A significant shift is underway in the technology investment landscape, epitomized by the recent high-profile maneuvers of Italian firm Bending Spoons. In a remarkable 48-hour period last month, the company announced its strategic acquisition of venerable internet brand AOL, swiftly followed by a substantial $270 million funding round. This capital injection propelled Bending Spoons’ valuation to an impressive $11 billion, a more than fourfold increase from its $2.55 billion benchmark established earlier in 2024. This rapid ascent underscores a burgeoning investment model focused not on quick exits, but on the enduring value of operational efficiency and long-term stewardship.

Bending Spoons has cultivated its rapid growth by strategically acquiring established, yet underperforming, technology brands such as Evernote, Meetup, and Vimeo. Its core strategy involves transforming these digital assets into profitable ventures through rigorous cost optimization and calculated price adjustments. While this operational approach shares similarities with traditional private equity, a fundamental distinction sets Bending Spoons apart: a steadfast commitment to perpetual ownership, with no intention of divesting these businesses. This "hold forever" philosophy is gaining traction among a new cohort of investors, challenging conventional venture capital paradigms.

Deconstructing the Venture Capital Power Law

The conventional venture capital model is fundamentally predicated on the "power law" distribution of returns. This principle dictates that a vast majority of venture-backed startups will either fail outright or achieve only modest success, while a very small percentage will generate outsized returns that compensate for all other losses. Venture capitalists typically invest in a broad portfolio, knowing that only a handful of "unicorns"—companies valued at $1 billion or more—will deliver the exponential growth necessary to justify their high-risk investments. This pursuit of hyper-growth often prioritizes rapid expansion over immediate profitability, pushing companies to burn through capital in pursuit of market dominance or technological breakthroughs.

However, this aggressive growth mandate often leaves a trail of "venture zombies"—companies that secured significant venture funding but ultimately failed to achieve the explosive growth trajectory required for a VC-scale exit. These entities might possess solid technology, a loyal customer base, and even generate steady revenue, but their growth rate is insufficient to attract further venture rounds or an acquisition by a larger tech player at a valuation that satisfies early investors. For these companies, often burdened by complex cap tables and aging investor funds seeking liquidity, the future can be uncertain, leading to stagnation despite their inherent value.

A Historical Blueprint: Constellation Software’s Enduring Legacy

While the term "venture zombie" might be relatively new, the strategy of acquiring and optimizing niche software companies for long-term cash flow has a distinguished precursor in Constellation Software. Founded in 1995, the Canadian company pioneered this "buy, fix, and hold" model, building an empire by acquiring hundreds of vertical market software (VMS) businesses. Constellation’s approach is characterized by its decentralized management, focus on operational autonomy for its subsidiaries, and a relentless pursuit of recurring revenue and profitability. Unlike private equity firms that often leverage significant debt and aim for a sale within a typical three-to-five-year horizon, Constellation’s strategy emphasizes patient, organic growth and reinvestment of earnings, proving the viability of a perpetual ownership model over decades. Their success provides a robust historical validation for firms now adopting similar strategies in the current market climate.

A New Lease on Life for Stagnating Tech Brands

Andrew Dumont, founder and CEO of Curious, a firm actively engaged in acquiring and revitalizing what he terms "venture zombies," firmly believes this "hold forever" strategy is poised for significant expansion. He contends that while 80% of venture-backed companies may not achieve unicorn status, many of them are inherently "great businesses" capable of generating substantial cash flows. Dumont defines a "great business" in this context as one that can be acquired at a reasonable valuation and subsequently revitalized to produce strong, consistent earnings.

Curious, for instance, raised $16 million in dedicated capital in 2023 specifically to target software companies that have stalled in their growth and are no longer attractive for follow-on venture investment. Since then, the firm has acquired five businesses, including UserVoice, a 17-year-old startup that had previously secured $9 million in venture funding from investors like Betaworks and SV Angel. Dumont highlights that such companies, while viable, often become trapped due to misaligned incentives. "It’s a great business, but the cap table wasn’t aligned with keeping it. These funds get old, and these companies just sit there," Dumont explained. Firms like Curious step in to offer a critical solution, providing liquidity for existing investors and resetting the company for a new trajectory focused on profitability.

Operational Efficiency: The Core of the Turnaround

The acquisition price for these "venture zombies" often reflects their stagnant status. While healthy Software-as-a-Service (SaaS) startups typically command valuations of four times annual recurring revenue (ARR) or more, dormant companies can be acquired for significantly less, sometimes as low as one times yearly revenue. This lower entry cost is crucial to the financial viability of the "buy, fix, and hold" model.

Upon acquisition, the immediate focus is on aggressive operational optimization. Firms like Curious implement swift cost-cutting measures and strategic price adjustments, often pushing these businesses to achieve profit margins of 20% to 30% almost immediately. Dumont illustrates this efficiency: "If you have a million-dollar business, you’re kicking off $300,000 in earnings." A key enabler of these rapid turnarounds is the centralization of core functions. Instead of each acquired company maintaining its own sales, marketing, finance, and administrative departments, these functions are consolidated across the portfolio, creating significant economies of scale and reducing overhead. This centralized approach allows for shared resources and best practices, which standalone, stagnating companies often cannot afford or implement effectively.

Beyond Unicorns: A Sustainable Growth Path

A fundamental divergence in philosophy separates traditional venture capital from this permanent ownership model. Venture capitalists are primarily motivated by the potential for exponential growth and subsequent "VC-scale exits"—acquisitions by larger corporations or successful initial public offerings. This singular focus often means that companies prioritizing profitability over hyper-growth are deemed less attractive, regardless of their underlying financial health. "Investors don’t care about earnings, they only care about growth," Dumont observed. "Without it, there’s no VC-scale exit, so there’s no incentive to operate with that level of profitability."

In contrast, firms like Curious and Bending Spoons operate with a different mandate. "We’re not trying to sell the businesses we acquire and don’t need VC-scale exits, so we can balance growth and profitability more sustainably," Dumont stated. The cash flow generated by their portfolio companies is then reinvested, either to grow the existing businesses or to fund further acquisitions. This creates a self-sustaining ecosystem of compounding returns, independent of the volatile M&A market or public offerings. Curious, for example, plans to acquire 50 to 75 additional startups like UserVoice over the next five years, targeting companies generating $1 million to $5 million in annual recurring revenue—a segment historically overlooked by larger private equity funds and secondary investors.

Market Dynamics and Future Trajectories

The increasing relevance of artificial intelligence (AI) is also playing a critical role in accelerating this trend. As AI-native startups emerge with disruptive technologies and more efficient solutions, older, legacy software businesses can quickly become less competitive or even obsolete, creating a larger pool of potential "venture zombies." This dynamic presents both a challenge for incumbent tech companies and a significant opportunity for permanent ownership funds adept at identifying and revitalizing these assets.

The broader market implications of this trend are multifaceted. For founders who didn’t achieve unicorn status, this model offers a viable exit strategy and a path for their creations to continue serving customers under a new, stable ownership. For employees, it can mean job security and a renewed focus on sustainable operations rather than constant pivots in pursuit of elusive growth. Economically, it represents a more efficient allocation of capital, breathing new life into valuable software products and services that might otherwise wither.

While Bending Spoons’ recent valuation hike validates the potential of the "venture zombie" acquisition model, its widespread adoption is not without hurdles. Dumont acknowledges the intensive effort required: "It’s a ton of work." Integrating diverse companies, navigating legacy technology, managing customer relationships through changes, and instilling a culture of profitability demand specialized operational expertise and a long-term commitment that many investors may not possess or desire. Despite these challenges, the emergence of permanent ownership funds signals a maturation of the tech investment landscape, moving beyond a singular focus on hyper-growth to embrace the enduring value of sustainable, cash-generating businesses. This shift promises to redefine success for a significant segment of the digital economy, offering a new paradigm for both investors and innovators.