$5T opportunity: AI Roll Ups

In this solo episode, I break down the $5 trillion wave of small businesses set to change hands as their owners retire, and why AI agents make this wave a real opening for solo founders. I walk through how Thrive Holdings and General Catalyst buy accounting firms, property managers, and support centers, then run AI agents inside them to lift margins. Then I show how I'd run a one-person holding company: the folder structure, the agent files, the human approval rule, and my average week. I close with the strongest arguments against AI roll-ups, including the one I take most seriously. Timestamps 00:00 – Intro 01:52 – Why the $5 Trillion Shift Is Happening Now 04:52 – Examples: Thrive Holdings& General Catalyst 08:38 – The Fund Playbook 10:07 – The Small-Deal Gap 10:51 – The One-Person Holdco 14:23 – The Folder Structure 16:47 – The Agent Pipeline 18:38 – Inside a Reviewer Agent File 19:41 – My Week Running the Holdco 21:49 – How to Land the First Business 22:24 – Arguments Against AI Roll-Ups 27:43 – Closing Thoughts Key Points About a million small businesses, part of a $5 trillion shift, are set to sell by 2035 as owners retire (McKinsey). AI agents now handle the work these firms run on: data entry, document chasing, status updates, and first drafts. The big funds chase bigger deals, which leaves the small firms open for solo founders and small teams. A one-person holdco runs on shared agents and rules, plus a GM with real upside at each business. A person approves all agent work before it reaches a client. The corrections log, turned into rules every week, becomes the most valuable asset in the holdco. The #1 tool to find startup ideas/trends - https://www.ideabrowser.com LCA helps Fortune 500s and fast-growing startups build their future - from Warner Music to Fortnite to Dropbox. We turn 'what if' into reality with AI, apps, and next-gen products https://latecheckout.agency/ FIND ME ON SOCIAL X/Twitter: https://twitter.com/gregisenberg Instagram: https://instagram.com/gregisenberg/ LinkedIn: https://www.linkedin.com/in/gisenberg/

• 0:00Speaker 00

  Over the next 10 years, there's going to be millions of small businesses that are going to 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 Catalysts, 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

• 0:44Speaker 00

  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 Catalysts 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.

• 1:25Speaker 00

  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.

• 1:52Speaker 00

  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 a property management company. Maybe it's the 80s or the 90s, but they've 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

• 2:35Speaker 00

  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. And I say that, like, 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

• 3:17Speaker 00

  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 5% 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.

• 3:59Speaker 00

  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

• 4:41Speaker 00

  funds, the big funds have figured this out first. So, let me tell you exactly what they're doing. Let's learn from them. And some of these stories are actually really amazing. Okay, so what are the big funds doing? Thrive. Thrive Capital is Josh Kushner's firm. So, they were early in companies like Instagram, OpenAI. And a while ago, they spun out something called Thrive Holdings. And when Thrive Holdings started buying, surprised a lot of people because they went out and they bought local accounting firms. Now, they've bought close to 50 of these accounting firms over the last 24 months, and they just committed another

• 5:24Speaker 00

  billion dollars to buy more. So, obviously, it's working, right? One of them is a firm in Bellingham, Washington called Larson Gross. It's been around since 1949. They've got five offices and they've got 200 people. After Thrive got involved, the firm started using AI built on OpenAI's codex. I'm pretty sure Thrive has some sort of partnership with OpenAI. This tax season, it processed 7,000 returns. An accountant saved 31% of their time on average. One accountant had a job that used to take her 180 hours a year, and she got it down to 15. So, like, it's really, really working.

• 6:08Speaker 00

  And the interns who used to prepare tax returns started training to review them instead. And that's the part I can't stop thinking about. The people who used to do the work are becoming the people who check it. And keep that in mind because it comes back when we get to the arguments against all of this at the end. The other firm is General Catalysts. So, they're one of the biggest venture capital firms in the world. They set aside $1.5 billion for this strategy, and from what I heard, they put more than $750 million into at least 10 companies. One of them is Long Lake, which buys property management companies. They

• 6:51Speaker 00

  say that they've bought 18 businesses and gotten to $100 million in EBITDA in under two years with margins doubling, which is like hard to even comprehend, right? Another is Crescendo, which runs customer support centers. They say AI now handles about 90% of frontline tickets. And there's one I really like the structure of. So, when General Catalyst companies buy a business, they usually pay about 60% to 70% in cash. And the founder rolls about 30% equity into the new company. So, the person who built the relationship for 20, 30 years has a real reason to stay and make the handoff go well,

• 7:36Speaker 00

  which is like a big issue, right? One honest note, by the way, a lot of these numbers, when I was doing my research, are self-reported by young companies that are raising money, and none of them have been through a recession yet. So, I take them as a strong signal of where this is going, not as proof, right? It's early days. But, the thing that I take away from this is when you have Thrive and General Catalysts, both venture firms who I look up to and I think that they're really smart, they're putting billions of dollars into the same idea, you got to pay attention. And if you look at how they're running it, there's a pretty clear

• 8:18Speaker 00

  playbook and a pretty big gap they're leaving for everyone else, and that's what I care about. Like, of course, I hope they do well, but I really care about you, listening person, founder, who wants to make their first few million dollars. And I want to give you that opportunity, or at least get your creative juices flowing, to connect the dots. So, I'm trying to analyze their whole playbook, General Catalysts and Thrive. And the simplest way I can describe it is first, they build the platform, meaning the agents and the software, before they buy like literally anything. Then, they buy a firm people already trust. With clients who've been around for years, a lot of the time, they like brand

• 9:02Speaker 00

  names, like good brands. Then, they run the agents in the background. So, the agents do the work alongside the people, and nobody outside sees anything change. If anything, they're more timely, it's more optimized, the customers are hearing back faster, and they're getting hopefully better work. Once the agents are reliable, they move the back office over, things like data entry, collecting documents and first drafts, and then they buy the next firm, and then they plug it into the same platform. So, look at what that does to the business. Revenue stays the same because the clients are the same

• 9:46Speaker 00

  and they're paying the same invoices. Costs go down because agents are doing a big share of the work. So, profit goes from anywhere around 5% to 10% to, if the thesis holds, to 30% or 40%. It's basically the same business making three to four times profit. Now, the thing I think most people miss is that the funds need big deals. If you're a billion-dollar fund, you can't spend your time on a bookkeeping firm doing $2 million a year. It's just too small for them and it can't move the needle. That's how they think. And the McKinsey number that I gave earlier, about a million businesses are expected

• 10:28Speaker 00

  to sell, well, those are mostly small firms. So, Thrive and General Catalysts, like, I don't think that they're going to call them. I think they're going to call the bigger firms, or they're going to call the mid-market firms. So, the question I kept asking myself is what does the one-person version of this look like? And let's explore that. So, how would I set up a one-person holdco doing these AI rollups? I would set it up as you, the founder, you're at the top, you own a holding company, which is just a company whose job is to own other businesses. That's the simplest way to think about a holding

• 11:08Speaker 00

  company. Under it, there's a few small businesses. So, each one has a GM, a general manager, and usually that's someone who's already there. Think of it as like a senior bookkeeper who's been with the firm for 15 years, knows every client. Then, you make her the GM and give her a real piece of the upside.

• 11:29Speaker 00

  And this bar at the bottom is the part that makes the whole thing work. Every business uses the same agents, the same rule system, the same back office, and the same dashboards. So you build the layer once, so the second business is easier than the first, because half of what it needs already exists. And then the third one is easier, again, fourth, fifth, you get the idea. At the start, I said, there's a huge piece of this pie for solo founders. And there's a few reasons why I believe that. So the tools that you're going to use are the same tools that the funds are using. So thrive agents run on Codex. But yeah, you can use Codex, Cod Code, Gemini.

• 12:13Speaker 00

  You have access to the same models. You also get to be the integration. So the hardest part of any roll up is getting each new business onto the system without breaking anything. So the funds have to hire managers who learn every business from scratch, while you're the one in the room. You know, you know, the clients and you read the agent drafts yourself. So a lot of owners who would also rather hand their business to a person. You know, if you spent 40 years building something, you care about who takes it over. So if you're, you know, some of them are just not going to want to sell to a large venture capital firm, but they might want to sell to you.

• 12:56Speaker 00

  And again, that is an edge. And the deals, like we talked about, they're too small for the big funds. So you're not even competing with the general catalyst for them. You know, I've run a holdco now for, wow, six years? Almost? Actually, no, six years. I've run a holdco for six years. And I just got to say that like, who the GM is, is going to be such an important part of making this thing work. And I've seen not good GMs just not be able to take the business where it should be, should get to.

• 13:41Speaker 00

  And incredible GMs just really fly. So finding that person is super, super important. And this is pretty, you know, it's pretty much how I think about my own holding company. You know, we have a few businesses with amazing people running each one. And they've got like a shared layer underneath that keeps getting better. And we basically support those businesses. Now, let me show you what that shared layer could look like. This is something that you might want to screenshot. Or like I said, you know, if there's some likes and comments, I could put in the pinned comment.

• 14:23Speaker 00

  So this folder, folder structure is kind of like the org chart. I'll walk you through it so you can clearly understand how I think about this. The first folder is the thesis. So this is where you're going to write down what you believe, like which industries you're in and why, what a good business looks like to you. And that's going to keep you from buying something just because you got excited about it. The shared folder is that bar at the bottom of the drawing, meaning everything every business uses. So the agents and the global rules live here. There's also a folder of real accepted work that you use to test the agents every time you change something.

• 15:08Speaker 00

  And there are run books, which are just step by step instructions for things that happen more than once. Like, okay, it's day one after taking over a business, or what, you know, what you do when an agent sends something wrong. Then you're going to want to make sure each business has its own folder. So the clients file says who's been with the firm for 20 years, who's sensitive, who's loyal to a specific person. Those details are going to matter. The people file says who knows what. If the senior bookkeeper is the only one who knows how a certain client likes things done, that gets written down here. The rules file holds things that only apply to this business.

• 15:53Speaker 00

  So maybe this firm always sends reports on the third instead of the first, because one big client asked for that in like 2011. And the corrections log is where every fix goes. Anytime a person changes something, an agent did it, it gets logged here. If you set up only three files, I'd say, set up the global rules, each business rules, and the corrections log. Because that's the stuff that turns agents into something you can actually trust with a client, right? And honestly, even if you don't do this, like, don't do an AI roll up,

• 16:33Speaker 00

  thinking about your business in this way is pretty darn helpful. From a structure perspective, from getting more out of your AI agents, and for just being more AI native. So those are the folders. Let's talk about the agents living inside of them. Because there's one rule here that I think prevents most of the disasters people worry about. This is how work actually moves through one of these businesses. So when work comes in, the intake agent is going to collect the documents and chases anything that's missing. That's going to save a ton of time.

• 17:15Speaker 00

  You have the prepare agent who does the first draft of the actual work. In a bookkeeping firm, you know, what could that be? Categorizing transactions or drafting the months end close, things like that. You have the reviewer agent, which checks that draft against the rules. Something's off or something, you know, it sends it back. Then, yes, there's human beings, you know, you still want human beings a part of this. You're going to need a person to approve it. Usually, the same person who used to do this work by hand, and only after that does it go to the client. I think the most important rule of this whole system is the reviewer can block,

• 17:59Speaker 00

  but it can never send anything. And the prepare can't send anything either, by the way. A person always approves before anything reaches the client. Yes, can we get to a point where it's completely AI, you know, agents doing everything? Like, maybe one day, but I think at this point, you know, you do need to have humans do certain things. And also, human beings are the accountability layer for you, right? I'm going to do, I think I'm going to do a whole episode of the podcast about, about that. But yeah, the person is the accountability layer. I thought it might be interesting for, for people to see like,

• 18:41Speaker 00

  what do these agent files actually look like? Here's one. It's the one for the reviewer. So you can, you can check it out here. You know, your job, check every draft from the prepare before, before a person sees it. You score it or pass it to the person or send it back. Here's what you can do, here's what you can't do. Check every draft for these things, send it back if this, you know, when you pass it on. So what is this basically? I won't bore you with the details. It's basically like a plain English job description. Every agent in the system gets one. And it covers what its job is, what it's allowed to do, more importantly, what it can't do, and when it has to stop, ask a question and get human intervention.

• 19:26Speaker 00

  Most of the agent problems I've seen come from nobody telling the agent where its job ends and writing down what it can never do fixes a lot of that. So I think this will be helpful for you. So imagine you've rolled up a few of these businesses. What is a week, you know, an average week look like for you? People ask me about this. And they're, you know, the common feedback I get is, it must be so hectic. It's actually a lot less hectic than you think, because your GMs and your agents handle the day to day work. So here's how I would spend my week if I own a few of these businesses. On Monday, you want to look at the numbers, you know, for every business,

• 20:11Speaker 00

  check five core, core metrics. Number one, profit margin. Two, minutes of human time per job. Number three, how often agent drafts need fixing. Number four, client retention. And number five, whether the key people are happy and staying. A lot of people don't have that, but it's going to be key to the whole system, right? If profit is going up while clients are leaving, well, something's wrong. You're going to want to catch that early. On Tuesday, I do, you know, one call with each GM to hear what's working, what's annoying them, which clients need attention, how you can help. Wednesday, maybe it's your corrections log.

• 20:54Speaker 00

  I think it's the most important hour of the week, because I'd go and, you know, go through every fix a person made to an agent's work. And I turn to the one, I turn the ones that keep happening into rules. You know, you can, I'll just put up a prompt here, show you a prompt. Compare each agent draft with the version a person approved this week. Sort every change into factual error, client preference, missing information, or style. For any correction that happened more than once, propose a rule. Add each approved rule as a test using the original input and the accepted output. And that's how agents get better every week, and it just compounds. After a few hundred jobs, that list of rules becomes the most valuable thing you own.

• 21:39Speaker 00

  Because anyone could use the same AI models, but nobody else has your list of every way they go wrong in your kind of business. And then Thursday and Friday, that's for finding your next business. Coffee with owners, learning a new industry, figuring out what comes next. You know, there, people ask me about the marketplaces to buy some of these businesses. Like, I think it's BizBuy, BizBuy Sell and some other ones. They're, my experience is, once they hit the marketplaces, unless it's like super curated, like- You're not going to get a good deal. The best way to find these deals is to reach out and things like that.

• 22:24Speaker 00

  The last thing, by the way, people ask me is how do you get the first one? Like, how does the first one start? The path I like to pick, one industry, say, bookkeeping firms, and I start by selling them a service. Take one annoying job and do it with agents, like cleaning up month end for their messiest clients or chasing missing documents. And then doing that, you learn how these firms work from the inside. So you're building your agents on real work and you get to meet a lot of these owners. After six months, nine months, 12 months of doing good work for a bunch of firms, one of those owners is going to be ready to step back and you'll be the obvious person to take it over. So you start by serving them, you earn their trust, and eventually you own one.

• 23:09Speaker 00

  That's how usually these things happen. Okay, so when I posted this to X, like I said, I had, actually in my DMs, several billionaires, several of the biggest firms, you know, just wanted to talk more about this with me. And then I had a bunch of people being like, keep this quiet. But then I had a ton of quote retweets, plenty of smart people telling me why this won't work. Some of them have a point, or there's like a reason why I understand, like I understand where they're coming from. So I wanted to do a lightning round of some of the common complaints about doing AI roll up.

• 23:54Speaker 00

  So the first thing that, you know, I saw a lot of is roll ups always fail. This is private equity with an AI sticker on it. A lot of people saying, this is just private equity, this is private equity. And a lot of, a lot of private equity fails. So yes, a lot of roll ups do fail, but they almost always fail for the same reasons. Like they overpay, or they buy faster than they can integrate, or the culture falls apart. And yes, AI doesn't fix any of that, you know, on its own. That's actually why I like the one person version or the small team version. You buy slowly, you're the first one doing the integration and you price the business on what it makes today,

• 24:38Speaker 00

  instead of paying the seller for the AI upside you're planning to create. So, you know, I think, I understand where this is coming from, but like, that's, it's like saying, don't do startups because most startups fail. The second thing that I heard a lot of is, once everyone uses AI, the margins are going to get competed away. Yeah, eventually, probably yes, but there's a window between when your costs drop and when prices in your industry catch up. And in a lot of these industries, that window is actually years long. It's not like a month. And the stuff that keeps clients around, like 20 years of relationships and your own list of rules

• 25:21Speaker 00

  for how the work gets done, like it's, it's actually harder than people think to copy. The third thing I heard a lot of was, these are regulated and high stakes businesses. You need human beings checking everything, there's no savings. Yeah, you need human beings to check, you know, in some industries, you need human beings checking everything.

• 25:46Speaker 00

  But checking a draft takes a lot less time than making it from scratch. And remember, we're talking about Larson Gross's 31%, 31% margin?

• 26:00Speaker 00

  Well, that's where that came from. The people are still there, but what they spend their day on is different. And now they have just like a whole lot more leverage. It's basically like you're adding leverage, not in like the financial leverage sense. Like in the productivity sense of the word, they're just way more leveraged to do stuff. Fourth thing that people were saying was, people change, the staff and the clients are going to leave. I take this the most seriously, some will. And that's why the first 30 days changed nothing. The clients can see why the agents run in the background before they touch anything real and why the person who knows every client becomes a GM with a real piece of upside.

• 26:45Speaker 00

  So you want to really incentivize your senior leadership. I think that's really important.

• 26:53Speaker 00

  I'll do one last one.

• 26:57Speaker 00

  A bunch of replies saying, it's like, this is a fancy way of saying layoffs. And I get why people feel that way. It's a fair question to ask. But what the early examples show is people are shifting from doing the work to checking it, and each person is handling more clients than before. So we talked about that with the interns at Larson Gross.

• 27:17Speaker 00

  I'd be lying if I said, no jobs are going to change, a lot of them will. And then the question becomes like, okay, can, you know, if you've now evolved your role, you know, some people are going to be good in that new role, some people are going to be just satisfactory, and some people are just not going to be meeting expectations. Those people are going to probably get laid off. We haven't seen a lot of that yet, but I expect it will happen. Yes, so overall, like the TLDR on some of the replies I got, there are real risks with this type of business and business model, but none of them changed my mind about the size of the opportunity.

• 27:59Speaker 00

  And none of it changes my mind about how you approach the opportunity. So that's kind of how I see this $5 trillion AI roll up opportunity. You know, I think it's a huge, huge deal.

• 28:17Speaker 00

  It's happening. The early stories are remarkable.

• 28:23Speaker 00

  And I do think that, like I said, there's the, those businesses, there's tons of businesses that are too small for these big funds. I think this idea of a one person holdco or small holdco is really interesting. Few good businesses, a great GM running each, a shared layer of agents and rules underneath that gets better every week. If people want to hear more about this, these types of businesses, holdco, as I call it, multiprenuership. This idea of, you know, you have entrepreneurship is obviously you're starting businesses. And multiprenuership is when you own multiple businesses. I think it's a huge opportunity. I think you can cash flow it.

• 29:03Speaker 00

  And I hope the, this episode got the creative juices flowing. Like I said in the intro, I can expand on this.

• 29:12Speaker 00

  And I can put it in a pinned comment. I can put out the folder structure, the agent files, any prompts in there. If that hits 5,000 likes, comments and subscribes, I'll hit, I'll put it in the pinned comment. And if you start one of these businesses, tell me, because I generally love to hear about it. I love doing these videos and I love putting out the alpha. And although I might get some haters for it, for me, it's worth it because I think if it changes the lives of a few, it's absolutely worth it. This has been really fun and I'll see you in the next one. Take care.