Key Takeaways
- • General Catalyst, Thrive Capital and solo VC Elad Gil are acquiring mature businesses such as call centers and accounting firms and optimizing them with AI, a strategy often likened to private equity roll-ups, according to TechCrunch.
- • General Catalyst has backed seven such companies and is touting the approach as a new asset class; Long Lake, which acquires homeowners associations, has raised $670 million since its founding less than two years ago, per PitchBook data.
- • Khosla Ventures says it will "look at a few of these types of opportunities" but will complete a handful of deals to test returns before considering a dedicated vehicle.
- • The roll-up model could give AI startups instant access to large, established enterprise customers, addressing long sales cycles that many AI startups face.
Summary
A growing number of venture capital firms are shifting part of their strategy from funding startups to acquiring mature businesses and applying artificial intelligence to them, according to TechCrunch. Targets include call centers, accounting firms and other professional services firms, which the firms aim to optimize with AI to serve more customers through automation. The approach is often compared to private equity roll-ups and is being pursued by General Catalyst, Thrive Capital and solo VC Elad Gil.
General Catalyst is positioning the strategy as a new asset class and has backed seven such companies. Among them is Long Lake, which acquires homeowners associations to make community management more streamlined. Since its founding less than two years ago, Long Lake has raised $670 million, according to PitchBook data.
Several other venture firms told TechCrunch they are considering the model. Khosla Ventures, known for early bets on risky, unproven technologies, is among them. Samir Kaul, general partner at Khosla Ventures, said, "I think we'll look at a few of these types of opportunities." He noted that the approach could benefit the many AI startups VCs back, since acquiring established businesses would give those startups immediate access to large clients, a valuable advantage given the difficulty AI startups have winning customers amid rapid technological change and long enterprise sales cycles.
Khosla is proceeding cautiously. Kaul said "the companies we're looking at are very unlikely to lose money," but emphasized that he does not want the strategy to undermine the firm's return record. "My biggest stress in life is I'm managing other people's money, and I want to make sure that I continue to be a good steward of it." The firm plans to complete a few deals to determine whether these investments deliver strong returns before potentially raising a vehicle dedicated to the strategy.
General Catalyst is positioning the strategy as a new asset class and has backed seven such companies. Among them is Long Lake, which acquires homeowners associations to make community management more streamlined. Since its founding less than two years ago, Long Lake has raised $670 million, according to PitchBook data.
Several other venture firms told TechCrunch they are considering the model. Khosla Ventures, known for early bets on risky, unproven technologies, is among them. Samir Kaul, general partner at Khosla Ventures, said, "I think we'll look at a few of these types of opportunities." He noted that the approach could benefit the many AI startups VCs back, since acquiring established businesses would give those startups immediate access to large clients, a valuable advantage given the difficulty AI startups have winning customers amid rapid technological change and long enterprise sales cycles.
Khosla is proceeding cautiously. Kaul said "the companies we're looking at are very unlikely to lose money," but emphasized that he does not want the strategy to undermine the firm's return record. "My biggest stress in life is I'm managing other people's money, and I want to make sure that I continue to be a good steward of it." The firm plans to complete a few deals to determine whether these investments deliver strong returns before potentially raising a vehicle dedicated to the strategy.
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