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Taking AI Risk Off The Table

Taking AI Risk Off The Table

Peter Troost, Managing Director, CTO, PSG

The biggest risk of artificial intelligence? We believe it’s ignoring it.

AI has been around for a long time, but the release of ChatGPT and other pre-trained large language models over the last year have driven a dramatic advancement in both effectiveness and ease of adoption. These pre-trained large language models are also improving at an exponential rate – when ChatGPT was first introduced in November 2022, according to HIX.AI, the model supported 117 million parameters. Now in its fourth and latest iteration, HIX.AI has found that ChatGPT supports more than 100 trillion parameters.[1] We believe this added sophistication has drastically increased the technology’s potential applications for the average business, and those that aren’t figuring out how to leverage AI to their advantage will be left behind.

At PSG, we’ve adopted the philosophy that a rising tide lifts all boats. It is our priority to take lessons learned across the portfolio and rapidly disseminate them to improve all our portfolio companies. We want to help ensure our portfolio companies are on the leading edge of the adoption curve, capturing cost savings and productivity gains to protect and extend their competitive advantage in the market. To accomplish that goal, we’ve adopted a robust and collaborative model of education and information sharing with our portfolio companies. We have leaders within PSG and our portfolio company network presenting how they’re using AI in their business. We’ve identified key use cases and commercial solutions and are developing playbooks and how-to guides for our portfolio companies to put AI into action. We have dedicated ourselves to staying current on the huge number of solutions in the market and the latest advancements in AI.

This approach helps empower our portfolio companies to make strides in adopting AI, and we’re already seeing the benefits: today, based on regular updates we receive from our portfolio, 82 percent of our portfolio companies are incorporating AI into their processes, compared to 39 percent same time last year. Software development, customer service, predictive analytics and business communication have been the top areas of growth, and we’re seeing our portfolio companies thread AI throughout their operations in really creative ways.

Thanks to this network-based education approach, we believe the whole PSG portfolio is benefiting from AI lessons learned at each portfolio company. We also want to share what we’re learning with you, so stay tuned for stories about portfolio companies that are discovering AI opportunities and adopting them in ways that you wouldn’t expect. You won’t want to ignore what they’re exploring and discovering.

Peter Troost is the Chief Technology Officer at PSG Equity L.L.C.

[1] HIX.AI, “GPT-4 Parameters Explained,” Dec. 26, 2023.

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Disclaimer: The information contained herein is as of March 18th, 2024, is for informational purposes only and is not, and may not be relied on in any manner as, professional, tax, accounting, legal, ERISA or financial advice, or as an offer to sell or a solicitation of an offer to buy an interest in any strategy, fund, investment vehicle, or account managed by PSG Equity L.L.C. (together with its affiliates, “PSG”). No information contained herein shall constitute a recommendation or endorsement of any securities and any references to any securities or portfolio companies should not be used as the basis for making any decision about purchasing, holding or selling any securities or investments.

Certain information contained herein constitutes forward-looking statements. Due to various risks and uncertainties, actual events or results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements which only speak as of the date they are made. As a result, readers should not rely on such forward-looking statements.

Certain information contained herein has been obtained from published and non-published sources, and has not been independently verified by PSG, which does not assume responsibility for the accuracy of such information. Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof.

There can be no assurance that PSG portfolio companies will be able to effectively implement AI technologies or tools, or that doing so will not pose material risks to such businesses. A portfolio company’s ability to use, manage and aggregate data may be limited by the effectiveness of its policies, systems and practices that govern how data is acquired, validated, used, stored, protected, processed and shared. Failure to manage data effectively and to aggregate data in an accurate and timely manner may limit a portfolio company’s ability to manage current and emerging risks, as well as to manage changing business needs and adapt to the use of new tools, including AI. Use of AI technologies and tools poses additional risks relating to the protection of portfolio companies’ proprietary data, including the potential exposure of portfolio companies’ confidential information to unauthorized recipients and the misuse of intellectual property, which could adversely affect PSG, its funds or portfolio companies. Use of AI tools may result in allegations or claims against PSG, its funds or portfolio companies related to violation of third-party intellectual property rights, unauthorized access to or use of proprietary information and failure to comply with open source software requirements. Additionally, AI tools may produce inaccurate, misleading or incomplete responses that could lead to errors in decision-making, portfolio management or other business activities, which could have a negative impact on PSG or on the performance of its fund and portfolio companies. AI tools could also be used against PSG, its funds or portfolio companies in criminal or negligent ways.

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