Most PE firms think they’re further along than they are. While surveys show 82% claim to be “using AI,” the reality breaks down differently when you map actual capabilities. Based on observed patterns across the industry:

Stage 1: Experimentation (~60% of firms) ChatGPT for drafting emails. Excel macros with API calls. One-off automations that never scale. Partners excited about demos that never become tools. This is where most firms live—and where they stay.

Stage 2: Tool Adoption (~25% of firms) Licensed seats for Copilot or Claude. Deal teams using AI for document review. Some standardized workflows. Real time savings on repetitive tasks. But still no systematic approach—just individuals getting more efficient.

Stage 3: Process Integration (~10% of firms) AI built into core workflows. Automated first-pass due diligence. Portfolio company performance dashboards that actually update. Custom tools for specific firm needs. This is where ROI becomes measurable.

Stage 4: Strategic Capability (~5% of firms) AI as a lens for evaluating deals. Dedicated team building firm-specific models. Proprietary data advantages. The ability to spot which targets have untapped AI potential. These firms don’t just use AI—they think in AI.

The jump from Stage 2 to Stage 3 is where most firms stall. It requires moving from “let people use tools” to “redesign how we work.” That means someone has to own it, budget has to support it, and partners have to believe the juice is worth the squeeze.

Here’s the tell: Stage 1-2 firms talk about AI in terms of efficiency. Stage 3-4 firms talk about AI in terms of capability—what they can do now that they couldn’t before. Like automatically flagging covenant risks across 500 pages of loan docs, or predicting which portfolio companies will miss their quarters based on early signals.

The path forward isn’t complicated: Pick one high-value process. Build it right. Prove the ROI. Then expand. Most firms try to boil the ocean and end up with lukewarm water.