Venture capital is experiencing a stealth revolution—and it’s not the one that begins in a garage. Rather than pursuing solely the next hot idea from young founders, some of the best firms in the industry are turning their attention in a direction much more down-to-earth: buying up established companies and applying artificial intelligence to transform them.
This emerging strategy looks less like traditional VC and more like a private equity playbook—but with a modern, AI-powered twist. Firms like General Catalyst, Thrive Capital, Khosla Ventures, and solo investor Elad Gil are taking solid, revenue-generating companies—think call centers, accounting firms, and other service-based businesses—and injecting them with automation and machine learning to drive efficiency, scale, and growth.
A New Kind of Investment Play
General Catalyst is at the forefront with an expanding portfolio of firms leveraging this model. A standout is Long Lake, a company that is seeking to revolutionize homeowners association management. Long Lake has already raised a whopping $670 million since it came on board, illuminating just how much investor demand there is for this new model. General Catalyst is even terming it an entirely new asset class.
But they are not the only ones. Thrive Capital and Elad Gil have also begun to investigate these AI-powered roll-ups, and Khosla Ventures, famed for its big bets on game-changing technology, is being deliberately tentative.
“We’re interested in a few opportunities,” said Samir Kaul, General Partner at Khosla Ventures. “The businesses we’re interested in aren’t going to lose money, but we want to go slowly. We mustn’t tarnish our record.”
Why This Matters to AI Startups
This transition may be a game-changer for AI startups. Rather than attempting to acquire large enterprise customers from the ground up—a famously slow and painful process—AI startups can tap into the existing customer base of an already-established mature business.
Kaul simply stated: “When early-stage startups are having trouble getting customers, access to older ones through acquisitions makes all the difference.” This is particularly precious considering how rapidly the AI landscape is moving and the length of traditional B2B sales cycles.
Cautious Optimism and Smart Scaling
Khosla Ventures isn’t leaping in without caution. The venture wants to conduct some small-scale tests before determining if it will pursue a dedicated fund for this approach. And if things look good, Kaul says they’d probably partner with a private equity-style firm to do the acquisition portion of things, instead of developing that know-how in-house. “We wouldn’t do it by ourselves,” he said. “That’s not our area of strength.
This venture equity hybrid—fusing the speed and tolerance for risk of venture capital with private equity’s operational rigor—may transform the investment community’s understanding of how to fuel innovation. It’s also a sign of maturity in the AI industry, where the focus is no longer exclusively on breakthrough tech, but on scalable, sustainable effects.
The Bigger Picture
This trend is not simply about seeking new avenues to create returns. It’s an indication of how venture capital itself is changing. As the distinction between VC and PE becomes increasingly indistinct, AI is proving to be the driver of a new style of business change.
For mature service firms, it’s a second shot at innovation. For AI startups, it’s a path to real-world traction. And for investors, it’s a chance to challenge the very assumptions of how growth and innovation interact.
In a world that tends to fawn over the next big thing, this model is a reminder: sometimes, the best play isn’t to create something new—the smartest is to make something old smarter.
