Beacon Software raises $250 million to fund ‘anti-private equity’ AI roll-ups

By Krystal Hu

(Reuters) -Beacon Software, a holding company that acquires smaller software businesses and uses artificial intelligence to transform them, has raised $250 million to fund its AI roll-up strategy, the company told Reuters.

The Series B round, led by General Catalyst, Lightspeed Venture Partners, and D1 Capital, valued the company at $1 billion.

With $335 million raised in total since its launch last year, the funding underscores investors’ optimism around how AI-led automations will reshape traditional industries.

Founded by former Instacart President Nilam Ganenthiran and ex-Sequoia Capital Partner Divya Gupta, Beacon says it targets self-funded firms serving “Main Street” customers in sectors often overlooked by major tech investors, including youth sports leagues, campgrounds, manufacturers and unions.

Beacon buys a profitable, niche software business about every two weeks and equips them with a new software tech stack powered by AI, according to Ganenthiran. These companies typically generate less than $20 million in annual recurring revenue but are consistently profitable.

Beacon’s model, which he calls the “anti-private equity firm,” aims to modernize traditional industries by emphasizing permanent ownership and reinvestment in growth rather than the cost-cutting and rapid exits associated with private equity.

“We’re set up to grow them and hold them forever, which is a very different approach than what these entrepreneurs usually get,” Ganenthiran said.

Beacon is profitable as an entity, Ganenthiran said, adding that the fresh capital was raised to buy more companies and invest in its central technology platform. He expects this will be the last funding round for the company.

Beacon’s model relies on its “acceleration team,” a group of engineers and product managers who overhaul technology and operations for acquired companies. The team uses AI to rewrite products, automate back-office functions such as accounting and payroll, and speed up product development.

Unlike traditional private equity transactions, Ganenthiran said founders often remain with their companies after a sale, motivated by cash-based earn-out structures. Beacon pitches its deals as partnerships that preserve a founder’s legacy while providing the capital and technology to scale their businesses.

VC firms are backing similar AI-driven roll-up efforts across professional services such as accounting, although the long-term return of such roll-up models remains untested.

(Reporting by Krystal Hu in San Francisco; Editing by Lincoln Feast.)