Luke Sophinos: VCs are acquiring traditional companies and rebuilding with AI
Luke Sophinos pointed out that in the past 24 months, VCs have been directly acquiring traditional companies and rebuilding them with AI, rather than selling them software.
General Catalyst acquired an accounting firm, Thrive established a holding company to operate service businesses, and Elad Gil integrated law firms, aiming to increase gross margins from 10% to 40%.
This trend represents a shift in event-driven capital strategy, strengthening market focus on AI operational arbitrage, benefiting vertical service integration targets, while pressuring traditional PE high-valuation software acquisition paths.
Source: Public information
ABAB AI Insight
In the past two years, venture capital firms have shifted from selling software to directly acquiring service-oriented enterprises. Historical paths show that General Catalyst, Thrive, and Elad Gil have initiated integrations in industries like accounting and law, where software penetration has lagged, using internal AI transformation instead of external tool sales.
On the capital path, VCs leverage equity control to accelerate workflow reconstruction and retain cash flow, motivated by bypassing sales friction to achieve gross margin leaps, with resources shifting from SaaS tool investments to operational asset ownership.
Similar cases can be seen in early PE leveraged buyouts of software companies and the current reverse operations of VCs in the service industry; we are currently in a phase where AI is internalizing in service areas that cannot be fully automated by software, with the industry's position shifting from tool providers to asset operators.
Essentially, this represents a transfer of pricing power. Owning assets captures the value of AI transformation better than selling tools, leading capital to shift from software premiums to service operational arbitrage, accelerating ownership restructuring in traditional service industries.
ABAB News · Cognitive Law
- Owning assets transforms faster than selling tools
- The service industry becomes the main arena for AI operational arbitrage
- Gross margin leaps determine capital flow