The Rise of ‘Hold Forever’ Investors: Embracing Venture Capital ‘Zombies’

Italian Company Bending Spoons Makes Waves with Major Acquisitions and Fundraising

In a surprising turn of events, Italian tech company Bending Spoons recently made headlines with its acquisition of AOL and a significant $270 million fundraising campaign. This move catapulted the company’s valuation to a staggering $11 billion, a remarkable increase from its previous valuation of $2.55 billion set in early 2024.

Bending Spoons’ rapid growth can be attributed to its strategy of acquiring struggling tech brands such as Evernote, Meetup, and Vimeo, and then revitalizing them through aggressive cost-cutting measures and price adjustments. While this approach bears resemblance to private equity tactics, the key difference lies in Bending Spoons’ decision to retain ownership of these businesses rather than selling them off.

Andrew Dumont, the founder and CEO of Curious, a firm specializing in acquiring and reviving “venture zombies,” predicts that the trend of holding onto acquired businesses indefinitely will gain traction in the future. This shift is expected to occur as AI-native startups render older VC-backed software companies less relevant in the market.

According to Dumont, a “great business” is one that can be purchased at a low cost, swiftly revitalized to generate substantial cash flow. This “buy, fix, and hold” strategy is gaining popularity among investors, with established players like Constellation Software leading the way, alongside newer entrants such as Tiny, SaaS.group, Arising Ventures, and Calm Capital.

Curious, for instance, secured $16 million in dedicated capital in 2023 for acquiring software companies that have reached a standstill and can no longer attract further investment.

Since then, Curious has acquired five businesses, including UserVoice, a 17-year-old startup that previously raised $9 million in VC funding from Betaworks and SV Angel.

Dumont emphasized the importance of aligning the cap table with the company’s vision, citing UserVoice as an example of a promising business with outdated funding structures. By providing liquidity and repositioning these companies for profitability, Curious aims to breathe new life into stagnant ventures.

While specific acquisition figures were not disclosed, Dumont revealed that struggling companies often sell for a fraction of the valuation commanded by thriving SaaS startups, with some “venture zombies” fetching as low as 1x yearly revenue.

Through a combination of cost-cutting measures and strategic price adjustments, Curious can swiftly elevate acquired businesses to achieve profit margins ranging from 20% to 30%. This operational efficiency stems from the ability to centralize key functions like sales, marketing, and finance across the portfolio companies.

Unlike traditional startups driven by the pursuit of VC-scale exits, Curious focuses on sustainable growth and profitability, enabling a balanced approach that prioritizes long-term value creation over immediate returns.

In contrast to conventional VC expectations, which prioritize growth over earnings, Curious leverages the cash flow generated by its portfolio companies to fuel further acquisitions, thereby perpetuating a cycle of strategic expansion.

Looking ahead, Curious plans to acquire 50 to 75 startups akin to UserVoice within the next five years, targeting companies with annual recurring revenues ranging from $1 million to $5 million. This market segment, historically overlooked by private equity firms and secondary investors, presents a lucrative opportunity for Curious to drive growth and value creation.

Dumont expressed confidence in the abundance of potential targets for acquisition, citing a rigorous evaluation process that has seen Curious assess over 500 companies and ultimately acquire five within a span of two years.

While Bending Spoons’ recent valuation surge serves as a testament to the viability of the “venture zombie” acquisition model, Dumont anticipates limited competition in this space due to the substantial effort required to extract profitability from stagnant businesses. He emphasized the intensive nature of this process, underscoring the dedication and strategic acumen essential for successful turnarounds.