This Week in Vertical Tech
Harvey, Rebel, MSOs in Legal, and more
Happy Friday,
Harvey’s CEO sat down for a chat around legal AI and the application layer more generally. The whole thing is valuable, but for our purposes you really only need the first 30 seconds. (the full discussion is at 46:00):
OpenAI is going to compete with vertical AI. They’ve hired investment bankers to build better finance models and there are certainly more verticals on the way.
If the safest posture is to assume foundation models are going to build into your vertical, what then is the proper posture for vertical companies innovating?
Weinberg seems to think it’s to anchor around problems that require systems vs. ultimately commodifiable LLM prompts.
But I also think it paints a different case for companies that already occupy the system of record for an industry. Systems of record are not disruptable. They’re in some sense the largest beneficiaries from AI becoming more performant for their domain. Epic benefits from OpenAI wanting to create better healthcare agents. Coupa and Ramp as well.
What are the second order effects from labs wanting to train better models? I think it’s beneficial to current systems of record. More soon.
Around the Ecosystem:
Rebel raised a 25m Series B to build a recommerce network. Reverse logistics/recommerce has fascinated me lately. I’ll be releasing the first Verticalized report on the industry next Thursday for paid subscribers.
Are MSOs finally entering the legal profession? MSOs in physician practices have been one of the big stories in PE over the past 10 years. If that happens in legal, what does that mean for legal AI tech or new business models that can be developed and commercialized?
Prediction Markets are on the rise and in the past week have gained immense institutional respect from media and finance. Event Horizon has done a series of breakdowns on where volume lies, the partnerships, and more. The newsletter is well worth a read!
Sean Cai writes about the history of RL and the current moment. More to come next week on this topic. I think it’s worth deeply considering the game theory involved around the need for RL environments in myriad verticals.
Tidemark released the 2025 Benchmark Report for Vertical SaaS:
This is the big takeaway in my view. Vertical SaaS adoption of AI is accelerating. What does that mean for incumbent vs. new AI companies in these industries?