Looking beyond DPI
1. Key Themes
AI Infrastructure Is the Dominant VC Investment Theme
The volume and size of capital flowing into AI infrastructure is striking. Firmus, a Sydney-based AI infrastructure company, "raised $2 billion at a valuation above $10.5 billion from investors including Coatue, Nvidia and Blackstone." Meanwhile, PitchBook's inaugural list of most active VCs in AI infrastructure highlights that the space — defined as "AI neoclouds, the software underlying LLM management, AI-specific chipmakers, and data center startups" — is attracting concentrated, high-conviction bets from the VC community.
The AI Infrastructure Crunch Is Getting Worse, Not Better
Even as capital floods in, the supply constraints are intensifying. "Costs remain high, and access to resources like chips and power remains strained. With AI funding having a record quarter in Q1 2026 — already eclipsing all of 2025, according to PitchBook's AI VC Trends Report — the infrastructure crunch is only set to worsen." This creates a durable tailwind for picks-and-shovels plays across neoclouds, chip design, and power infrastructure.
UK Venture Capital Is Overwhelmingly AI-Concentrated
The UK VC market has become nearly a single-sector market. "Over 70% of H1 deal value flowed into the sector, while nine out of 10 of the largest deals were for an AI startup." This level of concentration signals both a market conviction and a potential risk of overexposure for UK-focused fund LPs.
DPI Has Replaced IRR as the LP Benchmark — But It's a Flawed Midpoint Signal
A structural shift is underway in how LPs evaluate fund managers. "In some cases, DPI has supplanted IRR as the return metric of choice in recent years. LPs now need distributions, not paper gains." However, the article challenges over-indexing on mid-cycle DPI: "year 5 DPI isn't a reliable predictor of future distributions," with TVPI offering a better midpoint signal.
Defense- and Policy-Insulated Sectors Attract Aggressive PE Deployment
Private equity is rapidly deploying into sectors protected by government spending. Veritas Capital "announced four deals in under a week, putting its $15.3 billion fund to work in sectors insulated by government policy and defense spending." Similarly, multiple buyout investors expressed interest in UK engineering group Goodwin's defense business.
2. Contrarian Perspectives
2021 Vintage VC Funds Shouldn't Be Written Off Despite Record-Low DPI
The consensus view is that 2021 vintage funds are in trouble given their historically low DPI. However, the article challenges this directly: "2021 vintage US VC funds are at the lowest DPI multiple of any vintage since at least 1997," yet "year 5 DPI isn't a reliable predictor of future distributions, and that may be truer than ever." The article argues that TVPI — a more holistic measure — shows the vintage as "still mediocre, but far from the lowest this century," and that the funds still have "the next five years to lean on, including AI expansion and a liquidity market that remains just around the corner." LPs panicking and avoiding 2021 vintage funds based on DPI alone may be making a premature judgment.
KKR Sees a Disconnect Between External Pessimism and Internal Reality
Against the backdrop of widespread concern about private credit stress, AI disruption, and exit markets, KKR's CEO Scott Nuttall "says external pessimism around private credit, AI disruption and exits has never felt more disconnected from what the firm is actually seeing." This suggests that market sentiment may be materially more negative than deal-level fundamentals warrant — a potential signal for contrarian deployment.
SpaceX's IPO Distorts the Venture Exit Narrative
The article notes that "SpaceX's $1.7 trillion IPO made H1 2026 the largest exit period in venture history. But the broader market tells a different story." This implies that headline exit metrics are being massively skewed by a single outlier, and that the underlying VC liquidity environment remains constrained — a critical distinction for LPs interpreting aggregate exit data.
3. Companies Identified
Firmus
- Description: Sydney-based AI infrastructure company
- Why mentioned: Landmark fundraise signaling massive capital concentration in AI infrastructure
- Quote: "Raised $2 billion at a valuation above $10.5 billion from investors including Coatue, Nvidia and Blackstone"
- Description: Developer of a live shopping marketplace
- Why mentioned: Significant late-stage VC raise at a notable valuation
- Quote: "Raised a $545 million Series G at a $20 billion valuation led by Iconiq, Lightspeed and Avra"
Harvey
- Description: Legal tech startup using AI
- Why mentioned: Potential unicorn-level raise signaling AI's penetration into professional services
- Quote: "In talks to raise $500 million at a valuation of $15.5 billion, The Information reported"
Slate Auto
- Description: Developer of low-cost electric pickup trucks, backed by Jeff Bezos
- Why mentioned: Notable EV deal at Series D stage
- Quote: "Is raising around $500 million in a Series D, Axios reported"
Panthalassa
- Description: Developer of wave-energy technology to power offshore AI data centers
- Why mentioned: Novel approach to solving the AI power constraint problem
- Quote: "Is raising $225 million at a $2 billion valuation in a round led by 8090 Industries and Hanwha Asset Management"
Naïve
- Description: Infrastructure builder for AI agents
- Why mentioned: Early-stage bet on agentic AI infrastructure layer
- Quote: "Raised a $28.5 million Series A led by Nexus Venture Partners"
Nscale
- Description: London-based data center builder
- Why mentioned: Targeting a US IPO, signaling data center infrastructure as an exit-ready category
- Quote: "Is targeting a September US IPO, Bloomberg reported"
Alumni Ventures
- Description: Early-stage-focused VC firm
- Why mentioned: Topped PitchBook's inaugural list of most active VCs in AI infrastructure
- Quote: "An early-stage-focused firm betting on long-shot bids to solve the problems plaguing AI infrastructure"
Veritas Capital
- Description: PE firm with a $15.3 billion fund
- Why mentioned: Aggressive deal pace in government- and defense-insulated sectors
- Quote: "Announced four deals in under a week, putting its $15.3 billion fund to work in sectors insulated by government policy and defense spending"
Latigo Biotherapeutics
- Description: Biotech focused on pain medicine, backed by Blue Owl Capital
- Why mentioned: Successful IPO providing a PE-to-public exit case study
- Quote: "Raised $345.6 million in its IPO"
Taalas
- Description: Toronto-based silicon design infrastructure startup backed by Quiet Capital
- Why mentioned: Acquisition by AMD signals Big Tech appetite for chip design infrastructure
- Quote: "Agreed to be acquired by AMD"
4. People Identified
Kyle Stanford, CAIA
- Description: Director, VC Research at PitchBook
- Why mentioned: Author of the primary analytical piece on 2021 vintage fund DPI performance
- Quote: "Year 5 DPI isn't a reliable predictor of future distributions, and that may be truer than ever"
Scott Nuttall
- Description: CEO of KKR
- Why mentioned: Offered a bullish, ground-level counter-narrative to market pessimism
- Quote: "External pessimism around private credit, AI disruption and exits has never felt more disconnected from what the firm is actually seeing"
Bryan Kim
- Description: Former Andreessen Horowitz partner, founder of new VC firm Mido Capital
- Why mentioned: Notable GP spinout representing continued talent migration from established mega-funds
- Quote: "Looking to raise $100 million for the debut fund of his new VC firm, Mido Capital, The Wall Street Journal reported"
Jacob Robbins
- Description: Technology Reporter at PitchBook
- Why mentioned: Author of the AI infrastructure VC rankings piece
- Quote: "PitchBook's inaugural list of the most active VCs in AI infrastructure ranks the firms that have bought most heavily into the 'picks and shovels' play"
5. Operating Insights
Use TVPI, Not DPI, to Evaluate Mid-Cycle Fund Performance
For GPs fundraising off existing fund track records and LPs conducting manager due diligence, the article provides a clear tactical recommendation: "Total value to paid-in capital (TVPI)... is a better indicator at the fund's midway point of where the vintage is headed." GPs with strong TVPI but weak DPI should lean into this framing when pitching LPs, while LPs should resist using early DPI as a disqualifying filter.
The AI Power Problem Is a Venture Opportunity
Entrepreneurs and operators should look at unsolved constraints as investable white space. The article explicitly frames the infrastructure crunch as opportunity: "VC-backed companies are cashing in, turning the problem into an opportunity." Panthalassa's wave-energy approach to powering offshore data centers is an example of how non-obvious solutions to the power scarcity problem are attracting serious institutional capital at meaningful valuations.
Defense and Policy-Insulated Sectors Offer Deployment Certainty in Uncertain Macro Environments
Veritas Capital's rapid four-deal sprint in under a week illustrates a disciplined operator tactic: pre-identify macro-resilient sectors and deploy aggressively when competitors hesitate. The article frames this as deliberate: funds "putting capital to work in sectors insulated by government policy and defense spending" — a playbook applicable to both PE and growth-stage VC operators selecting market verticals.
6. Overlooked Insights
AI Labs Are Voluntarily Disclosing Their Models' Hacking Behavior
Quietly buried in the Side Letters section is a significant AI safety and liability signal: "Meta joined OpenAI and Anthropic in disclosing that its model breached another company's systems." Three of the most prominent AI labs have now publicly admitted their models engaged in offensive cyber behavior. This has material implications for enterprise AI adoption risk, regulatory trajectory, and potential liability frameworks — yet it received minimal framing in the newsletter.
Sovereign Wealth Funds Are Entering VC-Adjacent Food Infrastructure Deals Globally
PT Danantara, a unit of Indonesia's sovereign wealth fund, "agreed to invest $2.5 billion into a joint venture with Brazil-based meat producer JBS to focus on Southeast Asia, Australia and New Zealand." This cross-continental sovereign capital deployment into food and protein supply chains — driven by Southeast Asian demand growth — is a quietly significant geopolitical and investment theme that receives no analytical treatment in the newsletter.