Premium: The Hater’s Guide to Private Equity

Source: Where’s Your Ed At Date: 2026-02-27 URL: https://www.wheresyoured.at/hatersguide-pe/

Summary

Ed argues private equity and venture capital created a valuation crisis by investing based solely on perpetual growth assumptions rather than actual business viability. PE/VC investors don’t understand software — they incorrectly believe AI tools can replace complex SaaS systems when “building software” involves far more than code generation (infrastructure, compliance, security, legal requirements). Leveraged buyout debt structures predicated on unrealistic growth now leave “zombie companies” trapped on balance sheets. The systemic risk: pension funds and bank capital channeled into this system face exposure when inflated assets can’t be sold.

Implications

The PE/VC ignorance-of-software thesis is directly relevant to AI investment: the same investors who loaded companies with debt on growth assumptions are now deploying capital into AI on the assumption that large language models replace enterprise software. Ed’s specific claim — that investors misunderstand what software actually requires — maps to the AI “replace SaaS” narrative that has driven enterprise AI valuations. If PE/VC firms are buying AI companies based on the premise that LLMs eliminate software complexity, the same zombie-company dynamic will follow when operational reality collides with the thesis.