Former Instacart and Sequoia executives are targeting profitable firms in undervalued sectors for AI modernization.
Toronto Beacon Software closed $250 million in Series B funding to acquire smaller niche software and services companies, embed them with artificial intelligence (AI), and grow them over the long term.
“Beacon is a company that opposes private investment.”
The artificial intelligence holding company says that since its launch last year, it has already acquired and partnered with dozens of software and services companies in areas such as education, finance, logistics and leisure.
More than 30 percent of them were Canadian. The group includes Saskatchewan's Let's Camp, an online platform for connecting campers to campgrounds, Toronto-based digital sports registration and club management company PowerUp, and Ottawa-based Viefund, which sells back-office software to mutual fund dealers.
Not to be confused with Toronto and Montreal. Fintech startup Beacon's eponymous AI convergence strategy is to target profitable software firms in sectors often overlooked by big tech investors and equip them with a new AI software stack. Co-founder and CEO Neelam Ganenthiran told BetaKit that Beacon acquires a new company about every two weeks.
Beacon provides portfolio businesses with a common platform of technology, design, FinTech and go-to-market capabilities, as well as access to an advisory community of leaders from Instacart, Meta, OpenAI and Shopify. The company plans to use its Series B capital to fund new acquisitions and scale its centralized tech team and artificial intelligence stack. Ganenthiran said Beacon is hiring technologists and engineers in Toronto, San Francisco and New York.
The company's all-equity Series B round, which closed in recent months, was led jointly by General Catalyst, Lightspeed Venture Partners and D1 Capital. BDT & MST Partners, Instacart CEO Chris Rogers and Sator Grove also attended, as well as existing sponsors including Mantle co-founder and CEO Amar Varma, and OpenAI Apps CEO and Shopify board member Fiji Simo. This brings Beacon's total funding to $335 million and values the company at $1 billion.
Beacon was founded last year by Ganenthiran and CTO Divya Gupta. Genenthiran is a Canadian who previously served as president of Instacart and a partner at D1 Capital, while Gupta, an American, is a former partner at Sequoia Capital and a software engineer at Databricks. In a statement, Ganenthiran said they founded the company to “transform the industries that silently power our daily lives.”
“The companies best positioned to serve Main Street customers and help them transition from the digital world to the world of artificial intelligence are the existing software and services companies they already know and trust,” Ganenthiran said. “In a future where AI commodifies competence, the scarce asset will be trust. Beacon partners with businesses Main Street already knows and trusts to provide them with the technology, tools and platform to accelerate Main Street's path to an AI-driven world.”
Each company Beacon acquires operates independently. The goal, Ganenthiran says, is not to centralize control, but to give “every founder and operator in our ecosystem access to world-class tools and capabilities that would otherwise be unavailable to a small software company.”
Beacon says its portfolio companies already serve thousands of enterprise clients, employ hundreds of thousands of people and support more than a million active users. Ganenthiran would not say exactly how many companies Beacon has acquired or the holding company's current revenue, but said its business is profitable.
While Beacon has been acquiring both its own and venture capital-backed companies, Ganenthiran said it has seen better engagement with the former to date. Beacon prefers that founders remain with the company after an acquisition, but the firm can be flexible.
Unlike traditional private equity, Beacon says its plan is not to chase short-term results and quick sales, but to drive “efficient and sustainable growth over decades” with the help of its team, more than two-thirds of whom are Canadian.
“Beacon is an anti-private investment company,” Ganenthiran said. “We buy a business to hold it forever, unlike private equity firms that are focused on optimizing for a 3, 5 or 7 year exit. We are focused on applying and creating new technologies to grow the business we buy even faster. We are not focused on cutting costs or squeezing dollars out of that business.”
Image courtesy of Beacon Software.
