Episode summary
AI, SaaS and the Next Private Markets Shakeout
Swimming With Allocators
· · 52 min · Hosts: Alexa Binns, Earnest Sweat · Guests: Chris Schelling, Nick Cassin
Summary
A guest argued that AI is already creating both genuine disruption and pockets of excess valuation, with the most exposed areas including simple horizontal software, low-value information services, and some richly priced AI-linked assets. He said the danger is not just in software: AI is also changing services, small businesses, diligence workflows, and even how investment committees function, while making senior investors more efficient rather than simply replacing them.
He also described private markets as increasingly bifurcated. In private credit, he said the headlines about a coming collapse are overstated because defaults and EBITDA deterioration have not matched the fear, even though underwriting discipline has weakened in places. In venture and private equity, he said the zero-rate period left behind capital misallocation, stretched SaaS valuations, and a harder environment for some 2020-2021 vintages. He was more optimistic on seed-stage technical venture and on quantum computing, which he suggested could be more transformational than AI over time.
A second theme was wealth-channel product design. The guest said democratizing alternatives can be positive if it expands access with lower minimums, good disclosure, and usable wrappers such as interval funds, but he was skeptical of layered SPV structures that obscure assets and fees. He argued that newer allocators need deeper relationships, more domain expertise, and better diligence habits, especially as private markets become more accessible.
Key takeaways
- The guest said AI is disruptive enough to matter, but valuation excess is already visible in parts of the market, especially simple software and AI-linked assets.
- He argued that private credit is not in an imminent blowup, because defaults remain contained and his firm tracks 60,000 credits in real time.
- He said the weakest SaaS businesses are those that can be replaced by AI-built internal tools, while proprietary-data and workflow-embedded software should hold up better.
- He was skeptical of SPV “sandwiches” and said investors should always read the LPA and PPM before buying private-market exposure.
- He said interval funds and other mutual-fund-like wrappers may be the best fit for wealth clients because they are easier to use than subscription-based products.
- He said seed-stage technical venture and quantum computing are the most interesting long-term opportunities, while later-stage venture looks more crowded and expensive.
Notable quotes
“there's no question it is a big technology disruption that is occurring but you can have think about bubbles”
“we see pockets of excessive valuation in certain areas and I think there's capital formation there that's going to lead to capital destruction in the long run”
“we don't see this impending, you know, 20% of the market is going to default like some of the headlines have been bordering on absurd”
“I think if you look at indexation there's some interesting characteristics that are relevant for private markets”
How the episode opens
Welcome to Swimming with Alligators, — The VC podcast from the LP perspective — With your hosts Alexa Bins — And Ernest S. You ready? Let's dive in. — Chris is so I'm so happy to have you back. Um, thanks for being on the show.
Well, thanks for having me back. Being the first repeat guest is quite an honor. So, pleasure.
Yes. Yes, that is correct. Chris is the first repeat guest.
I was looking it up before we started recording. Uh I believe your last episode was episode 22. People should go back to it.
And it was released May 1st uh about two May 1st two years ago, 2024. Um so as I I was going back and looking uh last episode that you were on uh you know the market was very different. Uh you talked a lot about behavioral econ uh behavioral finance caprock multif family offices and manager selection.
Just curious now that you're in a new seat at um Axia um you know what's changed in the market and you know why the move?
A lot has changed. I mean, two years goes by in a blink, but um I'll just give kind of like the background for the move and sort of like what we do and what we kind of see and where, you know, I think a lot of this is evolving in wealth. It's happening really rapidly.
Like the level of sophistication and changes that are occurring in terms of like product structure and what's happening in wealth is just going so fast.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai in private markets
- saas valuation and risk
- private credit diligence
- venture secondaries
- wealth platforms for alternatives
Companies and tickers mentioned
- Aksia
- Sidley Austin LLP
Watch the episode
Watch “AI, SaaS and the Next Private Markets Shakeout” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Swimming With Allocators
Swimming With Allocators, this episode and its artwork belong to Earnest Sweat, Alexa Binns. Octagon is not affiliated with the show; this page is an independent summary.
