Thrive Capital Creating vehicle for serial M&A
Thrive Capital has bet big on artificial intelligence, including emerging giants of the field like OpenAI and Databricks.
Now the venture capital firm is taking a different approach: creating and buying companies that it believes can benefit from A.I. Four people with knowledge about the matter say that Thrive Capital has created a company called Thrive holdings to help develop and purchase start-ups. According to a person with knowledge of the situation, the firm is close to closing $1 billion in funding for Thrive holdings’ first round. The first investors include Thrive Capital’s existing group of backers, including pension funds and endowments.
But because Thrive Holdings is essentially being set up as a permanent capital vehicle, it can keep raising money over the years, these people said.
In many ways, it’s an unusual bet by Thrive Capital. The firm was founded by Joshua Kushner in 2010. It made its name betting big on fast-growing start-ups. These included Instagram, Stripe, Kim Kardashian’s skims and the payment processor Stripe. In recent years, it has focused on A.I. businesses. It led an OpenAI round of funding in October, which valued ChatGPT at $157 billion. It also invested in Anysphere, a company that specializes in A.I. Google-owned Isomorphic Labs is an A.I. drug researcher owned by Google.
Thrive Holdings appears to be particularly interested in everyday industries. Thrive Capital already has two companies that fit the mold: Crete, a company that specializes in accounting, and Long Lake, a company that focuses on buying managers for homeowner associations. Thrive Holdings is already investing in complementary fields, such as I.T. These people said.
Other VC firms have publicly committed themselves to a serial acquisitions strategy, also known in finance as a “roll-up”. General Catalyst for example, promoted its plan to support “A.I. enabled roll-ups” when it led a fundraising round for Eudia – an A.I. enabled legal services company. It has also invested in Long Lake. 8VC is also betting on a similar approach. ; Long Lake, for example, uses such software to automate the operations of homeowner associations.
But unlike roll-ups done by Wall Street mainstays like private equity firms, the venture firms are targeting younger companies. Thrive Holdings plans to focus on the operations of businesses it purchases, using a team software engineers and Thrive’s ties to A.I. These people said that Thrive Holdings is different from other venture firms because it is a holding company, which can own stakes for a long period of time, or even “forever”, according to one person with knowledge of the firm. At least five of these companies have valuations above $1 billion. Oscar Health is one of them, a health insurer that is driven by technology. However, its current market valuation of $3 billion is only a third of what it was when it went public back in 2021.
Other companies that Thrive has incubated are the health care billing firm Cedar, the health benefits application Rightway Healthcare, and the virtual patient management start-up Cadence.
