New York Private Finance tends to find most of its clients in the middle market, entrepreneurs whose businesses generate revenues of $25MM- $250MM annually. These individuals are “all in” on their enterprises as they seek to grow their wealth substantially. They do this without access to public markets and with limited access to relevant private credit. Most of the private credit transactions being discussed in the media today involve very large pools of capital designed to serve large companies, often public, and the financial sponsor ecosystem.
So too with most commentary on the impact of AI. The press is focused on staff reductions at large entities like Microsoft and Amazon, but the unexpectedly dramatic growth in GDP recently reported cannot be explained simply by the actions of the big guys. Given the crosswinds of tax changes, tariffs, and political instability, GDP growth must also owe something to incipient productivity enhancement induced in part by the rapid adoption of AI. Although cited in relation to large companies for the most part, AI is also having a growing impact on small and medium-sized companies, such as those of our clients.
It is too soon to predict with certainty that AI will cause dramatic growth in markets or permanent productivity enhancements that justify new valuation concepts, but it is not too early to imagine same. One of our clients is doing precisely that: building a new healthcare company conceived as a remote diagnostic service coupled with bricks and mortar practitioners as necessary. The result is a vastly more efficient delivery system that both patients and insurers are already embracing with alacrity, and correspondingly, a dramatic process of value creation.
But new businesses are not the only beneficiaries. It is not too soon to contemplate restructuring existing businesses to leverage the analytical insights and operating efficiencies promised by AI. Even small businesses will see fundamental changes, akin not just to the internet boom of the 1990’s but the Industrial Revolution of the 1800’s. Unlike “adapt or perish” however, the watchword this time will be “adapt and flourish”, as even relatively small companies find it increasingly easy to leverage the value proposition of the new technology. Trickle down meet melt up.
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