SAN FRANCISCO — Beacon Software, a holding company that acquires smaller software firms and uses artificial intelligence to overhaul their operations, has raised $250 million in fresh funding to accelerate its AI-driven acquisition model, the company told Reuters.

The Series B round, led by General Catalyst, Lightspeed Venture Partners, and D1 Capital, values the company at $1 billion. Beacon has now raised a total of $335 million since its launch last year, underscoring growing investor confidence in AI’s potential to modernize traditional industries.

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AI Meets the “Main Street” Economy

Founded by former Instacart President Nilam Ganenthiran and ex-Sequoia Capital Partner Divya Gupta, Beacon targets self-funded software firms serving “Main Street” businesses — sectors often ignored by big tech investors — including youth sports leagues, campgrounds, manufacturers, and unions.

The company typically acquires one profitable niche software business every two weeks, each generating under $20 million in annual recurring revenue but maintaining steady profitability. After acquisition, Beacon upgrades their technology stack with AI-powered systems to automate operations and accelerate growth.

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A Long-Term Alternative to Private Equity

Ganenthiran describes Beacon’s approach as an “anti-private equity” model. Instead of pursuing quick turnarounds and cost-cutting to prepare for resale, Beacon focuses on permanent ownership and long-term reinvestment in its portfolio companies.

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

Beacon itself is already profitable, according to Ganenthiran. The new capital will be used to acquire more companies and enhance its central AI technology platform. He added that this is expected to be the firm’s final funding round.

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AI at the Core of Every Acquisition

At the heart of Beacon’s strategy is its “acceleration team” — engineers and product managers who modernize the operations of newly acquired companies. Using AI, the team automates accounting and payroll systems, rewrites outdated code, and speeds up product development cycles.

Unlike traditional buyouts, Beacon allows founders to stay involved through cash-based earn-out structures, presenting each deal as a partnership designed to scale their legacy rather than replace it.

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A Growing VC Trend

Venture capital firms are increasingly backing similar AI-driven roll-up strategies across industries such as accounting and professional services. However, analysts note that the long-term financial sustainability of these roll-up models remains untested.