Elad Gil, a seasoned venture capitalist, has been a trailblazer in the AI space, backing startups like Perplexity, Character.AI, and Harvey before the technology gained mainstream traction. Now, Gil is setting his sights on a novel opportunity: leveraging AI to reinvent and scale traditional businesses through roll-ups. This strategy involves acquiring mature, people-intensive businesses such as law firms and professional services firms, scaling them using AI, and then using the improved margins to acquire other similar businesses and repeat the process.

Gil's approach is grounded in the belief that generative AI excels at understanding, manipulating, and producing text across various mediums, including audio, video, coding, sales outreach, and back-office processes. By transforming repetitive tasks into software, he argues that business margins can be significantly increased, leading to the creation of entirely new types of businesses.

The math behind this strategy is particularly compelling for those who own the business outright. Gil explains that by increasing a company's gross margin from 10% to 40%, one can buy other companies at a higher price than competitors, thanks to the increased cash flow per business and leverage. This enables roll-ups in ways that others cannot.

So far, Gil has backed two companies pursuing this strategy, including Enam Co., a one-year-old company focused on worker productivity, valued at over $300 million by its backers, including Andreessen Horowitz and OpenAI's Startup Fund.

While Gil cannot discuss specifics of private deals, he suggests that this approach represents something new. Unlike technology-enabled roll-ups from a decade ago that used technology as a thin veneer to increase valuation, AI can radically change the cost structure of businesses.

Gil has famously backed big brands like Airbnb, Coinbase, and Stripe, which have produced riches for their backers. However, the challenge with roll-ups lies in finding the right team composition, ideally including a strong technologist and someone with private equity expertise. Gil has met "maybe two dozen of these teams" so far and mostly looked past them, not because they "weren't amazing" but because "they still need to sort some things out."

With deep relationships across Silicon Valley, Gil may find himself competing more aggressively with firms like Khosla Ventures as they weigh whether to pursue such deals.

Gil's ability to spot trends earlier than most stems from his love for technology, progress, and engagement with people working on important, interesting things, as well as the technology itself. This hands-on approach has allowed him to see clear winners emerging in the AI market after years of uncertainty.

In legal, healthcare, customer success, and support, Gil believes the main winners are becoming apparent, including his own portfolio companies. Among these bets are Harvey, which develops large language models for law firms and in-house legal teams, Abridge, a healthcare AI company, and Sierra AI, which helps companies implement AI agents for customer service.

While Gil is careful not to declare the game over, he notes that the map of likely winners is solidifying. This moment represents more than just another investment cycle to him. Being at the intersection of two transformations – betting on the future of AI and how AI will reshape everything else – is "very exciting."

In conclusion, Elad Gil's visionary approach to using AI to reinvent and scale traditional businesses through roll-ups has the potential to revolutionize entire industries. By identifying and backing the right teams and technologies, Gil is poised to create a new era of business growth and transformation.