Summary:
VCs are acquiring mature businesses and enhancing them with AI to boost efficiency and customer reach
Firms like General Catalyst and Thrive Capital are pioneering this new investment strategy
Khosla Ventures is cautiously exploring this approach to maintain its strong return track record
This strategy offers AI startups instant access to large, established clients
Khosla plans to partner with PE-style firms for acquisitions, lacking in-house expertise
Venture capitalists are traditionally known for funding startups that disrupt industries or create new markets. However, a new trend is emerging where VCs are acquiring mature businesses and enhancing them with artificial intelligence (AI) to improve efficiency and customer reach.
The New VC Playbook
Firms like General Catalyst, Thrive Capital, and solo VC Elad Gil are leading this innovative approach. They're not just investing in startups but are actively acquiring established companies, such as call centers and accounting firms, to automate and scale their operations using AI.
- General Catalyst has already backed seven such companies, including Long Lake, which focuses on streamlining homeowners association management. Long Lake has raised $670 million in less than two years.
Khosla Ventures Joins the Fray
Known for early bets on risky technologies, Khosla Ventures is now exploring this strategy. Samir Kaul, a general partner at Khosla, mentioned the firm is cautiously evaluating these opportunities to ensure they align with their strong return track record.
Benefits for AI Startups
This strategy could be a boon for AI startups struggling to secure customers. By integrating AI into mature businesses, startups gain instant access to large, established clients, bypassing the traditionally long sales cycles in enterprise markets.
Proceeding with Caution
Khosla Ventures plans to partner with PE-style firms for acquisitions, acknowledging their lack of in-house expertise in this area. The firm aims to assess the viability of this strategy through a few initial deals before potentially raising a dedicated fund.
This shift represents a significant evolution in VC investment strategies, blending traditional venture capital with private equity tactics to unlock new growth opportunities through AI.
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