Elliot Katzman

I’ve spoken to over 2 dozen MDs at PE firms I can confidently say that the arb of figuring out how to implement Vertical AI at portfolio companies is very real right now It will fundamentally change underwriting for those who can do it predictably and unlock generational returns. Most are aware they need to act. Very few have.

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Layer is tackling one of the most overlooked pain points for SMBs: accounting. They’re gaining real traction doing so. Emergence is leading their seed round to bring embedded, AI-powered accounting to the SMB software stack. Kevin Spain highlights what makes this team and product so compelling. 

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😧It appears the public markets fear of AI has done a 180 - from fear of excessive investment to AI's ability to obliterate long incumbent software companies. I have a feeling we are going to hear the new riff "software is eating software" more times than the famous 2011 op-ed statement from Andreessen that "software is eating the world". Another 180 - long hardware, short (trad) software 🤯. AI infrastructure is literally eating memory. The global memory-ship shortage is expected to last another few years! 💽 Shout out to our pals at Inovia Capital for their State of Canadian Software Report. Thanks for the Miovision mention regarding the massive partnership potential for Canadian companies in the Middle East. 👉 https://lnkd.in/dyB8JkEh

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I agree with Lee McCabe here - operating partners are underused and, like many things (I see you, AI) are often more window dressing than value additive. To get the most out of these roles, I advise emerging managers: 1️⃣ Be clear on the FUNCTIONS of non-investment team members Are these individuals sounding boards, or specific-issue operators for portfolio companies? Do they sit on your IC, or only get pulled into portfolio companies as needed? Are they exclusive, or do you share their time? 2️⃣ Be clear on WHO those non-investment team members are providing value to If they provide value to you as the GP, consider making the function more of an "advisory council" where you're convening the group periodically to discuss origination, portfolio construction, firm evolution, political or industry interconnectivity. If they provide value to portfolio companies, make it clear how they are engaged, when, and for how long; these are often true operating partners. 3️⃣ Decide how those roles are remunerated, and whether they will commit to the fund or not Are they paid for by the fund, through a share of carry, or by portfolio companies? Are there common agreements, or each negotiated separately? Also - how much of the GP commitment do they represent, if at all? This is important as it relates to alignment. 4️⃣ Put a structure and process in place to properly integrate them Don't let someone discover the last time you spoke to X politician who serves as your operating partner was eight months ago. Put in place a plan to periodically consult with them on their specific areas, or have specific parts of your diligence process involve them. The best firms get this right and create structure around this.

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Most startups die trying to get what an existing business already has — Customers Cash flow Systems Brand trust Why start from zero when you can buy from momentum? Buy a business doing $500K–$2M in revenue. Leverage seller financing, SBA, or private capital. Keep the team, fix the margins, and scale. It’s not about being an entrepreneur anymore. It’s about being an acquirer. Startups are hope. Acquisitions are math. And math wins. 🦈

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Back to margin improvement: Front-loaded investment disrupted JDL's margin improvement in 2025, but we see a clear return to margin expansion in 2026-27 with moderated investment and improved efficiency. We expect JDL's net margin to improve from 3.6% in 2025 to 3.7% in 2026 and 3.8% in 2027, with identifiable drivers including earnings turnaround at Deppon, consolidation of on-demand delivery business and loss reduction in overseas business. We also see room for JDL to expand margins over the mid- to long term given its relatively higher cost vs. peers and dedication to tech investments.

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If you have a group of people at a #PE portfolio company all “kinda playing,” with #AI, it is not a strategy focused on an outcome. Think about the confusion if you have over 20 portfolio companies all with the similar approach.https://ow.ly/3ScQ50XGlKS

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The global professional services market (law, consulting, accounting, marketing, etc.) is worth over $6 trillion annually. It’s a massive white-collar sector, and AI-native firms are emerging to replace or radically reshape it. The end state is relatively clear: companies will interface directly with intelligent agents to get work done. But the path there is still uncertain, since the underlying tech isn’t yet robust enough to handle complex workflows end to end. Three main strategies to attacking this huge market are emerging: ⸻ 1. Sell to existing service firms (e.g., Harvey) Pro: Highest distribution; large firms already own the customer relationships Con: End customers will eventually prefer working directly with in-house agents instead of outside entities Harvey provides AI tools for major law firms, augmenting workflows like contract analysis, drafting, and legal research. ⸻ 2. Build an AI-native service firm (e.g., Crosby) Pro: Best long-term product experience, fully designed around AI-first delivery Con: Tough distribution; starting from zero without the brand or pipeline of traditional firms Crosby is rebuilding management consulting from the ground up as an AI-native firm, handling research, synthesis, and strategy work with a human-in-the-loop model that prioritizes speed and quality over headcount. ⸻ 3. Roll up legacy firms and augment with AI (e.g., Crete) Pro: Medium distribution; you get trusted client relationships plus the ability to embed AI deeply Con: Capital-intensive and operationally complex; requires transforming legacy systems while scaling new ones Crete is acquiring accounting firms across the United States and embedding OpenAI-powered tools into their workflows, streamlining tasks like audit prep, memo drafting, and data reconciliation at scale. ⸻ The winning strategy will depend on: • How quickly AI capabilities improve • Whether clients prioritize quality or familiarity • Who solves distribution without diluting the agent-first experience

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🚀 Verif-y is redefining digital record management. With 9 State DOE contracts, 200+ institutions onboarded, and 90%+ margins, this AI-powered SaaS platform is solving a $20B+ global problem: fragmented, insecure, and outdated education and credential systems. Now raising $5M Seed funding to accelerate U.S. and international growth. 👉 For VCs and institutional investors: this is defensible, AI-driven SaaS with regulatory moats — the right product, right time. See www.verif-y.com Then DM me for more info. Join us on this funding round? Follow me on LinkedIn: https://lnkd.in/e8bZ8srt

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Most private equity value creation still lives in slide decks. Realization lives in cash. The next era of private equity will not be won by firms with the best theses— but by those that can prove realization. The Realization Architect ensures that every decision, initiative, automation, leadership adjustment, and cash-flow outcome is governed as part of a coherent, defensible buyer story—one that commands value, protects IRR, accelerates DPI, and earns LP confidence through systems that make performance visible. A dedicated role governing enterprise value creation and converting execution into free cash flow materially improves exit quality for sellers—and de-risks outcomes for buyers. Realization is proof. https://lnkd.in/gmanz7vH

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