Venture capital firms have increasingly been acting like private equity firms by investing in or buying mature businesses in need of a turnaround. Now those firms are utilizing another PE strategy—rolling up multiple competitors into a single company that can operate more efficiently by combining costs.
Several years ago, McKinney said, “I would have been laughed out of the room if I pitched VCs on the strategy” to buy old payment providers. Since then, he added, the strategy has become “the hottest thing in Silicon Valley.”