VC (finally) lands a glove on PE 🥊
1. Key Themes
VC Returns Are Staging a Comeback After Four Years of PE Dominance
VC fund performance is recovering sharply, marking a potential inflection point in the asset class competition.
"The returns of venture capital funds have risen sharply since the second quarter of last year, signaling something of a fightback after four years of private equity dominance, according to PitchBook's latest Global Fund Performance Report."
The macro trigger for the divergence is well-identified: the 2022 rate shock that crushed VC valuations while PE held up better.
"The fates of the asset classes began to diverge at the start of 2022, coinciding with the Federal Reserve's decision to combat runaway inflation by implementing six interest-rate hikes, bringing headline rates from close to 0% at the start of the year to more than 4% by the end."
The Private Wealth Channel Is the Next Frontier for Alts Distribution — But Early Results Are Modest
Asset managers are racing to package institutional-grade private fund products for wealth advisers and retail clients, with "model portfolios" as the primary vehicle.
"Alternative fund managers are increasingly working to woo wealth advisers by designing off-the-shelf 'model' portfolios that contain pre-set sleeves for public stocks and bonds, alongside private ones."
"BlackRock CEO Larry Fink has extolled model portfolios as the path to shift asset allocations from the traditional 60/40 stocks-and-bonds mix to a 50/30 approach that allocates 20% to alternatives. Roughly three-quarters of wealth managers use model portfolios today."
Despite strong rhetoric, adoption is still nascent:
"Although many firms say these structures are brimming with potential for increasing exposure to alts, the concept has had a modest start."
Defense Tech and AI Infrastructure Are Attracting Mega-Round VC Capital
Two of the largest VC rounds in this issue reflect sustained institutional conviction in defense manufacturing and AI infrastructure buildout.
"Defense tech manufacturing company Hadrian secured a $1.37 billion Series D... at a $7.87 billion valuation."
"AI infrastructure connectivity platform developer Lumilens raised a $700 million Series C... at a $5.51 billion valuation."
Secondary Market Is Maturing, With a New Wave of Anchor Companies Emerging
As SpaceX approaches liquidity, the VC secondary market is repositioning around the next generation of anchor names.
"Stripe, Databricks and Anduril top our list of the 10 startups most likely to become the secondary market's new anchors."
UK Private Markets Are Booming in Headline Numbers but Concentrated and Fragile Underneath
Record activity in the UK masks structural risk.
"UK PE and VC both hit record paces in H1, but the gains mask a fragile foundation: Activity is concentrating in mega-deals and mega-rounds, while the broader ecosystem looks shaky."
2. Contrarian Perspectives
Pre-IPO Retail Fund Bets on "Scarce" Names Like SpaceX Are Backfiring
The consensus view was that pre-IPO funds offered rare access to high-quality private names at a premium — that premium is now evaporating.
"The retail investors who piled into pre-IPO funds chasing names like SpaceX are now learning that the scarcity premium driving those bets can evaporate."
This challenges the narrative that access to private unicorns is a reliable retail wealth strategy. When a dominant anchor company nears liquidity, the scarcity-driven pricing mechanism collapses, leaving late-arriving retail investors exposed.
Sequoia Is Pivoting Away from AI Foundation Model Bets Toward Physical World Themes
Against the consensus that AI model investment remains the dominant VC opportunity, Sequoia is explicitly redirecting capital.
"Sequoia says the era of chasing the next Anthropic is over. After investing heavily in the AI company, the firm's new money is being steered toward reindustrialization, robotics and chips instead."
This is a significant signal from one of the most influential VC firms — suggesting they believe AI model valuations are topped out and the next cycle of returns lies in physical infrastructure.
American Isolationism and Research Cuts May Be Accelerating China's Innovation Lead
The conventional view is that US policy is constraining China's technology ambitions. The counterpoint: those same policies may be self-defeating.
"Research cuts and isolationism in America are accelerating China's innovation, some argue, with one scientist saying China could have the next big vaccine breakthrough."
3. Companies Identified
- Description: Defense tech manufacturing company
- Why mentioned: Raised a landmark $1.37B Series D at a $7.87B valuation, one of the largest defense-tech VC rounds on record
- Quote: "Defense tech manufacturing company Hadrian secured a $1.37 billion Series D led by WCM Investment Management... at a $7.87 billion valuation."
- Description: AI infrastructure connectivity platform developer
- Why mentioned: Raised $700M Series C at a $5.51B valuation, signaling strong institutional appetite for AI infrastructure picks-and-shovels plays
- Quote: "AI infrastructure connectivity platform developer Lumilens raised a $700 million Series C... at a $5.51 billion valuation."
- Description: Global payments infrastructure company
- Why mentioned: Identified as one of the top anchors for the next wave of VC secondary market activity
- Quote: "Stripe, Databricks and Anduril top our list of the 10 startups most likely to become the secondary market's new anchors."
Databricks
- Description: Data and AI platform company
- Why mentioned: Named as a likely secondary market anchor alongside Stripe and Anduril
- Quote: "Stripe, Databricks and Anduril top our list of the 10 startups most likely to become the secondary market's new anchors."
Anduril
- Description: Defense technology company
- Why mentioned: Named as a likely secondary market anchor, reflecting defense tech's rising prominence in late-stage VC
- Quote: "Stripe, Databricks and Anduril top our list of the 10 startups most likely to become the secondary market's new anchors."
- Description: London-based bubble tea chain
- Why mentioned: Acquired by Bain Capital as its third PE owner, at a price below seller expectations — a case study in PE sponsor-to-sponsor fatigue and valuation pressure
- Quote: "Bain Capital just bought bubble tea giant Gong Cha—becoming the London-based chain's third PE owner—but paid well below what TA Associates was reportedly hoping for."
- Description: London-listed low-cost airline
- Why mentioned: Subject of a £5.7B acquisition by Apollo Global Management in a high-profile take-private deal
- Quote: "Apollo Global Management agreed to acquire London-listed low-cost airline EasyJet in a £5.7 billion deal after Castlelake stepped away from the bidding war."
- Description: European bicycle company, KKR portfolio company
- Why mentioned: Filed for insolvency in the Netherlands, a high-profile PE write-down after KKR paid €1.6B in 2022
- Quote: "Bike company Accell Group sought court protection and began an insolvency process in the Netherlands. KKR acquired it for €1.6 billion in 2022."
BlackRock
- Description: World's largest asset manager
- Why mentioned: CEO Larry Fink is championing model portfolios as the mechanism to democratize alternatives access at scale
- Quote: "BlackRock CEO Larry Fink has extolled model portfolios as the path to shift asset allocations from the traditional 60/40 stocks-and-bonds mix to a 50/30 approach that allocates 20% to alternatives."
Unitree Robotics
- Description: China-based humanoid robotics company
- Why mentioned: Seeking a $904M Shanghai IPO, a notable signal of China's ambition in robotics and an emerging exit path for Chinese VC
- Quote: "China-based humanoid robotics company Unitree Robotics is seeking to raise 6.1 billion yuan ($904 million) in a Shanghai IPO."
AVK Power Solutions
- Description: UK-based supplier of power solutions for data centers and AI infrastructure in Europe
- Why mentioned: Partners Group acquired a majority stake for $1B, reflecting PE's growing conviction in AI infrastructure plays
- Quote: "Partners Group agreed to acquire a majority stake in UK-based AVK Power Solutions, a supplier of power solutions for data centers and AI infrastructure in Europe, for $1 billion."
Sapiom
- Description: Developer of a platform to ship, run, and scale AI agents
- Why mentioned: Raised a $35M Series A led by Dragonfly, representing early-stage conviction in agentic AI infrastructure
- Quote: "Sapiom, the developer of a platform to ship, run and scale AI agents, raised a $35 million Series A led by Dragonfly."
Celestica
- Description: Supply chain solutions company listed in New York and Toronto
- Why mentioned: Raising $3B in new equity to fund data center buildouts, illustrating how public companies are also competing for AI infrastructure capital
- Quote: "Celestica... is seeking a $3 billion raise by selling new shares to fund data center buildouts."
4. People Identified
Larry Fink
- Description: CEO of BlackRock
- Why mentioned: Leading the charge to move wealth allocations toward alternatives via model portfolios; his 50/30/20 framework is becoming a reference point for the industry
- Quote: "BlackRock CEO Larry Fink has extolled model portfolios as the path to shift asset allocations from the traditional 60/40 stocks-and-bonds mix to a 50/30 approach that allocates 20% to alternatives."
Michael O'Dwyer
- Description: Incoming CIO of Abu Dhabi National Oil Company (ADNOC); former global co-head of energy at Morgan Stanley
- Why mentioned: High-profile hire signaling sovereign wealth and national oil companies are aggressively building institutional investment infrastructure
- Quote: "Abu Dhabi National Oil Company hired Michael O'Dwyer, global co-head of energy at Morgan Stanley, as its chief investment officer."
Rod James
- Description: Senior Editor, Private Equity at PitchBook
- Why mentioned: Author of the lead story on VC vs. PE performance
Alexander Davis
- Description: Head of Enterprise Reporting at PitchBook
- Why mentioned: Author of the model portfolio / private wealth distribution story
5. Operating Insights
The "Plumbing vs. Packaging" Problem Is the Core Distribution Challenge for Alt Managers
For fund managers trying to access the wealth channel, the article draws a sharp distinction between two levers: building better fintech infrastructure ("plumbing") vs. creating retail-friendly product wrappers ("packaging"). Both are necessary, but neither alone is sufficient.
"Plumbing is industry shorthand for an ever-evolving revamp of the distribution pipelines and fintech infrastructure underlying how private fund managers do business with a prized market segment: wealth advisers and their retail clients... the financial industry has also been innovating in how to package products: that is, coming up with retail-friendly wrappers for fund structures and other products that were originally built to serve big institutions, not wealthy individuals."
Takeaway for operators: Alt managers seeking to scale retail distribution should evaluate both dimensions — technological infrastructure AND product structure — rather than treating either as a complete solution.
Scarcity Premiums in Pre-IPO Investing Are Not Durable — They Collapse at Liquidity
For fund managers or entrepreneurs building access vehicles around specific private names, the SpaceX case is a cautionary tale about the lifecycle of the scarcity premium.
"The retail investors who piled into pre-IPO funds chasing names like SpaceX are now learning that the scarcity premium driving those bets can evaporate."
Takeaway: Pre-IPO vehicles must be structured and priced with the assumption that the scarcity discount compresses as IPO approaches — investors who buy late in the cycle are most exposed.
6. Overlooked Insights
Sequoia's Shift to Reindustrialization, Robotics, and Chips Could Redirect a Generation of VC Capital
While the headline is about Sequoia moving on from Anthropic-style bets, the downstream effect is significant: if a top-tier firm is systematically redeploying into physical-world infrastructure themes, it will attract LP capital, co-investors, and founder talent in that direction — potentially creating a self-fulfilling cycle away from software AI.
"Sequoia says the era of chasing the next Anthropic is over. After investing heavily in the AI company, the firm's new money is being steered toward reindustrialization, robotics and chips instead."
IPO Timing Is Becoming Structurally Harder Due to Unpredictable Rate Paths
A brief but important point buried in the Chart of the Day commentary: even with rate cuts, the dispersion of policy paths in 2026 is creating a more hostile IPO environment than the absolute level of rates alone would suggest.
"With H2 2025 rate cuts outpacing expectations but 2026 policy paths growing more dispersed, less predictable easing could delay the stabilization needed to support IPO timing and pricing."
This has direct implications for VC funds holding late-stage assets and counting on a 2026 IPO window — uncertainty, not just rate levels, is the gating factor.