Venture capital firms, traditionally drawn toward funding innovative startups poised to disrupt established industries or pioneer new sectors, are increasingly shifting toward a fresh investment strategy. Instead of exclusively backing untested young companies, some VCs now target mature, established businesses—such as call centers, accounting firms, and other professional service providers—and infuse them with artificial intelligence technology to streamline operations, automate processes, and significantly expand productivity.
Prominent venture firms adopting this strategic approach include General Catalyst and Thrive Capital, along with individual VC investors such as Elad Gil. General Catalyst, which touts this method as a distinct asset class, has already invested substantially in several ventures of this type. One notable example is Long Lake, a company founded under two years ago, which acquires homeowners’ associations and implements technological advancements for more efficient management. Long Lake has raised approximately $670 million so far.
Khosla Ventures, well-known for embracing early-stage investments in advanced, yet risky technologies, is also exploring opportunities within this specialized domain. Samir Kaul, a general partner with the firm, indicated that Khosla Ventures will likely consider taking steps toward similar AI-driven acquisitions. He emphasized that the firm intends an incremental approach, carefully performing initial acquisitions to ensure such investments align with their commitment to strong returns and responsible stewardship of investor funds.
For AI startups, this evolving approach presents a clear advantage. By merging the strengths of established, customer-rich businesses with cutting-edge AI technology, young companies in the crowded artificial intelligence space gain immediate and significant access to industry clients. This is especially valuable given the prolonged sales cycles typical of large enterprises, coupled with rapid developments and competition within AI.
Despite potential upsides, Khosla Ventures remains cautious. Kaul clarified the intention to carefully test the waters with initial transactions before considering formation of a specialized fund focused solely on such roll-up opportunities. If initial investments perform well, rather than manage acquisitions entirely alone, Kaul suggested partnering with a private equity firm possessing the requisite operational expertise for executing complex integrations and managing mature companies.
