Is Private Equity Cooked? - Andreessen Horowitz

An opinion piece from Andreessen Horowitz argues that technology buyouts face structural pressure, even though limited partner capital continues to flow into re-ups with existing buyout managers. The author contends that buyouts, historically viewed as the safer bet in private markets, are a late-cycle asset class that performs best once a technology wave has matured and business models are predictable enough to borrow against. The author argues that a new technology wave is underway and that venture capital is better positioned for such periods.

The piece cites several performance comparisons. US buyouts returned 14.5% a year over the last ten years, underperforming the Russell 3000, while US venture returned 17.6% a year over the same period on a pooled basis. The author notes that PE-backed middle-market companies carry 4.7–6.0x adjusted EBITDA in net debt across the 2019–25 vintages, compared with a median of about 2x for S&P 500 companies, according to J.P. Morgan. Exit timelines have lengthened to an average of about seven years, up from five to six years in 2010–21.

The article highlights the 2021–22 vintages as the most troubled. It cites Thoma Bravo's 2021 purchase of Medallia for about $6.4 billion, which was handed to lenders led by Blackstone in 2026, wiping out roughly $5.1 billion of equity for Thoma Bravo and co-investors. The author also points to continuation vehicles, which accounted for 14% of PE exit value in the first half of 2026 versus 5% in 2020 according to Jefferies, and to NAV loans that can flatter reported returns. Publicly traded BDCs heavy in software trade well below NAV, and roughly $140 billion of risky PE-backed loans mature in 2028 and another $160 billion in 2029, with about a third in software.

The author attributes part of the downturn to cyclical factors such as interest rates, but argues the larger change is structural. PE-backed tech exit value fell 77% year over year, and the author notes that many potential software buyers have seen their own shares decline. Bain estimates that a deal which once required about 5% annual EBITDA growth to make 2.5x now requires 10–12%. The article attributes the valuation gap largely to the fact that PE marks are set by owners rather than outside market transactions, a point the author illustrates with the comparison that more fiction has been written in Excel than in Word.