Holding Companies 2.0
Holding companies will set the stage for more versatile founders
I had dinner with a friend the other day who had just started his own venture studio, and we began talking about how easy it is for people to start companies these days, especially with all the tools available in the market. We then asked ourselves. “With all these tools. What does this all mean for company builders? What skill is required to be good at venture building?” It’s not accurate to say “we are good at creating companies” since that is broad and vague.
We concluded that the right way to view this is that company building is akin to being an architect in the way an architect plans structures. It doesn’t stop there. Knowing company architecture requires a deep understanding of not only operational tools, but financial ones as well. This combination is a powerful force that can elevate founders.
In the old school of thought, parents, professors, advisors, and other professionals preached specialization. 'Do not spread yourself too thin,' or 'He is doing too many things at once,' were (and still are) the common phrases of the day. I’ve heard this many times from more structured individuals. What this view fails to understand is that leverage is not fixed. My ability to do multiple things before was much more challenging than it is today, especially with all the new tools available to founders and creators. Why stop at one company when you can pursue multiple ones? We were taught in school to study multiple subjects, pursue multiple sports, and learn multiple skills, only to end up in a specialized field that we were meant to pursue for the rest of our lives.
I believe those days are gone due to the technological leverage we are seeing today, and this is why I believe holding companies will be the way of the future.
In the past, holding companies were often considered the domain of large corporations that spanned industries and geographies. They built moats around legacy businesses and used their structures to manage risk and pursue capital allocation strategies. But today, I believe technology is reshaping this landscape, and holding companies are no longer reserved for large legacy entities but are accessible to smaller, more nimble investors as well. This shift is being driven by a combination of AI and other complementary tools (such as Zapier, ChatGPT, Slack, Miro, and others) that empower founders to start companies more efficiently than ever before. These tools give founders more time for creative thinking and allow them to act more like orchestrators, while technological leverage takes over.
A traditional holding company serves as a parent entity that owns interests in various businesses but doesn't necessarily engage in day-to-day operations. The advantage of this structure is that it allows for centralized control over diverse assets, offering a strategic edge when it comes to capital allocation and risk management.
However, today's environment presents a unique opportunity for smaller, nimbler holding companies to succeed. What used to require massive overhead, extensive hierarchies, and large-scale operational management can now be accomplished by leveraging modern tools—particularly AI and other technologies that optimize processes. You can call these enabled services. More importantly, holding companies can now operate across industries, geographies, and sectors without the need for excessive human resources, allowing strong generalists to shine.
In the hands of smart, adaptable founders, this means holding companies no longer need to be associated with corporate giants. Smaller, more focused entities can now act as the "mothership" for multiple startups or ventures, acting as a creative engine for founders with wide-ranging ideas.
Instead of focusing on AI alone, I would argue that it is a range of other tools that complement AI that will make this corporate structure unique. ChatGPT is beautiful on its own, but much more powerful when combined with other tools such as Zapier, Miro, Slack, G Suite, etc. This combination is not black and white. Creators are like painters. Sure the painter might have a supercharged brush, but that allows her to do much more with her canvass, and knowing how to combine the different tools is an act of creativity, which cannot be replaced by AI. At least not yet.
There’s a misconception in today’s AI conversation that it will simply replace jobs. It does have merit, but like all technologies we have seen in the past (the internet, electricity, smartphones etc.) there is reason to be optimistic for it to be a human enabler. If we take a step back and really look at what AI is doing, it’s not so much replacing human creativity as it is augmenting it. I would argue that AI is an incredible tool that founders can use to run multiple ventures without the need for massive human capital. It’s not about replacing jobs—it’s about enabling humans to focus on multiple pursuits they are uniquely good at, while leveraging both human capital (partnerships) and technology to achieve those goals.
AI, in this context, becomes a catalyst for efficiency, especially in the creative and operational phases of business building. Want to bust out a full financial model? There’s AI for that. Need a quick analysis on a specific topic and turn it into a report? AI can spit that out instantly. Need a new logo and tag-line ideas for your business? Done. This frees up founders to focus on what truly matters: developing ideas, testing hypotheses, and bringing creative, novel solutions to market.
Testing and launching companies becomes much easier than it was only a few years ago. Not only that, retreating becomes easier as well as concepts can be tested and built at minimum cost, giving founders and creators confidence that even if their idea doesn’t pan out, they can always scale back. Real options become much cheaper with these new tools.
The corporate world has seen the rise of large conglomerates that succeeded by spreading risk across multiple sectors. Yet these conglomerates were often bureaucratic and slow to respond to market changes. Today’s micro-holding companies, however, can be nimble, using AI and other tech-driven efficiencies to build multiple companies without the excess weight of traditional conglomerates.
Think of a founder who wants to start three businesses: one in tech, another in retail, and the third in a creative field. Traditionally, that founder would need to create separate teams, secure funding, and juggle an overwhelming amount of operational oversight and expertise. But with a holding company model, and the aid of AI-driven platforms and complementary tools, they can now run all three businesses from a single hub with a lean team.
Imagine a founder utilizing tools to streamline financial management across all three companies, while leveraging AI to design marketing campaigns, product mockups, and even conduct sales projections. They can allocate resources more efficiently and test market fit with much lower risk.
More importantly, smaller holding companies foster innovation and experimentation. When a business inside the portfolio starts to lag or underperform, the founder has the flexibility to pivot quickly. If an idea shows promise but needs more resources, it can easily pull in capital or operational help from the holding company. In essence, this model allows businesses to fail fast and scale fast—an important benefit in today’s rapidly changing world.
One of the biggest shifts in today’s market is how creativity and reasoning, coupled with AI, can become a major driver of business success. The new holding companies that will emerge will likely not just be focused on tech or finance, but on harnessing creativity to drive innovation in every area—from design to marketing to product development.
In the article by Sequoia titled Generative AI’s Act o1, it state’s:
The cloud transition was software-as-a-service. Software companies became cloud service providers. This was a $350B opportunity. Thanks to agentic reasoning, the AI transition is service-as-a-software. Software companies turn labor into software. That means the addressable market is not the software market, but the services market measured in the trillions of dollars.
Back in the research lab, reasoning and inference-time compute will continue to be a strong theme for the foreseeable future. Now that we have a new scaling law, the next race is on. But for any given domain, it is still hard to gather real-world data and encode domain and application-specific cognitive architectures. This is again where last-mile app providers may have the upper hand in solving the diverse set of problems in the messy real world.
What Sequoia is saying is that last mile services will be the key to enabling this trillion dollar opportunity, and this involves creative reasoning, which the current LLMs cannot do (aside from logic and math). But over time, you can imagine a world with an abundance of tools that companies can use to enable many functions with less human interventions.
The ability to develop creative products, services, and experiences is more valuable than ever. AI can augment this creativity by helping founders test new ideas, prototype products, and even launch ventures at a fraction of the time and cost it used to take. When a holding company is built around this model, it unlocks entirely new forms of entrepreneurship. This is why Sequoia calls this next phase a trillion dollar opportunity.
Source: Sequoia
Now, to be clear, I am more of a traditionalist when it comes to investing and venture building. I am no AI expert and I have no idea where this kind of technology is heading, especially regarding the advancements of these applications. How can you know if a specific tool is valuable today but replaceable tomorrow? The velocity of change is both scary and exciting and it’s hard to tell how it will evolve, but it’s pretty obvious that it’s moving fast. That’s why it’s probably more prudent to use these technologies to enable existing businesses rather than directly investing in them as venture bets. I believe these trillions will spill over into more traditional sectors such as F&B, D2C brands, FMCG, manufacturing, and other traditional spaces.
We humans still need to drink water, eat bread, use shampoo and soap, and sleep on a mattress. Those things are not going away, but the way they are delivered to consumers will likely change. How? I’m not sure, but I choose to keep an open mind and remain nimble enough to experiment with new tools as this wave continues.
This is the future of holding companies: not large, lumbering entities, but small, agile, engines for creativity and development, for both tech and non-tech solutions. These structures will be able to rapidly scale businesses, and allow founders to experiment with new ideas across industries, and leverage the best of AI and complementary tools to shift their focus on the more human side of business.
ABOUT THE AUTHOR
Keenan Ugarte is Managing Partner at DayOne Capital Ventures, an independent private holding company that invests in and builds high-growth, early-stage businesses that serve the underserved Philippine mass market. He is also the Co-Founder of The Independent Investor, a media platform spotlighting early-stage companies and innovation within the Philippine startup ecosystem.