Venture Capital Firms Explore AI-Driven Acquisitions of Established Businesses

Venture capitalists traditionally invest in tech-driven companies that disrupt industries or pioneer new markets.

However, some VCs are shifting their approach. Instead of backing startups, they are acquiring established businesses—such as call centers, accounting firms, and professional service providers—and enhancing them with AI to boost efficiency and serve more clients through automation.

This approach, similar to private equity roll-ups, is being adopted by firms like General Catalyst, Thrive Capital, and solo VC Elad Gil. General Catalyst, viewing this as a new asset class, has supported seven such ventures, including Long Lake, a company streamlining homeowners association management. Since its launch less than two years ago, Long Lake has raised $670 million, per PitchBook data.

Though still emerging, other venture firms have shared with TechCrunch that they are exploring this investment model.

Khosla Ventures, known for early investments in high-risk, innovative technologies, is among them.

“We’re considering a few of these opportunities,” said Samir Kaul, general partner at Khosla Ventures, in an interview with TechCrunch.

This private equity-inspired strategy could benefit the numerous AI startups backed by VCs. By integrating mature businesses with advanced technology, AI startups gain immediate access to established client bases.

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Kaul noted that such access could help new startups struggling to secure clients independently, especially given the fast-evolving AI landscape, the influx of new companies, and the typically lengthy enterprise sales cycles.

Khosla Ventures is approaching this cautiously. “We’re targeting companies unlikely to lose money,” Kaul said, emphasizing his responsibility to manage investors’ funds prudently and maintain the firm’s strong performance.

While Khosla Ventures is beginning to explore AI-driven acquisitions, Kaul said the firm plans to test a few deals to evaluate their returns before potentially creating a dedicated investment vehicle for this strategy.

If initial investments succeed, Khosla would likely collaborate with a private equity firm for acquisitions rather than building an in-house team. “We’d partner with experts; we don’t have that capability ourselves,” he said.