Khosla Ventures Leads the Charge: VCs Explore AI-Infused Roll-Ups of Established Companies
Venture capitalists traditionally focus on investing in startups that leverage technology to disrupt industries or create new markets. However, some VCs are shifting their strategies by acquiring established businesses, such as call centers and accounting firms, and enhancing them with artificial intelligence (AI) to improve customer service through automation.
This approach mirrors private equity roll-ups and is being adopted by firms like General Catalyst, Thrive Capital, and solo VC Elad Gil. General Catalyst has recognized this as a new asset class, supporting several companies, including Long Lake, which consolidates homeowners’ associations to simplify community management. Long Lake has raised $670 million in funding in under two years.
As the model gains traction, Khosla Ventures, known for backing innovative technologies, is also exploring this investment strategy. General partner Samir Kaul expressed interest in evaluating such opportunities but noted the need for caution. He highlighted the desire to maintain strong returns on investments while experimenting with a new approach.
Interestingly, this strategy could benefit many AI start-ups by granting them immediate access to a robust customer base if they partner with these established businesses. This access can be especially crucial for AI startups struggling to secure clients independently amid an expanding market and lengthy enterprise sales processes.
Kaul emphasized that while Khosla Ventures is starting to explore AI roll-ups, they will focus on a few initial investments to gauge their effectiveness. It’s also imperative for Khosla to ensure these investments do not jeopardize its historically strong performance. Should this strategy show promise, they may collaborate with a private equity firm for acquisitions, rather than building an in-house team.
By blending traditional businesses with cutting-edge technology, Khosla Ventures and its peers aim to rejuvenate industries while paving the way for new startups to thrive in this evolving landscape.
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