The Italian firm Bending Spoons recently gained significant attention – particularly over the last month. Within a 48-hour period, the company announced both the acquisition of AOL and a substantial $270 million funding round, which resulted in a valuation of $11 billion, a considerable increase from the $2.55 billion it was valued at earlier in 2024.

Bending Spoons has experienced rapid expansion by acquiring established technology companies that have experienced a slowdown, such as Evernote, Meetup, and Vimeo, and then restoring their profitability through careful expense reduction and adjustments to pricing. Although this strategy shares similarities with those employed by private equity firms, a key distinction exists: Bending Spoons does not intend to sell these acquired businesses.

Andrew Dumont, the founder and CEO of Curious, a company focused on acquiring and revitalizing businesses he refers to as “venture zombies,” believes this “long-term ownership” approach will become increasingly common in the years ahead, as startups built around artificial intelligence diminish the relevance of older, venture capital-backed software companies.

“We operate under the conviction that the venture capital power law, which suggests that 80% of companies will not succeed, still produces many viable businesses, even if they don’t achieve unicorn status,” Dumont explained to TechCrunch.

Dumont characterizes a “viable business” as one that can be acquired at a reasonable price and quickly improved to generate significant cash flow. This “acquire, improve, and retain” strategy is being adopted by a growing number of investors, including Constellation Software, a pioneer of this model with 30 years of experience, as well as newer firms like Bending Spoons, Tiny, SaaS.group, Arising Ventures, and Calm Capital, as noted by Dumont.

“Our core strategy involves purchasing companies, making them profitable, and reinvesting those earnings to further expand the business,” Dumont stated.

In 2023, Curious secured $16 million in dedicated funding specifically for the purchase of software companies that have stalled and are unable to obtain further investment.

Since then, the firm has completed the acquisition of five businesses, including UserVoice, a 17-year-old startup that previously raised $9 million in venture capital from Betaworks and SV Angel.

“This is a strong business, but its ownership structure wasn’t conducive to long-term growth. Existing funding rounds mature, and these companies can become stagnant,” Dumont said. “We offer a path to liquidity and also restructure these companies to prioritize profitability.”

While Dumont did not reveal the purchase price of UserVoice, he indicated that struggling companies are typically sold for a fraction of the valuation commanded by thriving SaaS startups, which often sell for 4x their annual revenue or more. Based on the discussion, we estimate that “venture zombies” can sometimes be acquired for as little as 1x annual revenue. [Speculation]

By implementing cost reductions and price adjustments, Curious can quickly drive these businesses to achieve profit margins of 20% to 30%. “For every million dollars in revenue, this generates $300,000 in earnings,” he illustrated.

These improvements are possible because, unlike independent companies, they can consolidate functions such as sales, marketing, finance, and administrative tasks across their entire portfolio of businesses. “We are not focused on selling the companies we acquire and do not require the large-scale exits typical of venture capital, allowing us to balance growth and profitability in a more sustainable manner,” Dumont explained.

When questioned about why venture capitalists don’t encourage their startups to prioritize profitability as Curious does, Dumont responded: “Investors are primarily concerned with growth; earnings are secondary. Without substantial growth, there is no opportunity for a venture capital-scale exit, and therefore no incentive to operate with a focus on profitability.”

The capital generated by Curious’ companies is then used to acquire additional startups, Dumont added.

The firm intends to acquire between 50 and 75 startups similar to UserVoice over the next five years, and Dumont is confident that there will be no shortage of potential targets. Curious is concentrating on acquiring startups that generate between $1 million and $5 million in recurring annual revenue, a segment of the software market that, according to Dumont, has historically been overlooked by private equity firms and secondary investors.

“We have been pursuing this strategy for just under two years, and we have evaluated at least 500 companies, ultimately acquiring five,” Dumont said.

While Bending Spoons’ significant increase in valuation may reinforce the viability of the “venture zombie” acquisition model, Dumont does not anticipate a surge in new competitors. Revitalizing struggling businesses is a demanding undertaking. “It requires a substantial amount of effort,” he concluded.