A PE firm pointed Claude at a shared drive. What happened next changes the math.
Hey there!
Fully back into it this week after having some fun with the kids over spring break. Checked off a couple of new countries: Mexico and Honduras, and very much enjoyed the opportunity to have some downtime to rest and come back full of energy. So let's roll!
I recorded a new episode of PE Data Guy this week with Tim Schulte, who leads value creation at Council Capital in Nashville. Before Council, he was on the value creation team at Vista Equity Partners, which might be the most famous playbook-driven firm in the industry. He left that model deliberately and built something different.
Three learnings from that conversation below. Enjoy the rest of the memo.
Cheers,
Graeme
Three Things I Learned This Week
A PE firm pointed Claude at a shared drive. 30 missing toolkits appeared in an hour.
Tim told me a story about a colleague at Council Capital who installed Claude, pointed it at their shared drive, and in under an hour, it had generated 30 toolkit artifacts that the value creation team had been trying to build for years. Sales frameworks. Procurement templates. HR playbooks. All of it.
The instinct is to hear that story and think that the value-creation team is in trouble. Tim’s take is more interesting. He thinks the toolkits just became table stakes. Every PE firm will have access to the same AI-generated frameworks within a year. The differentiator moves upstream. Not what tools you have, but which ones you deploy, when, and with what judgment.
Council Capital invests in founder-led healthcare companies, with a portfolio ranging from EMR platforms to autism therapy providers to home care agencies. You cannot hand them all the same toolkit and expect it to work. The custom implementation, the pattern recognition across contexts, the trust you build with a founder in month one. That is what survives commodification.
If your value-creation model depends on proprietary frameworks that no one else has, the clock is ticking. If it depends on people who know which framework to reach for and when to throw it away, you have more time than you think. Watch the full conversation here.
PE firms confuse pressure in a board meeting with help. Tim has a test for it.
Tim said. “All PE firms talk about providing strategic and operational support. Most confuse pressure in a board meeting and help as the same thing.”
He breaks PE value creation into three categories. Collaborative but shallow, where the firm is pleasant but there is no real substance behind the support. Substantive but rigid, where there is genuine expertise but it gets imposed as a one-size-fits-all playbook. And collaborative AND substantive, where real tools and real talent are deployed in partnership with the company.
Most firms think they are in category three. Tim’s test is simple. Look at the cost structure. Council’s value-creation team is composed of W-2 employees. Their cost is passed through to portfolio companies at a below-market rate because it is spread across the portfolio. That is a structural commitment. If the value creation function is a slide in a fundraising deck and not a line item in the budget, you are probably in category one or two.
The distinction matters because it is about to get tested. When AI can generate every tool, the firms that invested in the human infrastructure to deploy those tools well will pull ahead. The firms that were performing will be exposed.
What the Industrial Revolution tells us about where PE's competitive advantage lies
Tim studied history at Duke, not finance. He made a point near the end of our conversation that reframed my thinking about the current AI moment in PE.
During the Industrial Revolution, machines became available to everyone. The factories that won were not the ones with the best machines. They were the ones who figured out how to organize people around the machines. The resistance to change, the training, the workflows, and the management systems. That was where competitive advantage lived.
He sees the same pattern now. Every PE firm will have access to the same AI tools. The firms that figure out how to organize their portfolio companies around those tools, manage the change, train people, and build the workflows will create the most value. The technology is the easy part. The human system around it is the hard part.
For operating partners and value creation teams, this is a direct message. Your job is not being replaced by AI. Your job is becoming the person who figures out how AI gets deployed across five very different companies without breaking any of them.
Two News Stories From This Week in Mid-Market PE and Data
PE confidence hit 86%, up from 48% a year ago. The largest single-year sentiment shift in PE history.
Sources: BCG 2026 PE Report | PwC PE Deals Outlook | Deloitte Mid-Market Survey
What happened. Industry-wide PE confidence jumped from 48% to 86% year over year. 40% of Q1 2026 deals involved an AI-enabling component. KKR closed a $23B North American PE fund. SpaceX filed confidentially for an IPO at a potential $1.75 trillion valuation. The headline numbers suggest a market that has decided the down cycle is over.
Why you should care. The confidence number is real but uneven. Mega-fund deal volume surged, while mid-market deal volume is still lagging. The split matters because the mid-market is where most portfolio companies live and where most operating partners work. Higher confidence at the top does not automatically translate to faster exits or easier fundraising in the middle. Meanwhile, 52% of buyout-backed companies have been held for four or more years. The pressure to deploy or decay is intense. If you are sitting on a portfolio company that needs to exit in the next 18 months, the confidence number is less relevant than whether your data can survive the diligence process that comes with it. Buyers are doing full commercial due diligence at $50K-$150K per project. They are taking their time and they are thorough.
BCG finds PE-backed companies with systematic AI deliver nearly 2x return on invested capital. But only 22% of firms use digital readiness as a go/no-go in diligence.
Sources: BCG: PE’s Advantage Is Shifting, Not Shrinking | Accenture: AI Redefining PE | KPMG PE Survey 2026
What happened. BCG published data showing that PE-backed companies with systematic AI implementation achieve nearly twice the return on invested capital compared to those without it. Digital transformation alone delivers 15-20% ROI. Digital plus AI delivers 30-35%. Time to value accelerates 40% when AI is built on a mature digital foundation. Separately, 73% of PE firms now conduct digital due diligence, but only 22% use digital readiness as a go-or-no-go criterion when deciding whether to proceed with an acquisition.
Why you should care. Read that gap again. 73% are looking at it. 22% are acting on it. That means the majority of firms are doing the due diligence, seeing the gaps, and buying anyway, without requiring the company to fix them first. The BCG data tells you why that is expensive. AI on top of a mature digital foundation delivers nearly twice the return of digital alone. AI on top of a fragmented foundation delivers frustration and a write-off. The 22% who use readiness as a gate are not being cautious. They are being disciplined. They know that acquiring a company without data readiness means spending the first 12-18 months of the holding period building what should have been there before they bought it. That is time you do not get back.
Free Tool of the Week - VCP Data Score
Does your value creation plan assume the data exists to execute it? The VCP Data Score is an interactive assessment that scores portfolio company data readiness across five dimensions. Takes two minutes. Gives you something concrete before your next operating partner review.
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Cheers,
Graeme