Making sense of tech-enabled services

David Pinsky
4 min readApr 17, 2022


Every business I read about these days is a “tech-enabled strategic partner that leverages machine learning and AI to deliver better outcomes.” Yikes. Clever marketing or empty words?

The term tech-enabled services (“TES”) was first coined in the mid-2000s by an investment group called Emergence Capital. Despite having been in the lexicon for nearly two decades, the definition remains vague.

Put simply, tech-enabled services can be thought of as leveraging technology to accelerate, improve or scale the delivery of some type of service.

Source: ACG Partners

Index Ventures cites the following example:

“Instead of the traditional lawyer being able to support a maximum of ten clients a month, using machine learning software, this same lawyer can now support a hundred clients a month, while offering a better service”

The lawyer’s use of technology improved the end service (perhaps fewer human error driven mistakes) and helped scale their deployment of services across a greater number of clients (automation made the process more efficient).

How is this different from pure-play software or SaaS?

The obvious distinction is a tech-enabled service is primarily a service offering — not a product. This typically requires a significant amount of human capital involvement throughout the engagement. Further, tech-enabled services are a lower risk, lower hanging fruit approach to incorporating technology into business processes (vs. the rip & replace approach of software).

Source: Index Ventures

Though easier to implement than pure software, tech-enabled services don’t scale nearly as well because of the inherent human-capital related component. The incremental delivery of a software offering requires practically zero marginal cost. The same can’t be said for a TES.

In the lawyer example above, each incremental client delivery of their service strains the lawyer’s time, and soon enough they’ll need to bring additional personnel into their firm.

Tech-enabled services are typically characterized by attractive business models and thus an interesting domain for investors for several reasons:

  1. Recurring revenue: Business mix is often characterized by revenue that is largely recurring or re-occuring in nature
  2. Sound margins: Embedded tech enables operating leverage as businesses scales — gross margins typically 50%+
  3. Robust growth: Opportunity to further entrench within existing customer base, upselling and capturing share as customers look to consolidate vendors

The spectrum of TES businesses includes:

A) Companies that are already tech-enabled

B) Companies that can easily be tech-enabled

C ) Companies that help their clients become tech-enabled

In general, compelling models in this space are businesses that can move up the value chain from more of a project oriented solution towards that of a managed service, which is characterized by recurring revenue.

A Case Study: Take RIA-in-a-Box, which started out as a consultancy focused on compliance solutions for independent wealth advisors (registered investment advisors, or RIAs).

In its early days, the company offered consulting services for regulatory filings and registrations, a manual and time intensive process. After being acquired through the Search Fund model by a scrappy entreprenuer, the business slowly evolved towards a managed serviced model and built out an internal portal to automate many of the legacy compliance processes. Today, the business has meaningfully “expanded the box”, offering a fully built out SaaS plataform which offers a seamless set of compliance tools for independent RIAs. The company has expanded beyond regulatory registrations to include solutions that help manage employee supervision and attestations (code of ethics, gifts & entertainment policies), employee trade monitoring, cybersecurity as well as vendor due diligence.

In June 2021, RIA-in-a-Box was acquired by a strategic, Complysci — a leading provider of regulatory technology and compliance solutions focused on the financial services sector.

This is the perfect example of a business moving up the value chain, building a better business model in the process and likely commanding a meaningful valuation uplift at exit.

In this environment, tech-enabled services trade at ~mid-teen EBITDA multiples given their sound business characteristics. A few exciting sub-sectors in the space include:

  1. Marketing & Information Services
  2. Education & Training
  3. Insurance, Legal and Risk
  4. Compliance
  5. Corporate Outsourcing
Source: Harris Williams

In subsequent posts, I’ll dive into the merit of some of these sub-domains.

Follow me on @Medium for more insights on the evolving tech-enabled service landscape and in the meantime, feel free to message me with any thoughts, feedback, etc!