Italian firm Bending Spoons flew largely underneath the radar — till final month. In a span of 48 hours, the corporate introduced the acquisition of AOL and an enormous $270 million increase, 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 way of aggressive cost-cutting and value will increase. Whereas the corporate’s method is much like non-public fairness, there may be 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 without end” technique will turn out to be 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 legislation, through which 80% of corporations ‘fail,’ produces many nice companies, even when they’re not unicorns,” Dumont instructed TechCrunch.  

Dumont defines a “nice enterprise” as one that may be bought at a low value and rapidly 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 entire mannequin is to purchase these corporations, make them worthwhile, and use these earnings to develop the enterprise,” Dumont mentioned.

In 2023, Curious raised $16 million in devoted capital for getting software program corporations which have stalled and may not safe follow-on funding.

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 a terrific enterprise, however the cap desk wasn’t aligned with maintaining it. These funds get outdated, and these corporations simply sit there,” Dumont mentioned. “We offer liquidity and likewise reset these corporations for profitability.”

Though Dumont didn’t disclose how a lot he paid for UserVoice, he mentioned that stagnant corporations promote for a fraction of the valuation commanded by wholesome SaaS startups, which generally promote for 4x annual income or extra. Primarily based on our dialog, we estimate that “enterprise zombies” typically promote for as little as 1x yearly income.

By implementing cost-cutting and value will increase, Curious can push these companies to realize 20% to 30% revenue margins nearly instantly. “You probably have a million-dollar enterprise, you’re kicking off $300,000 in earnings,” he supplied for example.

They obtain the turnarounds as a result of, in contrast to the stand-alone corporations, they will centralize features like gross sales, advertising and marketing, finance, and different admin roles, throughout all of their portfolio corporations. “We’re not attempting to promote the companies we purchase and don’t want VC-scale exits, so we are able to stability development 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: “Traders don’t care about earnings; they solely care about development. 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’ corporations is then used to purchase different startups, Dumont mentioned.  

The agency plans to purchase 50 to 75 startups like UserVoice over the subsequent 5 years, and Dumont is definite he received’t have a scarcity of targets to select from. Curious is targeted 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 outlets and secondary traders have traditionally ignored.

“We’ve been doing this for a bit of underneath two years now, and we’ve in all probability checked out at the very least 500 corporations, and we purchased 5,” Dumont mentioned.

Whereas Bending Spoons’ huge valuation hike might validate the “enterprise zombie” acquisition mannequin, Dumont doesn’t count on loads of new competitors. Turning income out of stagnation isn’t simple. “It’s a ton of labor,” he mentioned.