I Only Care About Terminal Value - by Yoni Rechtman

I Only Care About Terminal Value

Prefix's seed round, Slop Con NYC, LLM-client privilege

Apr 17, 2026

There’s a meme war going on right now between “it’s all about SBC” and “it’s all about terminal value.” The obvious answer is that it’s both. But the important is why it’s both, and what that tells you about where the SoftWars™ are headed.

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. That’s the basic dichotomy of the market right now.

If you are one of the happy few companies that the market believes not only has INCOME/earning potential but the potential to be a perpetuity (has terminal value), then it doesn’t matter because nothing matters. 25% of revenue as SBC is merely the price to pay for acceleration. The problem is that your low growth, moderate adjusted-EBITDA SaaS name is not one of them. Cutting SBC will make that business more attractive to a value-oriented financial acquirer but doesn’t give you a future.

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.

From Matt Slotnick:

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.

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.

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.

Strong endorse.

Now to make this about ME. This matters as much or more at seed than anywhere else.

Basically the only questions that you can really even ask are:

Do I love this guy/gal
Is there a story that matters
Is there something convex/interesting to spend money on today
Is there terminal value

This often gets muddled by asking “what’s your moat” which doesn’t make sense and has no good answer. You of course can’t have a moat early. If you could, you probably couldn’t start. (Some notable exceptions include things like regulatory capture through political connections, but those are rare).

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. If nothing else it’s a more interesting/revealing conversation to have early.

And if you can’t/don’t have a strong POV on terminal values in 10 years you shouldn’t be investing in a category with 10+ year hold periods. This goes for founders and investors alike.

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?” Obviously things are hard and you can only make those claims in a narrow set of companies but the point stands. And I it’s not an academic question; it winds up really impacting what you build and prioritize today (capital allocation).

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.

We are not traders. We’re investors who, as a bug or feature, have no liquidity. All we have is terminal value - hopefully our companies will too.

We Co-led Prefix’s Seed Round

A couple years ago I wrote about why repair and maintenance is a super elegant way to get into industrial workflows efficiently and build a many-armed tentacle monster:

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 - not just a question of price.

That was a preview of Prefix (and Heave).

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.

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.

Prefix lets big brands interact with small, local service providers on more of a like-to-like basis: buy from Prefix, get service fulfilled by the best local players. Best of both worlds. And on the other side, it makes those big accounts winnable for small businesses that would otherwise never get in the door.

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 for small independent brands.

We co-led a $7.5M seed round with Collide Capital to help Prefix keep scaling. The company is expanding aggressively beyond QSR chains into retail and other multi-site verticals, and over time we’re excited to see them go deeper on both sides of the marketplace.

Prefix is a revenue driver and sales orchestration opportunity for the supply side, and a coordination layer that keeps getting more valuable for the demand side. This is how useful technology gets into the real economy and makes long tail entrepreneurship more possible and profitable.

Prefix is hiring AEs and senior salespeople around the US.

Slop Con

On Saturday, May 2nd, we’re hosting NYC Slopcon, a hackathon for product engineers, vibe coders, commercially minded engineers, technically minded sales people, high velocity operators, etc..

We are convinced that the world is reorganizing around four archetypes and ways of working: slop cannons (non derogatory), SREs, adults, and hot people.

The best AI native companies are increasingly recruiting commercially minded engineers regardless of the role. They explicitly want people who are comfortable using tools AND thinking about product AND thinking about customers. 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.

We’ll have prizes and credits from OpenAI, Vercel, Pangram, and Memelord. Join us. Slop em up.

The world needs attorney client privilege for AI

Messages to LLMs are not privileged/are discoverable. We’re starting to see them show up in litigation along with the advice for regular people not to ask Claude about the law.

This is a gift to the legal cartel and it’s bad for everyone else.

Consulting LLMs about legal matters in parallel to lawyers, before lawyers, and instead of lawyers is pro-social behavior. 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.

Worse, the genie can’t go back in the bottle. The landlords, employers, corporations, and scammers will use AI to drop the cost of contracts and litigation threats to zero. Consumers will get screwed.

Someone should build the product that serves the behavior and protects the user.

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. I’m sure there’s nuance here, but the broad strokes seem solvable by a good lawyer and a good product person working together.

The business model is either standalone consumer AI and/or PLG for a consumer neofirm.

On one hand this is “safety driver in the Waymo” which is dumb. On the other, it’ll ultimately be good for people, which is good.