Alternative Investments
Jul 20, 2026
Alternatives Access: Unlocking Agentic AI in Private Markets Today
This webcast explores how innovations in artificial intelligence are unlocking new opportunities for investors in private software assets, with a focus on navigating the evolving private markets, understanding the impact of agentic and vertical/horizontal AI, and capturing growth in the era of AI-powered software.
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This session is close to the press. Welcome to the JP Morgan webcast. This is intended for informational purposes only. Opinions expressed herein are those of the speakers and may differ from those of other JP Morgan employees and affiliates. Historical information and outlooks are not guarantees of future results.
Any views and strategies described may not be appropriate for all participants and should not be intended as personal investment, financial, or other advice. As a reminder, investment products are not FDIC insured, do not have bank guarantee, and they may lose value. The webcast may now begin.
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Hello, everyone, and thank you for joining us. We are back for another iteration of alternatives access, where we're going to give you the latest ideas and insights from JP Morgan's Private Bank but also from some of our favorite partners across the industry. Today, I am joined by Ashley McNeill, head of equity capital markets for Vista Equity, and also co-president of Vista One. Ashley, I'm thrilled to have you today. I think it's going to be a great conversation.
Yeah. Thank you so much for having me. I'm really looking forward to it.
You bet. So one of the things that we spend a ton of time with our clients on is just the opportunity set in private markets. Companies are staying private longer, and there's a tremendous opportunity set when we think about just accessibility. We talked about it a couple of weeks ago, but almost 90% of companies with $100 million of revenue or more are privately held companies.
So just volume alone makes the private markets interesting. One of the things we wanted to spend today on is just software in particular. We have this conversation around technology more broadly, but software is a really compelling part of the market today, even just from an economy perspective. So in the spirit of five ideas, five charts in 25 minutes with this webcast today, I'd love for you to take us into chart one.
Sure. So chart one is software. And why? Why do we care about software? It is one of the fastest and largest growing subsectors of the market, both private and public, that one can invest in. And the rationale for why software, what's so exciting and compelling about software is three things. First and foremost, it's the predictability of the business model.
If you think about the revenue, it's subscription or contractual based. In the public market, over 80% of revenue for top line for software is contractual or reoccurring. And so therefore, it's a very predictable business model. The second reason is it's mission criticality. So enterprise software functions as the backbone of enterprise for corporate America, and it provides mission critical functionality.
So it is something that helps with your taxes, your payroll, getting your product out, your marketing. Basically, it facilitates all sorts of different mission critical aspects of a business. And the final one, which I'm sure we'll touch on later, is it is the nexus for data collection and workflow data, and that's pretty critical as we think about technology and where we're going. You need data, and you need information on those workflows, and software provides that.
And it's interesting too that you bring it up. Obviously, I work at JP Morgan, and I know for a fact that we take, one, our software providers incredibly seriously, but also just our tech spend year over year, getting it right with the partners because they're typically long-term partnerships when we talk about bringing in enterprise software into the company, so I think it's an interesting point.
The second thing I'd say too is oftentimes our clients have thought about software similar to that of infrastructure. And I think in a modern world, software is part of our infrastructure in a more digital world versus that of 20 or even 30 years ago, so I think super interesting. If we press forward one chart, I'd love to take us to idea number two.
And I think this is super interesting when I think about the accessibility of private markets. One of the things that you and I have talked about over time in a number of our conversations is just that a number of software companies-- 90-plus percent are actually privately held. Talk to us about why that is and then just the opportunity set more broadly.
No. That's right. I mean, it's over 95% of software companies are private. Meaning when you look at the public markets, and you see brand name software companies, that's a very small representation of the actual broader market. And a lot of that comes down to the functionality of the life cycle of software and the ability to deploy software at early, early stages of a company all the way to very, very mature companies.
And so when you think about enterprise software and how much is in the private realm, a lot of that has to do with the fact that this is technology that's up and coming, that's changing quite a bit. And so you are getting access to different life cycle points of that software. And it's really critical as you think about the world we're in, and how fast things are moving and technology is moving that a lot of these companies stay in that private realm because they're in the growth phase of their development, and they're learning how to provide that solution set to their customers.
And so they're likely going to remain in that stage of life in the private market. And we'll only become public when they've reached a certain maturity, which as this slide highlights only a handful do.
And I think too, what's interesting about that is, one, today there are less publicly traded companies than there were 20 years ago. We see that decline. Of course, there are regulatory reasons for that in a number of different things. The growth of private markets, companies being able to continue to be financed in private markets. So talk us through just before we move forward why is that software companies more deeply focused on growth are less likely to go public earlier stage maybe relative to a health care company, where we see companies going public sooner in their life cycle.
I think it's for a variety of reasons. First and foremost is that capital markets are creative, and there is readily accessible capital available in the private markets that at one other point in time couldn't access. And so there the need, the desire to go public is diminished if you're going to raise capital because you can raise capital in the private markets.
The second is because of the pace of change of technology and because of the solutions that you're providing-- you hear a lot of information around CapEx deployment, and the need to pivot the solution set. A lot of that requires being in the private market, being able to deal with your private customers, your private clients, to adapt this technology and change in a readily fashion. That, frankly, being in the public market with the quarterly reporting just does not facilitate.
Implementing some strategies, some go to market things, some new product-- that all takes time. And it's stuff that can be done much more readily in the private market. And then the final thing is I think a lot of the success of software comes down to those three things I talked about. But being mission critical to a company also means the ability to, one, protect that information, collect that information, and report that information. And oftentimes, having exposure to the public markets doesn't necessarily facilitate that relative to remaining private.
That's an interesting point, too. I think we've heard Robert Smith of Vista Equity Partners talk about being able to have the sovereignty and dominion over your data set and that being core to who you're choosing as software partners and what you're embedding into your company infrastructure. And so I think that sort of speaks to that more broadly. You have a long history and background in equity capital markets.
And so I'd love for you to spend a moment on chart three. So if we move forward, I think this is pretty compelling. When we think about the valuation environment, we are coming off of really a dramatic five-year cycle-- 2020 and 2021 we saw, I think, valuations that in a lot of times you could on one end absolutely underwrite from a fundamentals perspective and on the other end not do that.
And we saw a lot of shifts and change over the last-- call it three to five years. Walk us through the valuation environment today for software and why it could be potentially a compelling entry point for clients, who are looking to invest today.
Absolutely. And I think it's actually fascinating to me where software is trading today. Now, I would keep in mind this chart is emblematic of public names. We obviously don't have all of the data for private, but I do think it's a great proxy for software, broadly speaking. And to me, what's so fascinating is we are in this world of complete and utter change in technology.
We are starting to see some leaps and bounds that we had not seen for a 20, 30, 40-year cycle. And software continued to persist along at this very steady, I'd argue, 10-year average valuation. So you're right. We did have this five-year explosion that was a pull through of valuation. It was a lot of things that were meant to take phase in over time that got pulled through.
And we've now returned to a much more normalized valuation pace. And this normalized valuation pace, I think, is pretty phenomenal, given the positioning that software is going to have as this technology gets deployed and the necessity of this application layer, this software layer, to really bring this technology to you, and to me, and to everyone else. And so it's a great place from an entry point, as you think about valuations, because you've got the history of where the valuations have been. And this is very much in line with where software historically traded.
And I think to one of the things that we talk about as a firm and really just thinking about accessibility of private markets has been a change in structure. So historically in private markets, if you wanted to get access to software or any other technology or asset class, your only options were a traditional tenure drawdown strategy, where you're investing over a three to five-year period and then harvesting it over a next three to five-year period.
And so from an entry point standpoint, you could be captive in what vintage year you get trapped in, if you will, from an investing period. I think today our clients have the optionality with semi-liquid and evergreen vehicles, where over time, over a 10-year cycle you have the optionality of just more diversification vintage year, over vintage year, over vintage year.
And so I think for our clients who are thinking about software, who are thinking about AI, who are thinking about infrastructure and the likes, you have two ways to play. And software, I think, is one of those interesting places today. Again, from a valuation standpoint, what we should be thinking about is this a durable or defensive part of the portfolio that we could potentially be adding.
In the spirit of that, chart four-- and this is one of my favorites just in the conversation today. That I'd love for clients to spend a little bit of time on. But it's this idea in a modern world, where we've seen cost come down somewhat materially, and we have a broader outlook on what CapEx spending from the Mag Seven will be for software.
We're seeing AI hit the application layer. And what that means is it's not just the enterprise or corporations who will benefit but also you and I. This world of agentic or assistant outside of just generative AI. So I'd love for you to spend a moment on the modern opportunity set with AI specifically, and then we can't have a conversation without I A is a bubble or not. That was coming. So I'd love for you to spend a moment on is AI going to eat software, or is it going to feed it? And so what the modern opportunity set looks like.
Yeah. No, I agree with you. This is my favorite slide as well. And I think it's predicated on just taking a giant step back. In that we believe that this is a general technology that is going to be used ubiquitously, and you and I are going to get to benefit from it. And the person down the street will get to benefit from it, and corporate America will get to benefit from it. Corporate America to truly benefit from it needs to have a partner, a long-term partner, that they have already embedded within their system help them access this technology.
And that's going to be done through enterprise software, through the application layer. So as you think about the build out and all the hype you've seen around AI, we believe that it's going to happen in phases. Phase one is this semi hardware build out phase. Phase two is this hyperscaler enabler, AI enabler phase, and the final phase, which is where software is the crux of, is this application layer, this AI adopter.
And as you think about software starting to really deploy AI within their ecosystem to then help corporate America, you see cost savings both on the top line growth line, which is outlined on the chart here, as well as the margin efficiency line.
Sure. And just to give everyone an example, top line growth, meaning enhanced productivity, growth of the overall company, and then bottom line truly meaning-- sort of cost efficiencies and savings in dollars.
Yeah. A lot of the rhetoric we've heard has been really focused on that cost impact. It'll make us more efficient. I can use-- why write the paper? You can use ChatGPT to write the paper-- that kind of stuff. We're going to start seeing new products come about. Hey, you were solving this problem using this solution. Now, let me give you this solution and then some. And all of a sudden--
I will say on the cost saving, it's one of those things where sometimes you just want to call a restaurant and have a person pick up the phone when you're trying to make a reservation, instead of it being an AI bot but noted.
But I think this is a great example. So we believe that software is going to start falling into one of, basically, two buckets. It's going to become a tier two economy for software. Tier one will be you have an agent. You're right. You go to make a reservation and an agent. A non-human being takes your order. And guess what? That agent can work 24/7, and it never goes online.
And that's where you get that cost-savings because you're no longer now paying for someone to answer the phone. You've got an agent doing. But then there's also tier two of software, which is the actual solution set they're providing corporate America doesn't need to be agentified. I don't need an actual agent to get smarter each time they do the task. I just need the task completed, and I don't need to use all that GPU and all that CapEx to build that out. I just need that.
But I can use AI to handle my payroll, or I can use AI to do customer service, or I can use AI to make my engineers more efficient so that they're coding faster, and better, and quicker. And so when software starts to really break off into those two things, that's when I think you'll start really seeing, at least in both in the public-- and we're already seeing it in the private-- this additive to both the top line revenue growth. So you're starting to either offer new products because you've become agentified, or you're offering the same product, but you can offer it faster, better, quicker, because you've become more efficient.
And you've talked about a life cycle-- three-pronged life cycle and where we are. What's interesting is where you see dollars going today and where you see investment today. It really is still across all three of those, whether it's the hardware spend down to the application layer. It's fluid, if you will-- not necessarily year by year by year. Talk about what's interesting from an investment perspective of whether it's CapEx. Maybe that's more infrastructure in data centers and power generation to the application layer, where you start to see it hit software.
One of the things we've been talking to our clients about is now a time to do early stage investing, now that it is starting to hit the application layer, or does buyout in being with a core of solution where you can influence management team, influence board decisions. What are your thoughts there more broadly around the stage of investing?
So I really do think you want to be as diversified across all the different life cycles and ecosystems as you can. However, if past technology expansions show us anything, past revolutions show us anything, in order to introduce general technology to the broader population as well as corporate America, it requires some economies of scale.
That's right.
And to get that economies of scale, you're looking for people, companies, investment opportunities that have ecosystems that can leverage off each other. So I think it's less about CapEx spend. I look at CapEx spend, but I also look, like, do they have partnerships? Is there an alignment with people?
Do they have a group of technologists that they are affiliated with that they can leverage that? So I think there's a little bit of that. I also think everything, it's not going to be a straight line up. This is going to have fits and starts and maneuverability, so you want to be within an ecosystem that can help capture some of that fits and starts.
So oh, they learned a lesson in contracting for AI for their agent here. So now, they're going to make sure that that's enforced across the broader organization or the broader investment community. And so making sure that there's a big ecosystem to provide you with that scale so that there is lessons being learned and implementation happening more ubiquitously.
And just your thoughts more broadly. If we Zoom out and look at capital markets more broadly into 2026, what is your take on a reopening? We, obviously, have a changing interest rate environment that makes movement of companies into public markets potentially more interesting at this juncture, but we've also talked about companies staying private longer. What your thoughts more broadly just on the market into 2026?
So statistically, I'm supported in my thesis that I'm fairly bullish for 2026. I know that sounds bizarre after three years of what will likely be record returns. Statistically, it's still supported that the fourth year is actually OK, although we'll see. But there's three things that I'm really excited about for 26. First is profits and profitability. If you look at both public and private companies, and you look at their earnings capabilities and their earning power for 26, it is quite substantial.
You're starting to see expectations being met with actual real profits. So I'm very excited about the health of corporate America going into 2026. I also think that from-- you mentioned the Fed, but from a policy standpoint, things are setting up to be more tailwinds than headwinds. And so again, I feel like that is setting up for a very positive market.
And then final is positioning. If you look at the markets, and you see how active retail investors have been as well as institutional investors-- you've seen how much money has flown into the equity markets. I feel like we are in a great position for both new issues-- so the health of IPOs and follow-ons for those to be quite successful in '26, as well as the positioning of both institutional and retail accounts. And so it feels like I don't want to say the stars are aligning because that may be too optimistic, but it feels like '26 could be a really good year.
So if we pull that thesis and we move it back into private markets-- because again, my compliance partners will be upset if I don't guide to past performance is not always a future indicator on a go forward. But I think what's interesting is we're also of, I think, primed for an interesting opportunity in private markets. If you pull that thesis through of more favorable environment in public markets, what does that mean for private market investing? And then maybe we pull in software very specifically right around what the entry point might look like.
So from a private positioning standpoint, I think all three of those characteristics play in. I think it's very similar. I think that you're in an environment where it feels like deals are going to get done and people want to do deals, and that's very healthy. You're also at a time period, where people want to deploy capital for innovation and for these modern AI opportunities, for this margin efficiency.
So from a private perspective, I think all three of those still apply. And I think, again, to your point, past performance doesn't necessarily present future performance. But all of those themes in years where we've had all of those themes at play, they've been very good years, both for the public and private markets.
And then for software in particular-- I mean, we've talked about the waves. We've talked about money being deployed. We saw the valuations of public markets. I think that this is just such a unique moment in time for software and for the application layer.
I think we are at the early phases of application valuation, creation, really being deployed. And as I mentioned earlier, it's not going to be a straight line. It's going to be fits and starts, but I do think '26 is going to be the year that you start seeing real proof points. You start seeing real data. You start seeing metrics. Maybe it'll be revenue per head, or maybe it will be retention rates. But you're going to see real metrics show you how AI is positively impacting these corporations.
And I think even more so that takes us perfectly to chart five, where I'd love for everyone to just spend a moment to absorb this. And maybe you talk us through it. But when we think about the shift, the mix, whether it's labor costs, whether it's IT expense-- bringing it into, again, a healthy corporate America but also having this interesting opportunity to invest on the private side, you just see an acceleration of growth that again, I think, presents a really compelling opportunity.
Completely. Spot on. When you talk to enterprise software CEOs and CFOs, and you ask them what are you most focused on bringing to your clients in 2026? It's really predicated around this efficiency layer. That I am the mission. I provide a mission critical service to my customers.
Is there a way I can do it in a gentrified fashion, where I have instead of a human being, who can be unreliable, who needs to sleep, who needs to eat, who needs to just not be there 24/7 for you actually be there for you 24/7? And can I then redeploy that human to create another solution set, or another product, or another something that then further services whatever the mission critical problem is that I'm addressing? So I think that you're going to start seeing this play out. I mentioned revenue per head. It's not because corporations want to run with less people employed, but they want the employees they have to be more efficient.
And happier. I think there's this idea that if I can remove-- to your earlier point-- just some of the business as usual, that BAU work, where I'm not actually being that productive, or using my brain, or my strategic, or creative skills that I think I may have, we can identify and bring in agents or assistants, if you will, through this software. And again, just all have happier Monday through Fridays, which I think is a pretty compelling point.
The last thing I would love for you to touch on is, what are you most excited about? Is there a vertical within software? Because now we think about software as a horizontal, right, not a vertical. It's not just one sector. It spans everything from insurance and financial services and beyond. I think one of the things we've seen most predominantly is accounting has been transformed by software over the past decade-- more to come. Enterprise software more broadly touches every aspect-- automation, manufacturing, everything. So talk to us a little bit about what you might be most excited about.
Well, I mean, I love all my children equally. So to be clear, I think every sector has really exciting aspects to it. I think for 2026 what I'm most excited about, both on the private and the public side for software, is this layer, which we call the infrastructure layer, but it's the layer that is helping bring all these workflows and this data to the cloud, which is what you need if you're going to deploy AI or create an agent.
You need all of that information readily accessible for your large language model to actually deploy. So it's an area that I'm watching acutely because I think it's going to be the first mover advantage or first leader advantage as far as showing how adaptable this technology is for broad spectrums across all the different sectors.
And then, obviously, cybersecurity is a really easy one because as you think about AI and tech becoming more pervasive in our everyday lives, the surface area that you need to defend against or prevent attacks from, obviously, grows. And so that's an area that's going to need to evolve faster and quicker and will continue to always be in high demand. So those two sectors are definitely sectors that I am watching as the leading indicators of adaptable-- of this technology being adopted but also the success of that adoption.
Awesome. Well, we heard it here first. Ashley, thank you so much for your time today. This was great.
Great. Thank you.
For everyone who joined us, we appreciate your time. Hopefully, we left you all a little bit smarter, or at least with something interesting to talk about in your next conversation. We're excited about the opportunity set in private markets on a go forward, and we're wishing everyone a happy New Year. We'll be back next month with more conversation, just more broadly, across the private equity spectrum, compelling sector exposure across health care, industrials, manufacturing, technology, so on and so forth. So more to come, but thanks to all for joining us.
Thank you for joining us. Prior to making financial or investment decisions, you should speak with a qualified professional in your JP Morgan team. This concludes today's webcast. You may now disconnect.
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Text: PLEASE NOTE: This session is closed to the press. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments involve greater risks than traditional Investments and should not be deemed a complete investment program. They are not tax efficient, and an investor should consult with his/her tax advisor prior to investing. Alternative Investments have higher fees than traditional Investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. The value of the investment may fall as well as rise and investors may get back less than they invested. The views and strategies described herein may not be suitable for all clients and are subject to investment risks. Certain opinions, estimates, investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice. This material should not be regarded as research or as a J.P. Morgan research report. The information contained herein should not be relied upon in isolation for the purpose if making an investment decision. More complete information is available, including product profiles, which discuss risks, benefits, liquidity and other matters of interest. For more information on any of the investment ideas and products illustrated herein, please contact your J.P. Morgan representative. Investors may get back less than they invested, and past performance is not a reliable indicator of future results.
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Welcome to the JP Morgan webcast. This is intended for informational purposes only. Opinions expressed herein are those of the speakers and may differ from those of other JP Morgan employees and affiliates. Historical information and outlooks are not guarantees of future results.
Any views and strategies described may not be appropriate for all participants and should not be intended as personal investment, financial, or other advice. As a reminder, investment products are not FDIC insured, do not have bank guarantee, and they may lose value. The webcast may now begin.
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An animation shows the JP Morgan signature logo being written in gold.
The speakers sit behind a desk in a studio with a view of New York City out of the large window behind them. Text: Jasmine Green-Hogan, Alternative Investments Specialist, J.P. Morgan Private Bank. Jasmine speaks to us.
(SPEECH)
Hello, everyone, and thank you for joining us. We are back for another iteration of alternatives access, where we're going to give you the latest ideas and insights from JP Morgan's Private Bank but also from some of our favorite partners across the industry. Today, I am joined by Ashley McNeill, head of equity capital markets for Vista Equity, and also co-president of Vista One. Ashley, I'm thrilled to have you today. I think it's going to be a great conversation.
Yeah.
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Text: Ashley MacNeil, Head of Equity Capital Markets and Co-President of VistaOne, Vista Equity Partners.
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Thank you so much for having me. I'm really looking forward to it.
You bet. So one of the things that we spend a ton of time with our clients on is just the opportunity set in private markets. Companies are staying private longer, and there's a tremendous opportunity set when we think about just accessibility. We talked about it a couple of weeks ago, but almost 90% of companies with $100 million of revenue or more are privately held companies.
So just volume alone makes the private markets interesting. One of the things we wanted to spend today on is just software in particular. We have this conversation around technology more broadly, but software is a really compelling part of the market today, even just from an economy perspective. So in the spirit of five ideas, five charts in 25 minutes with this webcast today, I'd love for you to take us into chart one.
Sure.
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Logo: J.P. Morgan Private Bank. Text: Confidential and Proprietary. Software is one of the largest and fastest growing sectors. A bar graph, titled 2028 Market Cap Estimate (dollar sign T N), has a bar for each of several industries and 0 to 35 dollar sign T N along the y axis. The bars get taller from left to right: Education 0.1, Legal 0.2, Sports 0.8, Agriculture 1.0, Media 1.5, Real Estate 2.3, Hospitality 2.8, Telecom 3.2, Transportation 4.0, Automotive 4.6, Insurance 5.3, Energy 11.2, Retail 12.5, Healthcare 21.5, Financial Services 27.6, Software 33.8. Text: Top Industry Growth Rates (2024 to 2028 CAGR): Retail 11%, Education 12%, Transportation 12%, Legal 12%, Software 13%, Energy 14%, Healthcare 16%.
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So chart one is software. And why? Why do we care about software? It is one of the fastest and largest growing subsectors of the market, both private and public, that one can invest in. And the rationale for why software, what's so exciting and compelling about software is three things. First and foremost, it's the predictability of the business model.
If you think about the revenue, it's subscription or contractual based. In the public market, over 80% of revenue for top line for software is contractual or reoccurring. And so therefore, it's a very predictable business model. The second reason is it's mission criticality. So enterprise software functions as the backbone of enterprise for corporate America, and it provides mission critical functionality.
So it is something that helps with your taxes, your payroll, getting your product out, your marketing. Basically, it facilitates all sorts of different mission critical aspects of a business. And the final one, which I'm sure we'll touch on later, is it is the nexus for data collection and workflow data, and that's pretty critical as we think about technology and where we're going. You need data, and you need information on those workflows, and software provides that.
And it's interesting too that you bring it up. Obviously, I work at JP Morgan, and I know for a fact that we take, one, our software providers incredibly seriously, but also just our tech spend year over year, getting it right with the partners because they're typically long-term partnerships when we talk about bringing in enterprise software into the company, so I think it's an interesting point.
The second thing I'd say too is oftentimes our clients have thought about software similar to that of infrastructure. And I think in a modern world, software is part of our infrastructure in a more digital world versus that of 20 or even 30 years ago, so I think super interesting. If we press forward one chart, I'd love to take us to idea number two.
And
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Enterprise software is predominately accessible via private markets. 96% of software companies occupying the private markets vs. public markets. A graph, titled Public vs. Private Technology Investment (% of total value) has two bars, one for Public and one for Private, each broken into three sections, IT Services, Software, and Hardware. The public bar is labeled at the bottom, Market Capitalization of IT Constituents. The IT Services section appears between 0 and about 5%, Software is between about 5% and about 37%, and Hardware is between about 37% and 100%. The Software section is labeled, about 4,000 public software companies. The Private bar is labeled at the bottom, P.E. Technology Buyouts. The IT Services bar appears between 0% and about 3%, Software is between about 3% and 60%, and Hardware is between 60% and 100%. The Software section is labeled, about 92,000 Private Software Companies.
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I think this is super interesting when I think about the accessibility of private markets. One of the things that you and I have talked about over time in a number of our conversations is just that a number of software companies-- 90-plus percent are actually privately held. Talk to us about why that is and then just the opportunity set more broadly.
No. That's right. I mean, it's over 95% of software companies are private. Meaning when you look at the public markets, and you see brand name software companies, that's a very small representation of the actual broader market. And a lot of that comes down to the functionality of the life cycle of software and the ability to deploy software at early, early stages of a company all the way to very, very mature companies.
And so when you think about enterprise software and how much is in the private realm, a lot of that has to do with the fact that this is technology that's up and coming, that's changing quite a bit. And so you are getting access to different life cycle points of that software. And it's really critical as you think about the world we're in, and how fast things are moving and technology is moving that a lot of these companies stay in that private realm because they're in the growth phase of their development, and they're learning how to provide that solution set to their customers.
And so they're likely going to remain in that stage of life in the private market. And we'll only become public when they've reached a certain maturity, which as this slide highlights only a handful do.
And I think too, what's interesting about that is, one, today there are less publicly traded companies than there were 20 years ago. We see that decline. Of course, there are regulatory reasons for that in a number of different things. The growth of private markets, companies being able to continue to be financed in private markets. So talk us through just before we move forward why is that software companies more deeply focused on growth are less likely to go public earlier stage maybe relative to a health care company, where we see companies going public sooner in their life cycle.
I think it's for a variety of reasons. First and foremost is that capital markets are creative, and there is readily accessible capital available in the private markets that at one other point in time couldn't access. And so there the need, the desire to go public is diminished if you're going to raise capital because you can raise capital in the private markets.
The second is because of the pace of change of technology and because of the solutions that you're providing-- you hear a lot of information around CapEx deployment, and the need to pivot the solution set. A lot of that requires being in the private market, being able to deal with your private customers, your private clients, to adapt this technology and change in a readily fashion. That, frankly, being in the public market with the quarterly reporting just does not facilitate.
Implementing some strategies, some go to market things, some new product-- that all takes time. And it's stuff that can be done much more readily in the private market. And then the final thing is I think a lot of the success of software comes down to those three things I talked about. But being mission critical to a company also means the ability to, one, protect that information, collect that information, and report that information. And oftentimes, having exposure to the public markets doesn't necessarily facilitate that relative to remaining private.
That's an interesting point, too. I think we've heard Robert Smith of Vista Equity Partners talk about being able to have the sovereignty and dominion over your data set and that being core to who you're choosing as software partners and what you're embedding into your company infrastructure. And so I think that sort of speaks to that more broadly. You have a long history and background in equity capital markets.
And so I'd love for you to spend a moment on chart three. So if we move forward, I think this is pretty compelling.
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Text: We believe enterprise software companies have seen a valuation reset as growth normalizes and margins expand. A line graph, titled Normalization of public software valuations, has years from 2014 to 2025 along the x axis and numbers from 0 to 20 along the y axis. It has a jagged line, representing All S.a.a.S, beginning at about 6.5 in 2014, peaking at 17.3x in 2021, then ending at 7.0x today. Text: 2014 to 2018, average 6.1x. 2022 to 2025, average 7.2x.
(SPEECH)
When we think about the valuation environment, we are coming off of really a dramatic five-year cycle-- 2020 and 2021 we saw, I think, valuations that in a lot of times you could on one end absolutely underwrite from a fundamentals perspective and on the other end not do that.
And we saw a lot of shifts and change over the last-- call it three to five years. Walk us through the valuation environment today for software and why it could be potentially a compelling entry point for clients, who are looking to invest today.
Absolutely. And I think it's actually fascinating to me where software is trading today. Now, I would keep in mind this chart is emblematic of public names. We obviously don't have all of the data for private, but I do think it's a great proxy for software, broadly speaking. And to me, what's so fascinating is we are in this world of complete and utter change in technology.
We are starting to see some leaps and bounds that we had not seen for a 20, 30, 40-year cycle. And software continued to persist along at this very steady, I'd argue, 10-year average valuation. So you're right. We did have this five-year explosion that was a pull through of valuation. It was a lot of things that were meant to take phase in over time that got pulled through.
And we've now returned to a much more normalized valuation pace. And this normalized valuation pace, I think, is pretty phenomenal, given the positioning that software is going to have as this technology gets deployed and the necessity of this application layer, this software layer, to really bring this technology to you, and to me, and to everyone else. And so it's a great place from an entry point, as you think about valuations, because you've got the history of where the valuations have been. And this is very much in line with where software historically traded.
And I think to one of the things that we talk about as a firm and really just thinking about accessibility of private markets has been a change in structure. So historically in private markets, if you wanted to get access to software or any other technology or asset class, your only options were a traditional tenure drawdown strategy, where you're investing over a three to five-year period and then harvesting it over a next three to five-year period.
And so from an entry point standpoint, you could be captive in what vintage year you get trapped in, if you will, from an investing period. I think today our clients have the optionality with semi-liquid and evergreen vehicles, where over time, over a 10-year cycle you have the optionality of just more diversification vintage year, over vintage year, over vintage year.
And so I think for our clients who are thinking about software, who are thinking about AI, who are thinking about infrastructure and the likes, you have two ways to play. And software, I think, is one of those interesting places today. Again, from a valuation standpoint, what we should be thinking about is this a durable or defensive part of the portfolio that we could potentially be adding.
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Text: Modern AI opportunity for enterprise software. Modern AI can accelerate revenue growth and reduce operating costs. Two bar graphs appear, one titled Revenue Impact and one titled Cost impact. The Revenue Impact graph shows Illustrative Revenue at $100, Improved GTM Productivity and plus $5 to 15 above the $100. New Agentic Offerings is above the $5 to 15 above $100, but labeled not sized. And the AI Enabled Revenue is the $100 plus the 5 to 15 dollars. An ascending arrow across the top of the bars is labeled, 5 to 15% plus. The Cost Impact graph shows Illustrative Op Ex at $100, Go to Market 5 to 10 dollars below the $100, Customer support 1 to 5 dollars below the 5 to 10, Research and Development 4 to 10 dollars below the 1 to 5. And AI-enabled Op Ex is a full 75 to 90 dollars. A descending arrow appears above the bars labeled negative 10 to 25%.
(SPEECH)
In the spirit of that, chart four-- and this is one of my favorites just in the conversation today. That I'd love for clients to spend a little bit of time on. But it's this idea in a modern world, where we've seen cost come down somewhat materially, and we have a broader outlook on what CapEx spending from the Mag Seven will be for software.
We're seeing AI hit the application layer. And what that means is it's not just the enterprise or corporations who will benefit but also you and I. This world of agentic or assistant outside of just generative AI. So I'd love for you to spend a moment on the modern opportunity set with AI specifically, and then we can't have a conversation without I A is a bubble or not. That was coming. So I'd love for you to spend a moment on is AI going to eat software, or is it going to feed it? And so what the modern opportunity set looks like.
Yeah. No, I agree with you. This is my favorite slide as well. And I think it's predicated on just taking a giant step back. In that we believe that this is a general technology that is going to be used ubiquitously, and you and I are going to get to benefit from it. And the person down the street will get to benefit from it, and corporate America will get to benefit from it. Corporate America to truly benefit from it needs to have a partner, a long-term partner, that they have already embedded within their system help them access this technology.
And that's going to be done through enterprise software, through the application layer. So as you think about the build out and all the hype you've seen around AI, we believe that it's going to happen in phases. Phase one is this semi hardware build out phase. Phase two is this hyperscaler enabler, AI enabler phase, and the final phase, which is where software is the crux of, is this application layer, this AI adopter.
And as you think about software starting to really deploy AI within their ecosystem to then help corporate America, you see cost savings both on the top line growth line, which is outlined on the chart here, as well as the margin efficiency line.
Sure. And just to give everyone an example, top line growth, meaning enhanced productivity, growth of the overall company, and then bottom line truly meaning-- sort of cost efficiencies and savings in dollars.
Yeah. A lot of the rhetoric we've heard has been really focused on that cost impact. It'll make us more efficient. I can use-- why write the paper? You can use ChatGPT to write the paper-- that kind of stuff. We're going to start seeing new products come about. Hey, you were solving this problem using this solution. Now, let me give you this solution and then some. And all of a sudden--
I will say on the cost saving, it's one of those things where sometimes you just want to call a restaurant and have a person pick up the phone when you're trying to make a reservation, instead of it being an AI bot but noted.
But I think this is a great example. So we believe that software is going to start falling into one of, basically, two buckets. It's going to become a tier two economy for software. Tier one will be you have an agent. You're right. You go to make a reservation and an agent. A non-human being takes your order. And guess what? That agent can work 24/7, and it never goes online.
And that's where you get that cost-savings because you're no longer now paying for someone to answer the phone. You've got an agent doing. But then there's also tier two of software, which is the actual solution set they're providing corporate America doesn't need to be agentified. I don't need an actual agent to get smarter each time they do the task. I just need the task completed, and I don't need to use all that GPU and all that CapEx to build that out. I just need that.
But I can use AI to handle my payroll, or I can use AI to do customer service, or I can use AI to make my engineers more efficient so that they're coding faster, and better, and quicker. And so when software starts to really break off into those two things, that's when I think you'll start really seeing, at least in both in the public-- and we're already seeing it in the private-- this additive to both the top line revenue growth. So you're starting to either offer new products because you've become agentified, or you're offering the same product, but you can offer it faster, better, quicker, because you've become more efficient.
And you've talked about a life cycle-- three-pronged life cycle and where we are. What's interesting is where you see dollars going today and where you see investment today. It really is still across all three of those, whether it's the hardware spend down to the application layer. It's fluid, if you will-- not necessarily year by year by year. Talk about what's interesting from an investment perspective of whether it's CapEx. Maybe that's more infrastructure in data centers and power generation to the application layer, where you start to see it hit software.
One of the things we've been talking to our clients about is now a time to do early stage investing, now that it is starting to hit the application layer, or does buyout in being with a core of solution where you can influence management team, influence board decisions. What are your thoughts there more broadly around the stage of investing?
So I really do think you want to be as diversified across all the different life cycles and ecosystems as you can. However, if past technology expansions show us anything, past revolutions show us anything, in order to introduce general technology to the broader population as well as corporate America, it requires some economies of scale.
That's right.
And to get that economies of scale, you're looking for people, companies, investment opportunities that have ecosystems that can leverage off each other. So I think it's less about CapEx spend. I look at CapEx spend, but I also look, like, do they have partnerships? Is there an alignment with people?
Do they have a group of technologists that they are affiliated with that they can leverage that? So I think there's a little bit of that. I also think everything, it's not going to be a straight line up. This is going to have fits and starts and maneuverability, so you want to be within an ecosystem that can help capture some of that fits and starts.
So oh, they learned a lesson in contracting for AI for their agent here. So now, they're going to make sure that that's enforced across the broader organization or the broader investment community. And so making sure that there's a big ecosystem to provide you with that scale so that there is lessons being learned and implementation happening more ubiquitously.
And just your thoughts more broadly. If we Zoom out and look at capital markets more broadly into 2026, what is your take on a reopening? We, obviously, have a changing interest rate environment that makes movement of companies into public markets potentially more interesting at this juncture, but we've also talked about companies staying private longer. What your thoughts more broadly just on the market into 2026?
So statistically, I'm supported in my thesis that I'm fairly bullish for 2026. I know that sounds bizarre after three years of what will likely be record returns. Statistically, it's still supported that the fourth year is actually OK, although we'll see. But there's three things that I'm really excited about for 26. First is profits and profitability. If you look at both public and private companies, and you look at their earnings capabilities and their earning power for 26, it is quite substantial.
You're starting to see expectations being met with actual real profits. So I'm very excited about the health of corporate America going into 2026. I also think that from-- you mentioned the Fed, but from a policy standpoint, things are setting up to be more tailwinds than headwinds. And so again, I feel like that is setting up for a very positive market.
And then final is positioning. If you look at the markets, and you see how active retail investors have been as well as institutional investors-- you've seen how much money has flown into the equity markets. I feel like we are in a great position for both new issues-- so the health of IPOs and follow-ons for those to be quite successful in '26, as well as the positioning of both institutional and retail accounts. And so it feels like I don't want to say the stars are aligning because that may be too optimistic, but it feels like '26 could be a really good year.
So if we pull that thesis and we move it back into private markets-- because again, my compliance partners will be upset if I don't guide to past performance is not always a future indicator on a go forward. But I think what's interesting is we're also of, I think, primed for an interesting opportunity in private markets. If you pull that thesis through of more favorable environment in public markets, what does that mean for private market investing? And then maybe we pull in software very specifically right around what the entry point might look like.
So from a private positioning standpoint, I think all three of those characteristics play in. I think it's very similar. I think that you're in an environment where it feels like deals are going to get done and people want to do deals, and that's very healthy. You're also at a time period, where people want to deploy capital for innovation and for these modern AI opportunities, for this margin efficiency.
So from a private perspective, I think all three of those still apply. And I think, again, to your point, past performance doesn't necessarily present future performance. But all of those themes in years where we've had all of those themes at play, they've been very good years, both for the public and private markets.
And then for software in particular-- I mean, we've talked about the waves. We've talked about money being deployed. We saw the valuations of public markets. I think that this is just such a unique moment in time for software and for the application layer.
I think we are at the early phases of application valuation, creation, really being deployed. And as I mentioned earlier, it's not going to be a straight line. It's going to be fits and starts, but I do think '26 is going to be the year that you start seeing real proof points. You start seeing real data. You start seeing metrics. Maybe it'll be revenue per head, or maybe it will be retention rates. But you're going to see real metrics show you how AI is positively impacting these corporations.
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Text: Agentic AI presents massive opportunity to accelerate growth by shifting mix of labor and IT expense. Agents address larger markets than traditional software. A bar graph shows two bars. The first bar, the large bottom section is labeled, US Enterprise Spend, % of GDP about 20%. The thin section at the top is labeled, about 300 to 350 billion dollars. The second bar has a bottom section of the same height as the first, but labeled US White Collar Payroll, % of GDP about 20%. The second bar has a tall top section, taller than the two bottom sections, labeled about 6,000 billion dollars.
(SPEECH)
And I think even more so that takes us perfectly to chart five, where I'd love for everyone to just spend a moment to absorb this. And maybe you talk us through it. But when we think about the shift, the mix, whether it's labor costs, whether it's IT expense-- bringing it into, again, a healthy corporate America but also having this interesting opportunity to invest on the private side, you just see an acceleration of growth that again, I think, presents a really compelling opportunity.
Completely. Spot on. When you talk to enterprise software CEOs and CFOs, and you ask them what are you most focused on bringing to your clients in 2026? It's really predicated around this efficiency layer. That I am the mission. I provide a mission critical service to my customers.
Is there a way I can do it in a gentrified fashion, where I have instead of a human being, who can be unreliable, who needs to sleep, who needs to eat, who needs to just not be there 24/7 for you actually be there for you 24/7? And can I then redeploy that human to create another solution set, or another product, or another something that then further services whatever the mission critical problem is that I'm addressing? So I think that you're going to start seeing this play out. I mentioned revenue per head. It's not because corporations want to run with less people employed, but they want the employees they have to be more efficient.
And happier. I think there's this idea that if I can remove-- to your earlier point-- just some of the business as usual, that BAU work, where I'm not actually being that productive, or using my brain, or my strategic, or creative skills that I think I may have, we can identify and bring in agents or assistants, if you will, through this software. And again, just all have happier Monday through Fridays, which I think is a pretty compelling point.
The last thing I would love for you to touch on is, what are you most excited about? Is there a vertical within software? Because now we think about software as a horizontal, right, not a vertical. It's not just one sector. It spans everything from insurance and financial services and beyond. I think one of the things we've seen most predominantly is accounting has been transformed by software over the past decade-- more to come. Enterprise software more broadly touches every aspect-- automation, manufacturing, everything. So talk to us a little bit about what you might be most excited about.
Well, I mean, I love all my children equally. So to be clear, I think every sector has really exciting aspects to it. I think for 2026 what I'm most excited about, both on the private and the public side for software, is this layer, which we call the infrastructure layer, but it's the layer that is helping bring all these workflows and this data to the cloud, which is what you need if you're going to deploy AI or create an agent.
You need all of that information readily accessible for your large language model to actually deploy. So it's an area that I'm watching acutely because I think it's going to be the first mover advantage or first leader advantage as far as showing how adaptable this technology is for broad spectrums across all the different sectors.
And then, obviously, cybersecurity is a really easy one because as you think about AI and tech becoming more pervasive in our everyday lives, the surface area that you need to defend against or prevent attacks from, obviously, grows. And so that's an area that's going to need to evolve faster and quicker and will continue to always be in high demand. So those two sectors are definitely sectors that I am watching as the leading indicators of adaptable-- of this technology being adopted but also the success of that adoption.
Awesome. Well, we heard it here first. Ashley, thank you so much for your time today. This was great.
Great. Thank you.
For everyone who joined us, we appreciate your time. Hopefully, we left you all a little bit smarter, or at least with something interesting to talk about in your next conversation. We're excited about the opportunity set in private markets on a go forward, and we're wishing everyone a happy New Year. We'll be back next month with more conversation, just more broadly, across the private equity spectrum, compelling sector exposure across health care, industrials, manufacturing, technology, so on and so forth. So more to come, but thanks to all for joining us.
Thank you for joining us. Prior to making financial or investment decisions, you should speak with a qualified professional in your JP Morgan team. This concludes today's webcast. You may now disconnect.
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Logo: J.P. Morgan. Text: KEY RISKS OF INVESTING IN ALTERNATIVES. Limited liquidity for private equity. Investments in private equity funds are intended for long-term investors who have the financial ability and willingness to accept the risks associated with making speculative and primarily illiquid investments. Interests in the private equity funds are generally not redeemable. An investor in such a fund may not freely transfer, assign or sell any interest without the prior written consent of the fund manager. An investor may not, save in particular circumstances, withdraw from a private equity fund. Interests In private equity funds will not be registered under the U.S. Securities Act of 1933, as amended or any other securities laws in any jurisdiction. There is no liquid market for such interests and none is expected to develop. Consequently, a commitment may be difficult to sell or realize. Limited liquidity generally. Interests are not publicly listed or traded on an exchange or automated quotation system. There is not a secondary market for Interests, and as a result, invested capital is less accessible than that of traditional asset classes. Also, withdrawals and transfers are generally restricted. Potential conflicts of interest. Investors should be aware that there will be occasions when a private equity fund's general partner and its officers and affiliates may encounter potential conflicts of interest in connection with the fund. Fund professionals may work on other matters and, therefore, conflicts may arise in the allocation of management resources. The payment of carried interest to the general partner may create an incentive for the general partner to cause the private equity fund to make riskier or more speculative investments than it would in the absence of such incentive.
Alternative Investing | 26 minute watch | Published January 13, 2026
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