Early AI Investor Elad Gil Bets on AI-Powered Rollups

Elad Gil, known for his early investments in AI companies like Perplexity, Character.AI, and Harvey, is now focusing on AI-powered rollups. He aims to transform traditional businesses by integrating AI to improve margins and scale operations through acquisitions.

Gil’s strategy involves identifying mature, people-intensive businesses such as law firms and professional services firms. By implementing AI to automate repetitive tasks, he believes these businesses can dramatically increase their margins. This enhanced profitability then allows for the acquisition of similar enterprises, creating a roll-up effect.

“This type of generative AI is very good at understanding language, manipulating language, manipulating text, producing text,” Gil explained. He sees applications in coding, sales outreach, back-office processes, and more. By converting repetitive tasks into software, businesses can achieve significant margin improvements.

Owning the assets outright is crucial for rapid transformation. “If you own the asset, you can [transform it] much more rapidly than if you’re just selling software as a vendor,” Gil noted. The substantial increase in gross margin, from 10% to 40%, provides the leverage to acquire other companies at competitive prices.

Gil has already invested in two companies pursuing this strategy. One of them is Enam Co., a one-year-old company focused on worker productivity, valued at over $300 million by investors like Andreessen Horowitz and OpenAI’s Startup Fund. Enam Co. aims to enhance productivity through AI-driven solutions.

According to Gil, this approach marks a significant departure from previous technology-enabled roll-ups. “There used to be these technology-enabled roll-ups 10 years ago, and most of them kind of ended up being not really that much of a user of technology,” he said. “I think in the case of AI, you can actually radically change the cost structure of these things.”

Finding the right team is a challenge. Gil seeks a combination of strong technologists and individuals experienced in private equity. He has met with numerous teams but emphasizes the need for a cohesive and well-sorted group.

Copycats also pose a potential challenge. As more firms, including Khosla Ventures, explore AI roll-ups, Gil may face increased competition. Khosla Ventures is among the VCs experimenting with AI-infused roll-ups of mature companies.

Gil’s passion for technology and progress drives his investment strategy. He and his team actively experiment with AI front-end companies, constantly evaluating their performance and tooling.

This hands-on approach has allowed Gil to identify clear winners in specific markets. “I feel like in the last couple months – maybe the last two quarters – a subset of markets have really crystallized,” he said. Legal, healthcare, and customer success are among the sectors where leading companies are emerging.

Examples of Gil’s AI investments include Harvey, which develops large language models for law firms; Abridge, a healthcare AI company focused on improving clinical documentation; and Sierra AI, which helps companies implement AI agents for customer service. Harvey is reportedly in talks to raise new funding at a $5 billion valuation. Abridge completed a $250 million Series D round co-led by Gil in February.

While acknowledging the progress made, Gil emphasizes that the AI landscape is still evolving. He sees this period as an exciting time of significant change, with endless opportunities for innovation.