The Italian company Bending Spoons remained in the shadows – until last month. Within 48 hours, the company announced the acquisition of AOL and a massive $270 million raise, quadrupling its valuation to $11 billion from the $2.55 billion set in early 2024.
Bending Spoons grew rapidly by acquiring stagnant technology brands equivalent to Evernote, Meetup and Vimeo, then increasing their profitability through aggressive cost cutting and price increases. While the company’s approach is just like that of personal equity, there is one key difference: Bending Spoons has no plans to sell the businesses.
Andrzej Dumont, The founder and CEO of Curious, a company that also acquires and revitalizes so-called “risk zombies,” believes the “hold forever” strategy will develop into increasingly outstanding in the coming years as AI-powered startups make legacy VC-backed software corporations less relevant.
“We think the high-risk energy law where 80% of companies ‘fail’ creates a lot of great companies, even if they’re not unicorns,” Dumont told TechCrunch.
Dumont defines a “big business” as one that may be purchased at a low price and quickly revived, generating significant money flow. The buy-fix-hold strategy is the playbook for a growing variety of investors, from 30-year-old Constellation Software, which pioneered the model, to newer players including Bending Spoons, Tiny, SaaS Group, Emerging venturesAND A quiet capitalin accordance with Dumont.
“Our whole model is to buy these companies, make them profitable and use the profits to grow the business,” Dumont said.
In 2023, Curious raised $16 million in dedicated capital to amass software corporations that have stalled and can not secure further investment.
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Since then, the company has purchased five corporations, including UserVoice, a 17-year-old startup that raised $9 million in VC funding from Betaworks and SV Angel.
“It’s a great business, but the cap table wasn’t set up to sustain it. The funds are aging and the companies are just sitting there,” Dumont said. “We are providing liquidity and also restoring profitability to these companies.”
While Dumont didn’t disclose how much it paid for UserVoice, he said stagnant corporations sell for a fraction of the valuation achieved by healthy SaaS startups, which generally sell for 4 times or more annual revenue. Based on our conversation, we estimate that “expedition zombies” sometimes sell for as little as 1x annual revenue.
By implementing cost reductions and price increases, Curious can force these corporations to attain profit margins of 20% to 30% almost immediately. “If you run a million-dollar company, you start making $300,000,” he offered as an example.
They are making changes because, unlike standalone corporations, they’ll centralize functions equivalent to sales, marketing, finance and other administrative roles across their portfolio corporations. “We are not trying to sell acquired businesses, and we do not need VC-scale exits so that we can more sustainably balance growth and profitability,” Dumont said.
When asked why VCs don’t push their startups to be profitable like Curious does, Dumont replied: “Investors aren’t interested in profits; they’re only interested in growth. Without that, there’s no way out at VC scale, so there’s no incentive to operate at that level of profitability.”
Dumont said the money generated by Curious corporations is then used to purchase other startups.
The company plans to purchase 50 to 75 startups like UserVoice over the next five years, and Dumont is confident it can have no shortage of targets to decide on from. Curious is focused on acquiring startups that generate $1 million to $5 million in recurring revenue annually, a segment of the software market that Dumont says private equity shops and secondary investors have historically ignored.
“We’ve been doing this for less than two years, we’ve probably looked at at least 500 companies and we’ve bought five,” Dumont said.
While Bending Spoons’ large valuation increase may validate its “venture zombie” takeover model, Dumont doesn’t expect much recent competition. Turning profits out of stagnation is demanding. “It’s a lot of work,” he said.