Venture investors have traditionally gravitated toward technology-driven startups that promise to shake up traditional industries or invent fresh business models. Now, some significant players are taking a new direction by purchasing well-established firms—such as call centers and accounting practices—and revamping them with artificial intelligence to increase efficiency and reach more clients through automation.
This emerging investment approach, often compared to private equity consolidation, is gaining momentum among firms including General Catalyst, Thrive Capital, and solo investor Elad Gil. General Catalyst, for example, has classified this method as a new kind of asset class and already counts seven businesses in its portfolio employing this strategy.
One illustrative venture is Long Lake, which acquires homeowners associations to streamline community management with technology. Long Lake has rapidly attracted $670 million in investment since its founding less than two years ago, reflecting investor enthusiasm for this model.
AI Integration Spurs Fresh Opportunities
Although this strategy remains relatively novel, other firms are signaling interest in experimenting with similar acquisitions. Khosla Ventures, renowned for its bold bets on breakthrough tech, is among those exploring possibilities, according to insights shared by partner Samir Kaul.
Blending established firms with AI tools could offer a distinct edge to emerging AI startups, granting them immediate access to thriving customer bases that have traditionally been hard to penetrate. These connections might prove vital when pioneering startups face hurdles in building relationships or closing sales with major enterprises.
At the same time, Khosla Ventures remains mindful of risks, prioritizing strong financial stewardship and protecting their track record of high returns. Kaul noted that the firm’s approach is measured, aiming to experiment with a limited number of these AI-powered business buyouts and roll-ups before considering a more focused investment vehicle.
Should these early investments yield the desired results, Khosla Ventures would likely partner with experienced private equity specialists to oversee future acquisitions rather than developing an in-house team. This partner-driven method reflects the firm’s emphasis on expertise and caution as it charts a potential new course for venture capital in the age of artificial intelligence.
