This is a strategy shift in the way investing is being done I wanted to note… as the story has appeared in three versions in my feed.
Venture capital’s series progression is stalling at the seed stage, according to new data released by Carta. In the first quarter of 2024, 46% of all seed deals were classified as bridge rounds, marking the highest rate for any stage that Carta has tracked. The decline in traditional funding rounds is attributed to market volatility, which is prompting startups to delay new priced rounds until they have clearer valuation expectations. Notably, the number of Series A deals fell by 79% from the first quarter of 2022 to the first quarter of 2025. This stagnation at the seed stage could impact return on investment expectations for later stages, particularly affecting limited partners who invest in Series A or Series B-focused funds.
TechCrunch reporting solo investor Elad Gil, an early investor in artificial intelligence, is now focusing on a new investment strategy that leverages AI to transform traditional businesses through what are known as roll-ups. Gil aims to acquire established, service-oriented companies, such as law firms, and enhance their operations using AI to significantly improve profit margins. Over the past three years, Gil has already supported two companies pursuing this model, one of which is Enam Company, valued at over $300 million. He notes that while roll-ups utilizing technology have been attempted in the past, they often lacked genuine technological integration. Gil believes that advancements in artificial intelligence can radically alter the cost structures of these businesses, allowing for increased cash flow and more aggressive acquisition strategies. He remains optimistic about the evolving landscape of AI and its potential to reshape various industries, particularly in sectors like legal and healthcare.
And Khosla Ventures is exploring a new investment strategy by acquiring mature businesses and enhancing them with artificial intelligence to optimize operations and expand customer reach. This approach, similar to private equity roll-ups, has already attracted attention from other firms like General Catalyst, which has invested in seven such companies, including Long Lake, which focuses on managing homeowners associations. Samir Kaul, a general partner at Khosla Ventures, indicated that while they are cautious, the firm sees potential in marrying established companies with new technology to benefit both parties. This strategy may help artificial intelligence startups gain immediate access to large, established clients, addressing the challenges many face in securing customers. Khosla Ventures aims to conduct a few deals to evaluate the returns on this investment model before potentially expanding its efforts.
Why do we care?
There’s a quiet but foundational shift happening in how capital flows into technology and service businesses—and it’s not the usual VC narrative. The stalling of venture capital progression at the seed stage and the emergence of AI-powered roll-up strategies signal a profound reordering of where the perceived value lies. And for IT services firms, this could reshape competition, valuation, and even exit strategies.
Carta’s data is stark: nearly half of all seed deals are now bridge rounds, and Series A deals are down 79% since Q1 2022. The classic startup progression—Seed → Series A → B → Exit—is no longer reliable. Valuation uncertainty and exit environment pessimism have made growth-stage capital scarce and expensive.
What Elad Gil, Khosla Ventures, and others are doing isn’t new in structure—it’s a classic private equity roll-up. What is new is the core thesis: using AI to radically shift operating margins, not just drive revenue through scale. Traditional roll-ups leaned on financial engineering and operational discipline.
These new AI roll-ups focus on cost transformation through tech integration—especially in people-heavy industries like legal, healthcare, or managed services. It’s not about digitizing workflows, it’s about replacing workflows entirely using AI.
This is a strategic realignment of capital and capability. Investors are signaling they no longer want to wait years for seed-stage AI startups to mature. Instead, they’re buying profitable businesses now and applying AI to them immediately.
For IT service firms, this is both a warning and an opportunity. If you’re not already considering how AI reshapes your margins, service delivery, and scalability—you’re leaving value on the table. Meanwhile, someone else may be preparing to extract it.