When looking at private equity, innovation is an important factor driving opportunities for institutional investors, said Orlando González, investment director of private equity at T. Rowe Price Investment Management.
Speaking during a session at the Canadian Investment Review’s 2025 Alternative Investment Conference, he provided a snapshot of some of the unicorns in this space over the last 30 years, companies that stayed private for longer to scale to a much more significant size. “Instead of going public as small caps, many of the industry leaders are really scaling up to be large cap, even mega cap companies, before they pursue a public market exit.”
While markets may ebb and flow, noted González, the pace of innovation is continuing to accelerate, with many of the great companies created during the most challenging economic periods. Referring to a recent investment, he shared a case study of Ramp, a fintech company founded in 2019, that’s accelerating revenue growth by plugging artificial intelligence into its processes.
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“While there’s a lot of hype around AI, we’ve seen the execution and application and real revenue growth that’s been generated in this company because of that technology. In five years, the company has gone from zero to more than 40,000 customers [and] from zero to a run rate of more than $750 million in annual revenue.”
It’s an example of an innovative company on the private equity landscape, said González, pointing to generative AI as the most significant technology since the creation of the internet. “It’s leading to the scaling of new companies very quickly. It’s leading to the creation of new sectors.”
However, he also cautioned that periods of intense innovation often create potential bubbles and recommended that investors be cautious. “Being cautious doesn’t mean staying on the sidelines; it means doing very deep, thoughtful research and figuring out where you can separate potential winners from where there might be more speculative risk.”
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In terms of opportunities, González also highlighted space technology, robotics and autonomous vehicles, noting the continued innovation and growth in this space. He also pointed to data infrastructure, especially as it relates to AI. “The amount of infrastructure that the explosion in AI is going to require is enormous.”
Referring to a recent report by the Massachusetts Institute of Technology, he said 95 per cent of investments in AI haven’t generated any returns for companies, but he noted the capital expenditure is enormous. “If you look at the hyper-scalers, so the Amazon, Google, Meta and Microsoft, in 2023, they spent just shy of $150 billion. I think it was $147 billion on CapEx related to AI internally within their own companies. This year they’re on track to spend north of $325 billion.”
While there’s certainly AI hype and speculation that it isn’t delivering real returns, González said he expects AI will continue to be a very important part of the market, economy and society going forward.
Read more coverage of the 2025 Alternative Investment Conference.