Italian firm Bending Spoons flew largely below the radar — till final month. In a span of 48 hours, the corporate introduced the acquisition of AOL and a large $270 million elevate, quadrupling its valuation to $11 billion, up from $2.55 billion set in early 2024.
Bending Spoons has grown quickly by buying stagnating tech manufacturers like Evernote, Meetup, and Vimeo, then turning them worthwhile by means of aggressive cost-cutting and worth will increase. Whereas the corporate’s strategy is just like non-public fairness, there’s one key distinction: Bending Spoons has no plans to promote these companies.
Andrew Dumont, the founder and CEO of Curious, a agency that additionally acquires and revitalizes what he calls “enterprise zombies,” is satisfied this “maintain endlessly” technique will develop into more and more distinguished within the coming years as AI-native startups make older VC-backed software program companies much less related.
“Our perception is that the enterprise energy regulation, by which 80% of firms ‘fail,’ produces many nice companies, even when they’re not unicorns,” Dumont advised TechCrunch.
Dumont defines a “nice enterprise” as one that may be bought at a low worth and shortly revived to generate substantial money flows. This “purchase, repair, and maintain” technique is the playbook for a rising variety of traders, from the 30-year-old Constellation Software program, which pioneered the mannequin, to newer gamers, together with Bending Spoons, Tiny, SaaS.group, Arising Ventures, and Calm Capital, in keeping with Dumont.
“Our complete mannequin is to purchase these firms, make them worthwhile, and use these earnings to develop the enterprise,” Dumont mentioned.
In 2023, Curious raised $16 million in devoted capital for purchasing software program firms which have stalled and may not safe follow-on funding.
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Since then, the agency has purchased 5 companies, together with UserVoice, a 17-year-old startup that raised $9 million in VC funding from Betaworks and SV Angel.
“It’s an incredible enterprise, however the cap desk wasn’t aligned with maintaining it. These funds get previous, and these firms simply sit there,” Dumont mentioned. “We offer liquidity and likewise reset these firms for profitability.”
Though Dumont didn’t disclose how a lot he paid for UserVoice, he mentioned that stagnant firms promote for a fraction of the valuation commanded by wholesome SaaS startups, which generally promote for 4x annual income or extra. Based mostly on our dialog, we estimate that “enterprise zombies” generally promote for as little as 1x yearly income.
By implementing cost-cutting and worth will increase, Curious can push these companies to attain 20% to 30% revenue margins virtually instantly. “If in case you have a million-dollar enterprise, you’re kicking off $300,000 in earnings,” he supplied for instance.
They obtain the turnarounds as a result of, in contrast to the stand-alone firms, they will centralize capabilities like gross sales, advertising, finance, and different admin roles, throughout all of their portfolio firms. “We’re not making an attempt to promote the companies we purchase and don’t want VC-scale exits, so we are able to steadiness progress and profitability extra sustainably,” Dumont mentioned.
When requested why VCs don’t urge their startups to be worthwhile like Curious does, Dumont responded by saying: “Buyers don’t care about earnings; they solely care about progress. With out it, there’s no VC-scale exit, so there’s no incentive to function with that degree of profitability.”
The money generated from Curious’ firms is then used to purchase different startups, Dumont mentioned.
The agency plans to purchase 50 to 75 startups like UserVoice over the following 5 years, and Dumont is definite he received’t have a scarcity of targets to select from. Curious is concentrated on buying startups that generate $1 million to $5 million in recurring income yearly, a phase of the software program market that, in keeping with Dumont, non-public fairness retailers and secondary traders have traditionally ignored.
“We’ve been doing this for slightly below two years now, and we’ve in all probability checked out at the very least 500 firms, and we purchased 5,” Dumont mentioned.
Whereas Bending Spoons’ huge valuation hike might validate the “enterprise zombie” acquisition mannequin, Dumont doesn’t anticipate loads of new competitors. Turning earnings out of stagnation isn’t simple. “It’s a ton of labor,” he mentioned.
