Venture with Grace
Fireside chat — AI native services - the next frontier of VC investing
5 Nov · 20 min
Key points
- Jake Saper argues AI native services will outgrow SaaS and target the 80% of the US economy in services.
- Dan Mishin's Manifest uses AI agents to cut immigration case turnaround from two months to two days and costs 15-20%.
- Saper says AI roll-ups are less likely to reach venture scale than AI native services.
AI native services could grow into a bigger market than software
Venture capital spent two decades funding software, and the great returns came from getting into the cloud early. Jake Saper argues the same trade now exists in services, which are 80% of the American economy but never scaled because a practitioner's hours run out. AI lets a lawyer or an accountant handle far more cases at the same quality, which turns services into 70 to 80% margin businesses. Manifest, an AI native immigration firm, is his proof point, and the obstacle is inertia among practitioners.
Takeaways
- AI native services can outgrow SaaS. Jake Saper coined the term in a 2024 post, The Death of Deloitte, that drew a cease and desist letter from Deloitte. He argues the model will become a bigger market than SaaS was to the cloud era.
- AI ends the linear cost problem in services. Services are 80% of the American economy but were long uninvestable because cost and revenue scaled together. With AI, revenue grows on static costs, producing 70 to 80% margin businesses.
- Immigration law is large and underserved. America has 1.3m lawyers and 10 times the lawyers per capita of any other country except Israel, yet 70% of Americans go unserved. Attorney rates average $550 an hour against a $27 average wage.
- Human inertia is the biggest bottleneck. Of America's 18,000 immigration lawyers, 11,000 have applied to work at Manifest, yet Mishin estimates only 5% are early adopters. Hiring the first services employees is hard because the business model is unfamiliar.
- AI roll-ups are a smaller, PE-shaped bet. Buying 20 or 30 accounting firms and then imposing AI carries lower odds of a venture outcome, Saper says, though it can still return two and a half times the purchase price eight years later.
- Saper's thesis grew out of Mechanical Orchard. He invested in the mainframe modernization company in 2023 because founder Rob Mee had built Pivotal Labs and taken it public. Venture's job is arbitrage, getting in before an area is understood and prices rise.
How Manifest runs a case
- Clients open a link on their phone and photograph six documents while an agent answers questions in real time.
- An agent extracts the information and pre-fills the immigration paperwork, so a lawyer has a completed file within ten minutes.
- Cases that once took two months now take two days, and Manifest can be 15 to 20% cheaper today and 40 to 60% cheaper over time.
- Lawyers are led by agents that tell them the next step and flag the specific gaps in a case.
- AI quality assurance catches errors that lawyers filling in information by hand routinely make.