Elad Gil Bets on AI-Powered Rollups

Elad Gil has a knack for spotting tech trends before they go mainstream. While many investors were still grappling with the implications of AI, Gil was already backing startups like Perplexity, Character.Ari, and Harvey. Now, the influential investor is shifting focus to a new opportunity: AI-powered rollups that transform traditional businesses.

The AI Rollup Strategy

Gil’s approach involves acquiring established professional service firms (like law practices) and using AI to streamline their operations. The improved efficiency creates higher margins, which then funds additional acquisitions. “It’s about converting repetitive tasks into software,” Gil explains. “This creates businesses with fundamentally different economics.”

The math is compelling – transforming a company from 10% to 40% margins provides significant financial leverage for expansion. “You can acquire competitors at higher valuations because your cash flow supports it,” Gil notes.

Current Investments

Gil has already backed several companies pursuing this model:

• Enam Co. (worker productivity, $300M+ valuation)
• Harvey (legal AI, potential $5B valuation)
• Abridge (healthcare documentation, raised $250M Series D)
• Sierra AI (customer service automation)

Why This Works Now

Gil emphasizes that today’s AI capabilities make this approach viable in ways previous tech rollups weren’t. “Earlier attempts just put a tech veneer on traditional businesses. AI actually transforms cost structures.” He points to generative AI’s ability to understand and manipulate language across text, audio, video, and code.

The key challenge is finding the right leadership mix – strong technologists paired with private equity expertise. “I’ve seen maybe two dozen teams,” Gil says. “Most need refinement before they can execute this model.”

Looking Ahead

While competition is emerging (including from firms like Khoshla Ventures), Gil remains confident. “In legal, healthcare, and customer support, we’re seeing clear winners emerge.” He describes this as an exciting moment where AI is reshaping entire industries.

For Gil, this goes beyond investment strategy. “It’s about being at the intersection of two transformations – AI’s evolution and its impact on everything else.”

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