Will AI Kill the Venture Capitalist?

Venture capital has long meant backing unproven startups betting on future growth. But in 2025, a noticeable shift is underway: blue‑chip VCs like General Catalyst, Thrive Capital, Khosla Ventures and 8VC are embracing a private‑equity style roll‑up playbook - buying real, traditional businesses and embedding them with AI to drive scale and improve margins. They’re not just investors anymore; they’re becoming PE-esque operators.

Khosla Ventures, General Catalyst, and peers are actively acquiring established businesses such as call centres, accounting and property management firms - and then integrating AI tools to streamline operations. One such venture, Long Lake Management Holdings, has raised roughly $670 million since late‑2023 to acquire homeowners’ association firms and apply AI for administrative automation.

General Catalyst alone has backed seven AI roll‑up companies, funneling $750 million into this strategy spanning legal services, real estate lettings, call centres and more. Its managing director Marc Bhargava says the aim isn’t to replace people, but to enable firms to handle 2–3× more clients via AI automation.

Thrive Capital’s investment in Savvy Wealth - a fintech/advisory startup valued at $225 million - is another example. Thrive is supporting Savvy’s roll‑up of smaller advisory firms and embedding AI to automate back‑office workflows.

Three converging trends fuel this strategy:

1. Vast fragmented markets - sectors like accounting, property management, customer service - under‑digitized and full of many small players.

2. Mature AI capabilities - generative AI now enables automation at scale in labor‑heavy processes.

3. Capital constraints and slow IPO markets - VCs are looking for liquidity and returns outside of traditional startups.

Long Lake has acquired around a dozen firms employing 1,400 staff, and targets expansion into HR services - all powered by AI-generated efficiencies. Vivek Kaul of General Catalyst notes they have allocated $1.5 billion to roll‑up strategies, often writing $100 million+ checks per project .

In H1 2025 U.S. VC deal value soared, with AI startup investments accounting for 64.1% of total deal value - driving overall funding up 75.6% to $162.8 billion.

The risk is that VC economics don’t naturally align with capital‑intensive roll‑ups. PitchBook warns that even if VCs can beat PE to deals, they face operational burdens balancing startup-style velocity and legacy business integration . Meanwhile Fortune casts doubt on returns, saying these AI‑enabled consolidations may deliver operational improvements - but only the type traditional PE firms expect, not typical VC upside .

Integrating AI into old guard businesses is analogous to performing a ‘brain‑transplant,’ requiring full re‑architecture of operations  Financial Times .

VC firms are changing. Traditional VC focused on tech startups is now blending with operational PE. By owning businesses with existing revenue and plugging in AI tools they already back, VCs stand to create a new asset class: AI-first operating platforms built via roll‑ups.

However, the integration complexity is nontrivial. Success hinges on careful acquisition execution, technology deployment, and post‑merger integration - areas where traditional PE has decades of experience. A failed integration could sink both returns and reputation.

So it might not be death (unless we can count private equity as death, which I suppose some might) - but AI is fundamentally changing how VCs operate. Top firms are evolving into quasi‑PE operators, deploying capital not just into startups but into real businesses, bought, consolidated, and transformed via AI.