I Only Care About Terminal Value

1. Key Themes

Theme 1: The Market Has Bifurcated Software Into Annuities vs. Compounders

The majority of software businesses are being re-rated to zero terminal value, creating a brutal valuation divide. Only companies perceived as perpetuities — with durable earning power and defensibility — are exempt from normal financial discipline.

"The market has decided that >95% of software is an annuity (fixed life) with $0 terminal value. If you're running an income stream, you need to care about income and constrain SBC (a cost). If you're accelerating/have TV (building a perpetuity/compounder), you don't."

"Running the badly run middling software companies a little (or even a lot) better won't change the narrative albatross weighing them down, except perhaps to the extent that running them better means just going all in on AI and acceleration."

Theme 2: AI Forces Legacy Software to Rebuild — Fast and Internally

The only viable response for incumbent SaaS companies facing AI disruption is to create empowered internal labs with CEO-backed mandates, free from legacy constraints. Incremental roadmaps are no longer viable.

"Take a portion of free cash flow and stand up a small, empowered labs group, with a real, honest to god mandate supported by the CEO. A mandate to build new solutions for your install base, unencumbered by existing offerings, pricing, messaging, or value props. You have to build, and you have to build fast. Because AI is moving fast, and prevent defense never works." — Matt Slotnick

Theme 3: Seed Investing Requires a Terminal Value Thesis, Not a Moat Thesis

Rechtman argues that asking "what's your moat?" at seed stage is the wrong question. The right question is whether a business has a credible long-term earnings and defensibility story — because that shapes capital allocation from day one.

"What you can (must) is a point of view on the long term margins, earning power, defensibility. A thesis about where the moat comes from and what the business looks like over time."

"I increasingly find myself saying 'I don't doubt you can do X reasonably well and earn a bunch of revenue but let's both accept there's no TV in that so what's it for?'"

Theme 4: Industrial/Real-World Marketplaces Built Around Repair Are Compounders

Repair and maintenance is a structurally superior entry point into industrial verticals: it is recurring, urgent, and high-value — giving marketplaces many shots on goal and motivated buyers. This creates a flywheel toward a multi-product platform.

"Many shots on goal to make a sale; something is always broken unlike equipment sales which is infrequent. Motivated buyers: repairs are urgent. When something breaks it needs to get fixed right now because uptime drives revenue. High value: unlike single use supplies, machinery and heavy equipment is high value and fixing it is high skill."

Theme 5: The "Product Engineer" Archetype Is Becoming the Universal Hiring Standard

AI-native companies are collapsing the traditional role distinctions between engineering, product, and sales. The multi-hyphenate "slop cannon" who can build, think about customers, and ship commercially is becoming the core hire across every function.

"The best AI native companies are increasingly recruiting commercially minded engineers regardless of the role... The salespeople are shipping (at least internal tools and automations for themselves) and the engineers are relentlessly focused on customer value."

"The highest performing companies will have 'product engineers' and slop cannons in every role (product/eng, sales, ops, talent, finance, CX, marketing, etc); it is a multi-hyphenate skill set crucial to accelerate each area of the business."

2. Contrarian Perspectives

Contrarian 1: Long-Term Predictions Are More Reliable Than Medium-Term Ones

Against the conventional wisdom that the future is harder to predict the further out you go, Rechtman argues the opposite for investors with decade-long hold periods.

"Counterintuitively, predicting the long term is actually easier/higher confidence than predicting the medium term. If Trump had lost in 2024 the world today would be very different but the world in 2040 might be largely the same either way because the forces/stories propelling the world are broad and deep. It's variance around durable trend lines."

This reframes the seed investor's job: ignore medium-term noise and orient around structural forces that are already in motion.

Contrarian 2: Fixing SBC at a Mediocre SaaS Company Is a Value Trap

The conventional playbook for activists or acquirers — cut costs, reduce SBC, improve margins — does not rescue a software business with no terminal value. It merely makes it attractive as a financial asset, not a going concern.

"Cutting SBC will make that business more attractive to a value-oriented financial acquirer but doesn't give you a future."

The implication: operational efficiency is not a strategy if it's divorced from a compounding thesis.

Contrarian 3: LLM Legal Consultations Are Pro-Social and Should Be Legally Protected

While the dominant legal and corporate view treats AI legal advice as a liability risk, Rechtman argues the reverse: the absence of attorney-client privilege for LLM conversations actively harms ordinary consumers, because the realistic alternative is not better lawyering — it's no legal review at all.

"The alternative to an LLM reading your employment contract is not having a fancy lawyer read it; it's signing it blind. Same goes for leases, demand letters, non-competes, etc."

"The landlords, employers, corporations, and scammers will use AI to drop the cost of contracts and litigation threats to zero. Consumers will get screwed."

3. Companies Identified

Prefix

Description: Marketplace for restaurant and retail facilities maintenance; connects multi-site national operators with independent local technicians.
Why mentioned: Portfolio company; Rechtman co-led their $7.5M seed round with Collide Capital. Used as a case study in the "repair as entry point" thesis.
Quote: "Prefix is a marketplace for restaurant and retail facilities maintenance. Independent technicians on one side, big multi-site operators on the other. The company makes repair and maintenance better, faster, and cheaper for some of the most demanding brands in the country, including Chipotle, Raising Cane's, and Bojangles, across thousands of locations."

Heave

Description: Mentioned alongside Prefix as a related company in the repair/maintenance space.
Why mentioned: Cited as a preview of the same industrial marketplace thesis.
Quote: "That was a preview of Prefix (and Heave)."

Slow Ventures

Description: Pre/seed venture fund (~$325M) where Rechtman is a partner.
Why mentioned: Author's firm; co-led Prefix's seed round.
Quote: "I'm a partner at Slow Ventures, where I lead pre/seed rounds from a ≈$325M fund."

Collide Capital

Description: Co-investor in Prefix's seed round.
Why mentioned: Named as co-lead alongside Slow Ventures.
Quote: "We co-led a $7.5M seed round with Collide Capital to help Prefix keep scaling."

OpenAI, Vercel, Pangram, Memelord

Description: Sponsors of Slop Con NYC hackathon.
Why mentioned: Providing prizes and credits for the event; signals alignment between these companies and the "product engineer" talent archetype.
Quote: "We'll have prizes and credits from OpenAI, Vercel, Pangram, and Memelord."

4. People Identified

Yoni Rechtman

Description: Partner at Slow Ventures; author of the 99d newsletter.
Why mentioned: Author and primary voice; frames the terminal value investment thesis and announces the Prefix investment.
Quote: "I'm a generalist investor looking for weird takes on important stories: N-of-1 companies taking non-obvious approaches to markets that matter."

Matt Slotnick

Description: External commentator quoted on incumbent software strategy.
Why mentioned: Cited with strong endorsement for his framework on how legacy software companies should respond to AI through internal labs and entrepreneurial culture change.
Quote: "So how does software fight back? You build. But not in the measured, incremental, multi-year roadmap manner that they're used to. The frontier shifts too fast for a multi year roadmap."

5. Operating Insights

Insight 1: Stand Up an Internal "Labs" Group With Real Teeth — Not Theater

For operators at incumbent software companies, the prescription is structural, not cosmetic. The labs group must have a CEO-backed mandate explicitly freed from existing pricing, messaging, and product constraints — and it must be backed by real cash flow.

"Take a portion of free cash flow and stand up a small, empowered labs group, with a real, honest to god mandate supported by the CEO... unencumbered by existing offerings, pricing, messaging, or value props."

Insight 2: Compensation and Talent Structures Must Change to Attract the New Archetype

Hiring for the multi-hyphenate "product engineer / slop cannon" requires rethinking incentive structures — not just job descriptions. Companies that don't evolve their comp and assessment processes will fail to attract the people who actually build compounding businesses in the AI era.

"Do everything you can to instill this entrepreneurial DNA within your company. Hire and promote people who truly get it. And part with those who don't. Compensation structures probably have to change. Talent assessment very likely has to change."

Insight 3: Use Repair/Maintenance as the Wedge Into Industrial Verticals

For marketplace founders, entering via repair creates structural advantages: urgency drives conversion, recurring breakdowns ensure repeat engagement, and the high-value nature of equipment repair justifies margin. This unlocks expansion into adjacent, higher-margin products over time.

"By starting with repairs (recurring, urgent, valuable) Prefix can profitably earn the right to start building relationships with customers on both sides. Over time there's obvious expansion opportunities into equipment purchase, capex financing, single use supplies, software, and self service offerings."

6. Overlooked Insights

Insight 1: There Is a Specific, Buildable Product for LLM-Attorney Privilege

Rechtman sketches the actual product architecture for a legally protected AI legal service — not just the concept. This is an actionable startup idea sitting largely undiscovered in a footnote.

"The shape is probably something like: minimum viable pretense for attorney-client privilege over LLM conversations. You sign up, you sign an engagement letter, there's a licensed attorney on the other end blessing the channel, and your conversations with the AI happen under that umbrella... The business model is either standalone consumer AI and/or PLG for a consumer neofirm."

Insight 2: Large Federated Accounts Are an Underappreciated B2B Marketplace Unlock

National chains with hundreds of locations are simultaneously large (easy to justify enterprise sales) and highly decentralized (dependent on local vendors), creating a structural mismatch that a marketplace can uniquely resolve. This dynamic is underappreciated as a marketplace entry strategy beyond QSR.

"Restaurants are a great place to start because they're large but highly federated accounts. A national chain has hundreds or thousands of locations, each depending on local technicians for HVAC, refrigeration, plumbing, and electrical. These are big customers that don't want to deal with rinky dink procurement across every market they operate in."