Boring Businesses
A casual scroll through any market-based journal suggests that every growth dollar today is sprinting toward the next great large-language model. The headline numbers look intoxicating: private AI deals are still priced at a median ~30x revenue, multiples once reserved for pre-IPO cloud darlings. Yet the cracks beneath the narrative are widening. Scale AI's decision this July to cut 14% of its staff, even after landing a marquee investment from Meta, signals that blitz-scaled capacity is colliding with thin margins. Venture investors are noticing: first-quarter 2025 saw only 2,101 AI/ML funding rounds, a 16.5% drop compared to Q4 2024 and 32% below the 2024 peak. In the blind spot created by this hype cycle, durable, cash-rich "boring" companies—think HVAC maintenance, drain cleaning and collision repair—are quietly trading at single-digit multiples.
The current AI boom is a classic case of mindshare outrunning cash flow. Investors are underwriting potential, not profit, paying up for companies whose moats can evaporate when the next, better model ships. Academic work on "blitzscaling" warns that chasing the highest growth "peak" as fast as possible often erodes long-term returns and leaves fragile business models in its wake. The market already offers examples: Stability AI's post-money valuation sits near $150 million; pennies compared with multi-billion-dollar peers after a mid-2024 down round and continued leadership churn. When narrative momentum cools, multiples compress violently, and equity raised at 30× sales can become an anchor rather than a badge.
Contrast that fragility with local service enterprises. Plumbing, pest-control and HVAC work demand on-site judgment and manual skill—tasks current AI cannot replicate. Market data bears this out: in Q1-2025, residential HVAC companies with $1-$5 million of EBITDA changed hands at ~8x EBITDA; roughly one-third of prevailing AI revenue multiples and based on real profits, not forecasts. Investors willing to study truck rolls instead of token counts can buy defensible yield at a discount.
Why do the discounts persist? Because supply is spiking just as institutional attention turns elsewhere. Nearly 12 million U.S. small businesses—about 41% of the total—are owned by baby boomers now at or beyond retirement age. Fewer than one-third have succession plans, forcing many owners to sell quickly and often below intrinsic value. At the same time, the federal SBA 7(a) program finances up to $5 million with only 10-15% down and 10-year amortization, and loan demand for $100k–$500k acquisitions is hitting record highs. Young operators, MBA graduates, ex-consultants, even college seniors are using this leverage to purchase two or three service businesses, centralize scheduling software, and exit to private equity at double the entry multiple. The playbook is repeating across HVAC, landscaping and niche manufacturing.
AI will undoubtedly reshape industries, but today's capital rush has over-corrected. When investors crowd a single narrative, opportunities bloom in the ignored corners. Service trades provide automation resistance, recession resilience and sticky local moats—yet still change hands at single-digit EBITDA multiples. With a once-in-a-generation "silver-tsunami" of motivated sellers and government-subsidized debt, the window for outsized risk-adjusted returns is wide open. Those willing to set aside the hype and learn how to run an air-conditioning company may find that the most contrarian tech play of 2025 is, paradoxically, not tech at all.
