, predictive analytics) and value creation within portfolio companies. AI can help facilitate the creation of integrated platform business models and ecosystems, enabling hyper-personalization, dynamic pricing and new service offerings (like product-as-a-service) at scale. This requires dedicated AI expertise, potentially even specialized AI operating partners within investment firms.

Strategic Roll-Ups Creating New Categories

The buy-and-build strategy evolves. Wave 3 utilizes strategic roll-ups not merely for consolidation and multiple arbitrage but as a tool to construct platforms that can define and dominate entirely new market categories. This involves integrating acquired companies to create a synergistic whole that offers a fundamentally different value proposition, effectively making prior competition irrelevant. It demands a visionary approach, going beyond operational integration to strategic market shaping.

Financial And Operational Agility At Scale

The new model necessitates marrying the operational rigor and scale achieved in Wave 2 PE with the speed and adaptability characteristic of VC and startups. Achieving this requires significant investment in modern technology infrastructure (cloud platforms, advanced analytics, AI), flexible operating models and empowered, agile teams capable of rapid execution and adaptation to market volatility. This agility allows platforms to pivot quickly, seize emerging opportunities and maintain resilience.

Founder-Led Energy Inside Institutionally Capitalized Structures

A critical, yet challenging, element is preserving the innovative spirit, passion and culture often associated with founder-led ventures, even after institutional investment. While founders often exit post-acquisition, Wave 3 seeks models that retain this entrepreneurial energy. This requires careful CEO selection, fostering alignment between founders/management and investors and deliberate cultural integration strategies that value innovation and speed alongside accountability and structure. Success hinges on finding leaders who can balance visionary thinking with disciplined execution within a PE-backed framework.

The Alpha Opportunity In Orchestration

The future belongs to those firms and leaders who can master this complex orchestration. The traditional levers of value creation—leverage, multiple expansion, basic operational tweaks—are becoming commoditized in an increasingly competitive and capital-rich environment.

The real alpha in the next decade will be generated not just by optimizing businesses but by building them differently—by successfully synthesizing venture speed, entrepreneurial energy and private equity discipline within these new, technologically enabled platform models. This requires a shift in mindset, skill set and strategy, focusing on integration, innovation and ecosystem dynamics.

I believe that building platforms where these forces converge is where the most significant value—and the next generation of market leaders—will be created. The third wave is here.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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