Dylan Patel explains how AI is changing private equity strategies. Instead of cutting costs after buying companies, the new approach front-loads spending to modernize operations: automating invoice reconciliation, moving teams off Excel to cloud systems, and using AI for customer support. The shift prioritizes efficiency gains over traditional cost-cutting.
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Like you spike up on spend a lot for the one time and then you spike down a lot and your cost efficiency's way better. You know, if we're looking at these companies that are AI rollups, right? You know, hey, let's take an existing company, let's completely destroy its cost structure, nuke its cost structure by just making it efficient with AI. What does that look like? 'Cause you, let's say, you know, private equity companies, they buy a company and right now they just squeeze the rag and, you know, discard it and make the American— Populous, like screwed.
Yeah, AI for efficiency has never made sense to me because the way that I use AI and the way that we use AI is very much about research, which is completely inefficient.
No, I mean, but like, you know, the flip side is like, you know, like we had agents go through all of the invoices we've sent out and there was like, and it caught, you know, we've been paid 'cause our manual processes, but like certain deals weren't tagged to the invoice properly and things like that. Or like we've had, You know, some, you know, like a lot of the ticket stuff is at least somewhat more efficient because AI is answering it. But now they're not sending it to the customer, but like they're, you know, pulling through all our data and be like, here's the answer. And then the analysts, I think that makes the support time per ticket shorter. And so I think like things are helping us make, be more efficient, surely, no?
I don't think that's the primary use case for us.
I guess like ClusterMax this time, the depth, breadth, and amount of testing you're doing versus last, you know, ClusterMax 2.0 especially, it's like—
Yeah, you can frame that as efficiency, but when I hear private equity take over a company and wring the towel dry, it's like meaning firing people and saving money and paying people less and—
Right, that's the traditional— my point was that's the traditional PE method, and what new people started to do is the roll-up, or rather the AI private equity sort of strategy, which, you know, they're calling it roll-up or something else, where they come in and instead of like trying to wring it dry in terms of like, that angle, they're more so modernizing all the systems. Oh, you use Excel for your databases and shit? Okay, let's just move to like standard cloud shit, spend a lot of money upfront. And this is the thing, private equity generally, there's some spend upfront when you first acquire a company for some transformation, but really it's like not that much, and it's really like you get the profitability pretty quickly. Yeah. But AI seems like it's like makes that tail and front load like much more severe, right? Like you spike up on spend a lot for the one time, and then you spike down a lot And your cost efficiency is way better. And so there's like a number of businesses where that's potentially the case, especially like, you know, we're still not at the point where like AI CRMs and AI like cold calling and AI like invoice and accounting and all these other things are really at critical mass, but we're so close.
