The Italian company Bending Spoons had largely flown under the radar until last month. In a span of just 48 hours, the company announced its acquisition of AOL and a massive 270 million dollar raise. This funding round quadrupled its valuation to 11 billion dollars, up from the 2.55 billion dollar valuation set in early 2024.
Bending Spoons has grown rapidly by acquiring stagnating tech brands like Evernote, Meetup, and Vimeo. The company then turns them profitable through aggressive cost-cutting and price increases. While this approach is similar to that of a private equity firm, there is one key difference. Bending Spoons has no plans to sell these businesses.
Andrew Dumont, the founder and CEO of Curious, a firm that also acquires and revitalizes what he calls venture zombies, is convinced this hold forever strategy will become increasingly prominent. He believes it will grow as AI-native startups make older venture capital-backed software businesses less relevant. He stated that the venture power law, in which 80 percent of companies fail, produces many great businesses even if they are not unicorns. Dumont defines a great business as one that can be purchased at a low price and quickly revived to generate substantial cash flows.
This buy, fix, and hold strategy is the playbook for a growing number of investors. The model was pioneered by the 30-year-old Constellation Software and is now used by newer players including Bending Spoons, Tiny, SaaS.group, Arising Ventures, and Calm Capital, according to Dumont. He explained that their whole model is to buy these companies, make them profitable, and use those earnings to grow the business.
In 2023, Curious raised 16 million dollars in dedicated capital for buying software companies that have stalled and can no longer secure follow-on investment. Since then, the firm has bought five businesses, including UserVoice, a 17-year-old startup that had raised 9 million dollars in venture capital funding from Betaworks and SV Angel. Dumont said it is a great business, but the cap table was not aligned with keeping it. He explained that funds get old and these companies just sit there. Curious provides liquidity and also resets these companies for profitability.
Although Dumont did not disclose how much he paid for UserVoice, he said that stagnant companies sell for a fraction of the valuation commanded by healthy SaaS startups. Healthy startups typically sell for four times annual revenue or more. Based on the conversation, it is estimated that venture zombies sometimes sell for as low as one times yearly revenue.
By implementing cost-cutting and price increases, Curious can push these businesses to achieve 20 to 30 percent profit margins almost immediately. He offered an example that if you have a million-dollar business, you are kicking off 300,000 dollars in earnings. They achieve these turnarounds because, unlike standalone companies, they can centralize functions like sales, marketing, finance, and other administrative roles across all of their portfolio companies. Dumont said they are not trying to sell the businesses they acquire and do not need venture capital-scale exits, so they can balance growth and profitability more sustainably.
When asked why venture capitalists do not urge their startups to be profitable like Curious does, Dumont responded by saying investors do not care about earnings, they only care about growth. Without growth, there is no venture capital-scale exit, so there is no incentive to operate with that level of profitability.
The cash generated from Curious’s companies is then used to buy other startups, Dumont said. The firm plans to buy 50 to 75 startups like UserVoice over the next five years, and Dumont is certain he will not have a shortage of targets to choose from. Curious is focused on acquiring startups that generate one to five million dollars in recurring revenue annually. According to Dumont, this is a segment of the software market that private equity shops and secondary investors have historically ignored.
He stated that they have been doing this for a little under two years now, and they have probably looked at at least 500 companies, and they bought five. While Bending Spoons’ big valuation hike may validate the venture zombie acquisition model, Dumont does not expect a lot of new competition. He emphasized that turning profits out of stagnation is not easy, stating that it is a ton of work.