Italian company Bending Spoons flew largely under the radar — until last month. Within 48 hours, the company announced the acquisition of AOL and a massive $270 million raise, boosting its valuation to $11 billion, up from $2.55 billion in early 2024.

Bending Spoons has grown rapidly by acquiring established tech brands like Evernote, Meetup, and Vimeo, then making them profitable through aggressive cost-cutting and price increases. While the company’s approach is similar to private equity, there is one key difference: Diversifying costs has no plans to sell these businesses.

Andrew Dumont, The founder and CEO of Curious, a firm he calls “venture zombies” and also rehabilitates him, believes this “hold forever” strategy will become increasingly prominent in the coming years as local AI startups make the old VC-backed software businesses less relevant.

“We believe that the Venture Power Law, which states that 80% of companies ‘fail’, creates a lot of businesses, even if they are unicorns,” Dumont told TechCrunch.

Dumont describes a “great business” that can be bought at a low price and revived quickly to generate enough cash flow. This “buy, fix, and hold” strategy is the playbook for investors growing from 30-year-old Nakshatra Software, which pioneered the model, to new players, including Bending Works, smallfor , for , for , . saas.groupfor , for , for , . Generated projectsand Quiet capitalaccording to Dumont.

“Our whole model is to buy these companies, make them profitable, and use those proceeds to grow the business,” Dumont said.

In 2023, Curious raised $16 million in dedicated capital to buy software companies that are stalled and can no longer secure follow-on investment.

Since then, the firm has bought five businesses, including UserVice, a 17-year-old startup that raised $9 million in VC funding from BetaWorks and SV Ferishta.

“It’s a huge business, but the cap table wasn’t tied to retention. These funds get old, and these companies just sit there,” Dumont said. “We provide liquidity and restructure these companies for profit.”

Although Dumont did not disclose how much he paid for UserService, he said stable companies sell at a fraction of the valuations commanded by healthy SaaS startups, which typically sell for 4x annual revenue or more. Based on our discussions, we estimate that “venture zombies” sometimes sell for at least 1x annual revenue.

By implementing cost cutting and price increases, the tycoon can push these businesses to achieve 20% to 30% profit margins almost immediately. “If you have a million dollar business, you’re starting at $300,000 in revenue,” he offered as an example.

They achieve flexibility because, unlike stand-alone companies, they can centralize functions such as sales, marketing, finance and other admin roles across all their portfolio companies. “We’re not trying to sell the businesses we acquire and they don’t have to get out of VC scale, so we can balance growth and profitability more consistently,” Dumont said.

When asked why VCs don’t push their startups to be as profitable as Curious, Dumont responded by saying: “Investors don’t care about revenue. They just don’t care about growth. Without that, there’s no exit at VC scale, so there’s no incentive to operate with that level of profitability.”

The cash generated from interested companies is then used to buy other startups, Dumont said.

The firm plans to buy 50 to 75 startups like UserVice over the next five years, and Dumont believes it will have no shortage of targets to choose from. Curious focuses on acquiring startups that generate $1 million to $5 million in annual recurring revenue, a segment of the software market that, according to Dumont, has historically been overlooked by private equity shops and secondary investors.

“We’ve been doing this for less than two years now, and we’ve probably looked at at least 500 companies, and we’ve bought five,” Dumont said.

While Spoon’s big value-added growth may validate the “venture zombie” acquisition model, Dumont doesn’t expect much new competition. Taking advantage of the status quo is not easy. “It’s a ton of work,” he said.