Leverage matters just as much as value creation

Right now, everything feels inflated. Prices, egos, valuations. I'm in college and my problems often feel like the world's problems. Growing up through many different socioeconomic environments shaped how I see the economy, and my perspective on it shifts every day.

I keep seeing big numbers everywhere, specifically on LinkedIn, where growth seems to be happening at an unimaginable scale. Most of the time, it's simply not real. There's a fragility in the system that's hard to ignore. So much of our world is built on debt: the debt ceiling, private debt, personal debt. We're indebted at every level and in every context, and nobody seems to ask why.

If you look into the private markets specifically, you'll see odd patterns. Huge funds that can't exit, investors recycling the same money between each other just to show movement, everybody smiling for the camera. So much of it is illusory.

I've always had too many interests. It's easier to name things I'm not interested in (chemistry, for one). For a long time, traditional private equity seemed like a logical career step. It's structured, ambitious, and respected. But after spending time looking at it more carefully, I've realized the industry doesn't represent what it used to. It's not about ownership or growth anymore. It's about exits, debt, and turning something alive into a spreadsheet and calling it value.

That thought sat with me, and it's why I'm writing this. For years, private equity was the endgame for people who wanted to build wealth through creation. Now it looks like a machine running out of purpose. I don't know when or how, but the traditional model of heavy-debt buyouts feels increasingly unsustainable. Maybe collapse is too strong a word for a six trillion dollar industry, but the parts that focus on real value creation, especially growth equity and expanding industries like AI, are funding something that can actually scale.

Private equity is dying because they're lying

That heading is deliberately strong, but the biggest lie in private equity right now is that it's still about building. Buy a company, make it better, create jobs, improve operations, exit when the time is right. That's the story people tell because it sounds noble. If you look at what's actually happening, the motive has shifted completely toward exiting.

Private equity made sense when interest rates were low and debt was cheap. You could buy a company, stack it with leverage, make a few tweaks, and sell it for more. That worked for years because money was essentially free. The cost of capital is higher now, though, and the math doesn't hold the way it used to. Interest payments eat into cash flow, and nobody wants to buy a business buried in debt.

The second problem is exits. The IPO window is mostly closed, strategic buyers are cautious, and secondary buyers are overloaded with their own portfolios. Firms start selling companies to themselves through continuation funds, which gives the appearance of activity but isn't real liquidity. It's recycling the same capital and calling it growth, and a lot of investors see through it.

Many firms are holding assets longer than ever. The average hold time used to be four or five years; now it's closer to seven or eight. That doesn't happen because they suddenly care about building value. It happens because they can't find anyone to take the company off their hands.

The returns aren't what they were either. Many studies have shown that private equity, after fees and leverage, performs about the same as public markets. Investors are paying for access to a club that doesn't generate much extra, and the outperformance story is falling apart.

Instead of rethinking the model, many firms have doubled down on the same playbook, raising larger funds, layering more debt, chasing even bigger exits. I think that's denial. Firms don't want to admit the cycle is broken, because what good does that do them?

Here are some of the numbers I came across:

• Global PE fundraising fell 24% in 2024, to about $589 billion.
• The average fund now takes nearly 22 months to close, by far the longest time on record.
• Exit activity dropped hard. The number of exits in Q2 2025 hit a three-year low at only 314 deals.
• The average hold time is now almost six years, the longest it's ever been.
• There's about $1.2 trillion in unspent capital sitting around, and a quarter of it hasn't been deployed for more than four years.
• Continuation funds made up nearly 20% of all exits this year.
• Across the US and Europe, about $380 billion in buyout debt had to be refinanced in 2024, up 80% year over year.

The entire industry won't vanish. There's too much money tied into it for that. But the version built on financial engineering and constant flipping feels like it's running on borrowed time.

Why growth approaches might still work

The only part of private markets that still makes sense to me is growth. Growth equity sits between private equity and venture capital. It's not gambling on ideas, and it's not milking cash cows either. The difference matters because growth investors actually need companies to expand, not just survive long enough to sell.

Where the money is still flowing, it's mostly in sectors that are genuinely growing: AI infrastructure, healthcare technology, energy transition, and financial infrastructure. The demand exists, the markets are expanding, and the businesses have real paths to scale rather than just extracting what's already there.

What makes growth equity interesting is that it still values building. You can't just lever a company to the brim and hope for a multiple expansion. You actually need product-market fit, revenue growth, and operating leverage. That forces investors to think like builders again, and it brings accountability back. The company either grows or it doesn't.

The best growth investors I've noticed are hands-on in a different way. They don't try to "fix" a business the way traditional PE does. They try to refine it, helping with hiring, product strategy, pricing, and go-to-market motion. When done right, they build real equity value.

Growth equity isn't immune, of course. If the broader economy slows, valuations will still compress. But these firms are investing in companies that can compound, not just get flipped. They aren't restructuring and firing people en masse. They actually care about the company, and that's what financial investment should look like. Growth investors tend to come from operating or product backgrounds more than from traditional banking, which changes how they think about customers, retention, and unit economics rather than just debt ratios and exit multiples.

Traditional PE will fade in parts, but growth approaches will stay relevant. They're closer to the original purpose of investing. A smaller, slower path to wealth, but a real one.

More personal thoughts

All these numbers we see day-to-day are just reflections of belief. When people believe in something, prices rise; when they stop, everything slows down. For a while, private equity was built on the belief that returns could always be engineered, that money itself could manufacture value. That belief is fading.

Investors are starting to run out of things to convince each other of. The markets are heavy and the optimism feels borrowed. Nobody wants to admit that the math doesn't work anymore, that the debt is too high, that growth can't just be written into a model. You can only flip so many companies before you realize you're trading paper, not progress.

Investing, in its simplest form, should mean backing something that deserves to exist. Somewhere along the way, that got replaced by backing whatever could be exited. The fastest money might have killed the patience that made the best money, and it's the conviction that's dying, not the capital.

I know I'll end up doing some kind of investing when I grow up. I enjoy it too much not to. Whether as an angel, a partner, or just managing my own portfolio, I need to remember that capital shouldn't just be thrown around. Leverage can make you wealthy, but it can also make you blind. If I ever start to forget what value means, I'll probably just be another part of the problem.

I should also say that all of this is just what I've gathered from reading, thinking, and trying to make sense of the data. I'm a nineteen year old who has never sat on an investment committee or managed a portfolio of companies, so there's a real chance I'm wrong. I might just be another college student piecing together headlines and pretending it forms a thesis. Even if my interpretations are naive, at least they're honest.

Private money isn't dead. It won't ever be. It's just lost the plot. Maybe I'll be part of the reason it finds a new one.