Elad Gil tries to reinvent traditional businesses by the use of AI. He has just come up with a new idea to bet on AI.
The idea is to find opportunities to purchase grown-up people-intensive firms, such as legal companies and other professional services firms, which would help them to grow through the use of AI. After this process, they would go to buy more of such businesses and keep a continuous cycle.
Elad Gil has more than 3 years of experience in this.
Elad Gil said this week over a Zoom call “This type of generative AI is very good at understanding language, manipulating language, manipulating text, producing text. And that’s audio, that’s video, that includes coding, sales outreach, and different back-office processes.”
He added, “You can increase the margins dramatically and create very different types of businesses.”
He continued, “If you own the asset, you can [transform it] much more rapidly than if you’re just selling software as a vendor. And because you take the gross margin of a company from, say, 10% to 40%, that’s a huge lift. Suddenly you can buy other companies at a higher price than anyone else because you have that increased cash flow per business; you have enormous leverage on the business on a relative basis, so you can do roll-ups in ways that others can’t.”
Elad Gil has backed 2 businesses so far by the use of this tactic. Enam Co, is a new productivity startup that has been valued at around $300 million by its investors and that has been for almost a year. Andreessen Horowitz and Open AI startup Fund are also included according to the info.
Elad Gil said he can’t talk about the details of the private deals, but he claimed that the strategy is new and unique. “It was kind of like a thin veneer painted on to increase the valuation of the company. I think in the case of AI, you can radically change the cost structure of these things.”
Gil is known for backing several well-known firms that have made their investors wealthy.
They include Airbnb and Coinbase which are now publicly traded as well as privately held Stripe, whose valuation has varied but as per the report, it settled around $91.5 billion this year at the time when its previous investors acquired more of its shares.
“There used to be these technology-enabled roll-ups 10 years ago, and most of them kind of ended up being not that much of a user of technology”.
Part of the challenge with roll-up locating the right team composition — ideally including a strong technologist along with someone who is “very sturdy in PE” — and “those matters don’t pass hand-in-hand,” Gil cited. He said he’s met “maybe two dozen of those groups” up to now and usually appeared beyond them, no longer because they “weren’t exceptional” however because “they nevertheless want to kind a few things out.”
Gil, who has deep relationships with firms across Silicon Valley, may also discover himself competing with those frequent collaborators, as a growing wide variety of them, like Khosla Ventures, bear in mind whether or not to pursue AI roll-americathemselves.
One senses that, both way, Gil isn’t in it for the money at this point if he ever became.
- Google Expands AI Features for Search and Introduces Enhanced “AI Mode” Shopping Option
- Apple Stock Dips as Trump Warns of 25% Tariff on Non-US iPhone Production
He says his capability to spot developments earlier than maximum comes rather from the coronary heart. “I love technology, and I love progress, and I love just engaging — both with people who are working on important, interesting things, but also the technology itself.”
