Today's issue is brought to you by Abacum.
If you're a finance leader inside a PE-backed portfolio company, you already know the drill: tighter timelines, higher reporting expectations, and a board that wants to see the value creation plan before the ink on the deal dries.
Abacum just published Private Equity in the AI Age - a field guide written for CFOs navigating post-deal pressure, roll-up complexity, and the 100-day sprint. It covers how AI-enabled businesses are commanding higher multiples, what PE firms now expect from PortCo finance teams, and how to structure capital, debt, and treasury decisions amid accelerating deal velocity. This isn't a trend report. It's the playbook I wish I'd had.
Like many experimental CFOs, I was attempting to build some crazy side project in Lovable the other day.
Lovable is a vibe coding tool where you type in what you're trying to make and it does some voodoo magic and boxes that look kinda like what you envisioned pop up and are somewhat clickable.
I got a lot further than I thought I would. Not to brag or anything, but I even figured out how to connect my skunkworks project to a real domain.
Hello world!
While this was an internal project and won't be any sort of revenue maker, what stuck with me is how Lovable defaulted me to certain partners along the way. One of those partners was Supabase, the backend database scaffolding all the stuff I needed to query.
Supabase is currently valued at $5 billion after a recent Series E raise of $100M. Lovable is valued at $6.6 billion after a $330M Series B in December, and recently eclipsed $400M in ARR. Both are doing just fine.
This playbook isn't new.
The big dogs have been doing it for decades. Safari handing the search keys to Google was worth an estimated $50B a year to Google. But it's not like Apple's doing it to be nice (nice isn’t one of the words I’d use to describe Apple). They receive roughly 36% of the revenue Google generates from search ads on iPhones, iPads, and Macs. So like $18B. Whew!
I have some personal experience with this distribution hack.
At PartsTech we spent basically nothing on traditional marketing. Over 80% of our customers came via referrals from our shop management system partners. We earned the right to become the default auto parts procurement application for a handful of those systems. Garage owners would use their SMS to run the business: scheduling, labor estimates, and accepting credit cards. When they wanted to order parts for a job, they'd automatically be prompted to go through PartsTech.
This didn't come without a cost. Many partners asked for a revenue share. They were rerouting customers to us, and we were taking a cut on every purchase.
One note: you still need a pretty good product for this to work. No partner is going to sacrifice the customer experience for something subpar. Our product was amazing and way more usable than our competitors which looked like they were created as part of the Apollo 13 program.
A great product is nothing without distribution.
That's becoming even more true with AI. As the cost of producing software drops, it won't always be the best product that wins. It'll be the one that finds the customer first. Sometimes without the customer even realizing it happened.
For many legacy software providers, the conclusion is uncomfortable and awkward turtle but real: they aren't going to be the best software solution in their category forever. There's no such thing as a permanent champ. But they might be able to win at being the default. And that's arguably more powerful. The default CRM. The default procurement application. The default database.
Life after death
It's entirely possible to build a second life as a steady, Eddy, embedded application supporting the AI-native knife fight (without participating in it).
Legacy billing platform watching LLMs duke it out
If you can't compete on innovation, selling pickaxes to the gold miners makes a ton of sense.
Another example… Think about when a big company decides they need a new ERP or HRIS. The first call isn't directly to Workday (that would be silly, and far too efficient). It's to Deloitte or PwC to help them "evaluate their options." Except Deloitte has like 3,000 certified Workday consultants on staff. They've built their entire practice around it: implementation methodology, project templates, and bespoke training programs. They’ve been Workday pilled.
So yea when they walk in to objectively help you evaluate vendors, the deck is stacked. Not through corruption, necessarily. It’s not a hostage negotiation. It's just what they know (and what they’re incentivized to push). They can implement Workday better than anything else because that's where they've invested.
While this is a services-to-software example, the same logic applies when you swap consultants for APIs.
Rethinking "marketing spend"
I have no idea what Supabase pays Lovable, if anything. But the value of that placement is very big. And if you're a CFO thinking about this model, the math starts with a question most people skip: what exactly are you paying for?
Is it a flat annual fee to be the default?
A cut on the first order only?
Or are you handing over a percentage of every future purchase that customer makes… forever?
That last one is sneaky. First-order rev share feels manageable (even if you lose money on that initial purchase). Lifetime rev share is a different beast entirely, especially if your retention is strong. This could actually be an anchor on your P&L. And the better your product, the more expensive that deal gets over time.
Then there's the org question. This kind of distribution doesn't run itself. Someone has to manage the partner relationship, negotiate the terms, make sure the integration actually works. That's not your demand gen team. It’s a sales / marketing / biz dev animal of a different breed.
Which means you're either hiring or reallocating. At PartsTech a ton of our technical resources went to building and maintaing integrations. I’m guessing Lovable changes their code a lot. Supabase will have to adjust. They are downstream to those changes.
So even if you spend less money on Google ads, and plow more into a partnerships function, what’s the actual number (and how much is ongoing)? Because the unit economics have to hold up over the entire lifetime of the customer for many of these partnerships, not just at the initial sale.
So what's your moat?
Disclaimer: Today’s partner may build what you have if they get bored (or realize how much you’re making).
At PartsTech we always thought “wow that would really suck if our SMS partners tried to recreate what we do and owned the full value chain.”
Many tried, but couldn’t crack it. We had a deep data moat built on a decade of relationship building with thousands of fragmented manufacturers who didn’t want to give that information out again.
So there is an existential risk (I think they call it platform risk) to this partnership strategy. You’ve gotta think through what your moat is.
Data: First party data they can’t replicate
Cornered experts: Some industries just require people who know things. You can’t hire them overnight.
Regulatory complexity: You chewed glass to do some sort of painful certification / licensing work. They can take advantage of your overhead.
Network effects: Your product gets better with the more people who are on it.
And sometimes the moat is simpler than any of that.
Doing the dirty work: The dog shit integrations nobody wanted to build with software from 1980. The ugly customer support for all too common edge cases. The manual data cleansing that has to happen before anything else works. Having to speak to Tony at your biggest supplier who’s grandfather started the place and he’s a jerk and makes you walk him through every line of a 700 page invoice each month. No one likes Tony.
Even if a partner could do it, they don't want to. It's not their core business. It's messy and thankless and hard to scale.
I know how to unclog a toilet. I'm still calling the plumber.
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