VC firms like General Catalyst and Mayfield are betting on AI to transform labor-heavy services businesses, automating 30-70% of tasks to boost margins. GC has deployed $1.5B to incubate AI-native firms, acquire traditional service providers, and scale via roll-ups—already doubling EBITDA in portfolio companies. However, challenges like "workslop" (AI-generated inefficiencies costing $9M/year per 10K employees) highlight complexities in executing this model. Despite risks, investors see AI-driven vertical integration as the next margin-boosting frontier.