Toronto-based Beacon Software has closed $250 million USD in Series B financing to purchase smaller, niche software and services firms, embed artificial intelligence (AI) into them, and grow them over the long run.
“Beacon is the anti-private equity firm.”
The AI holding company claims that it has already acquired and partnered with dozens of software and services companies—across areas like education, finance, logistics, and recreation—since its launch last year.
More than 30 percent of them have been Canadian. This group includes Saskatchewan’s Let’s Camp, an online platform to connect campers to campgrounds, Toronto 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 the Toronto and Montréal FinTech startup of the same name, Beacon’s AI rollup strategy is to target profitable software firms in sectors often overlooked by major tech investors and equip them with a new AI software stack. Co-founder and CEO Nilam Ganenthiran told BetaKit that Beacon acquires a new company every two weeks or so.
Beacon provides portfolio businesses with a shared platform of tech, 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 more acquisitions and scale its centralized tech team and AI stack. Ganenthiran said Beacon is hiring technologists and engineers in Toronto, San Francisco, and New York.
The company’s all-equity, all-primary Series B round, which closed in the last few months, was co-led by General Catalyst, Lightspeed Venture Partners, and D1 Capital. BDT & MST Partners, Instacart CEO Chris Rogers, and Sator Grove also participated, alongside existing backers including Mantle co-founder and CEO Amar Varma and OpenAI applications CEO and Shopify board member Fidji Simo. It 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 partner at D1 Capital, and the American Gupta is a former Sequoia Capital partner and Databricks software engineer. In a statement, Ganenthiran said they launched the company to “transform the industries that quietly power our everyday lives.”
“The companies which are best positioned to serve Main Street customers and help them navigate the transition from a digital world to an AI world are the incumbent software and services businesses which they already know and trust,” Ganenthiran said. “In the future, where AI makes competence a commodity, the scarce asset will be trust. Beacon partners with the businesses Main Street already knows and trusts and gives them the technology, tools, and platform to accelerate Main Street’s journey to an AI-first world.”
Every company Beacon acquires runs independently. The goal, Ganenthiran said, is not to centralize control but give “every founder and operator in our ecosystem access to world-class tools and capabilities that would otherwise be out of reach for a small software company.”
Beacon claims its portfolio companies already serve thousands of enterprise customers, employ hundreds of thousands of people, and support more than one million active users. Ganenthiran did not share how many companies exactly Beacon has acquired or the holding company’s current revenue, but did say that its business is profitable.
While Beacon acquires both bootstrapped and venture capital-backed companies, Ganenthiran said it has seen better alignment with the former to date. Beacon’s preference is for founders to stay on post-acquisition but the firm can be flexible.
Unlike traditional private equity, Beacon claims that its plan is not to chase short-term results and sell quickly but to foster “efficient and durable growth over decades” with the help of its team, more than two-thirds of which is Canadian.
“Beacon is the anti-private equity firm,” Ganenthiran said. “We buy businesses to hold them forever, unlike private equity firms who focus on optimizing for 3, 5, or 7 year exits. We are focused on applying and building net-new technology in order to grow the businesses we buy even faster. We are not focused on cost-cutting or squeezing dollars out of these businesses.”
Feature image courtesy Beacon Software.