Running capital has always focused on investing in companies that take advantage of technology to disrupt established industries or create entirely new business categories.
But some VCs start to turn the script over their investment styles. Rather than finance startups, they acquire mature companies – such as call centers, accounting firms and other professional service companies – and optimize them with artificial intelligence to serve more customers thanks to automation.
This strategy, often compared to investment capital roll-ups, is employed by companies such as General catalyst,, Prospered capitaland solo VC Elad Gil. General Catalyt, tuuting this as a new asset class, has already supported seven of these companies, including Long Lake, a startup that collects owners’ associations in order to make the management of communities more rationalized. Since its foundation less than two years ago, Long Lake has obtained $ 670 million in funding, according to Pitchbook data.
Although the strategy is still new, a few other business outfits told Techcrunch that they also planned to try the investment model.
Among them, Khosla Ventures, a company known for making early bets on risky and unproven technologies with long development times.
“I think we will examine some of these types of opportunities,” Samir Kaul, general partner at Khosla Ventures, told Techcrunch.
Interestingly, this approach flavored in PE could be a surprising advantage for the multitudes of AI startups, the VCs support. If a VC marries old companies with new technologies, AI startups wishing to serve these industries would essentially have instant access to large established customers.
According to Kaul, such access would be useful when new startups have difficulty securing customers by themselves. With the IA rapid change rate, the number of startups flowing on the market and historically long sales cycles involved in business sales, such difficulties apply to many AI startups.
But Khosla Ventures wants to proceed with caution. “The companies we look at are very unlikely to lose money,” said Kaul, but he does not want the strategy to ruin the solid history of the company. “My biggest stress in life is that I manage the money of others, and I want to make sure that I continue to be a good steward of it.”
While Khosla Ventures is starting to “compete” in investments withdrawn from AI, Kaul explained that the company wanted to conclude some agreements to assess whether such investments offer solid returns for the company before collecting funds for a sort of vehicle specifically intended for this investment strategy.
If the first bets take place, Khosla would probably join a PE style company to help it with acquisitions rather than hiring a team. “We wouldn’t do it alone, we don’t have this expertise,” he said.
