$5T opportunity: AI Roll Ups

Greg Isenberg (0:00)

Over the next 10 years, there's gonna be millions of small businesses that are gonna get sold because their owners are retiring. We're talking about $5 trillion worth of these businesses. Now, some of the biggest investors in the world, like Thrive and General Catalyst, are already buying them up, and they're using AI agents to make them way more profitable. Now, most people think that billion dollar funds can only do that, and there's just no room for solo founders or small teams. I don't. I think there's a huge opportunity here for solo founders, and almost nobody's talking about it. I posted about it on X yesterday, and it got over a million impressions. The funniest part was that my DMs and replies were filled with people messaging me to stop talking about it publicly, because they think there's so much alpha in this. So obviously, I'm making a whole episode of the podcast about this, and you're listening to it. If you stick around until the end, you'll learn three things. You'll learn why this is happening right now, and how Thrive and General Catalyst are actually doing it. You'll see exactly how I'd run one as a solo founder, down to the folders, the agent files, and what my average week would look like. And you'll hear the biggest arguments against this, including the one I take most seriously. I had hundreds of tweets of people who were like, yeah, here's what's wrong, and I speak to those arguments. If you're new here, I'm Greg Isenberg. I run a holding company of my own. I host The Startup Ideas Podcast, and I spend most of my time thinking about which kind of businesses are worth building right now. If this episode gets 5,000 likes, comments, subscribes, I'll give away more of my notes on this whole topic. It'll be in the pinned comment. Now let's get into the episode.

So why is this $5 trillion shift happening right now? And why is there an opportunity? I think three things happen at the same time. And when that happens, you usually get a new kind of business. The first thing is owners are retiring. So that $5 trillion number actually comes from McKinsey. And they expect about a million of those businesses to actually sell by 2035 These are people who started an accounting practice or an insurance agency or property management company. Maybe it's the 80s or in the 90s, but they built this loyal client base over 30 years and now they want to retire. Maybe their family doesn't want to get into the business. They don't have people lined up to take it over. Their kids went off and did something else and their employees usually don't want to run the whole thing. The second point is AI can do the work now. I don't think I could have said this eight months ago, but I'm saying it now. Think about what happens inside those businesses all day. Someone types numbers from a PDF into a spreadsheet and someone chases a client from the same missing document for the third time. Someone writes the same status update like 50 times a week. Not long ago, if you pointed AI at that work, you got a rough draft and someone had to redo it and it was like hallucinating all the time. Now, if you set it up correctly, you get a draft that somebody checks. And I'm getting to the point, I don't know about you, but I'm getting to the point where I can trust my AI agents and my AI agent systems sometimes way more than my human beings. Like my human beings on my team are making more mistakes than my AI agents. The third piece is service businesses are priced like their margins are stuck. So a normal service firm runs at five to 10% profit, something like that. And everyone assumes that it'll just sort of stay that way because that's been that way for the last 30 years. And that's how buyers value those businesses. But when you put all three points together, you get a huge wave of businesses about to change owners, full of the exact kind of work agents are good at, and priced as if nothing about them can change. And I think that's one of the biggest opportunities about right now. So yes, people have talked about boomers and the $5 trillion number I've seen before, but they haven't, but they've talked about it in the sense of like, okay, I'm going to buy this company, and then maybe I'll optimize it a little bit.

The Black Swan is the AI agents are actually really, really good right now. So I think that the funds, the big funds have figured this out first. So let me tell you exactly what they're doing. Let's learn from them.