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Crete PA's revenue exceeds $300 million with 20 firms

acquired

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Thrive partners with OpenAI for customized accounting

tools

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Venture capital targets traditional services for AI-driven

growth

By Krystal Hu

June 4 - Crete Professionals Alliance, an accounting

platform backed by Thrive Capital, plans to invest over $500

million to acquire U.S.-based accounting firms in the next two

years, and equip them with OpenAI-powered artificial

intelligence technology to boost efficiency, company executives

told Reuters.

Crete PA is the latest example of how venture capital firms

are going after traditional industries and funding a buying

spree to transform local businesses with AI in a roll-up play,

from healthcare to property management.

Founded in 2023, the company has grown to over $300 million

in annual revenue with over 20 accounting businesses, making it

one of the fastest-growing accounting firms in the U.S. Crete

now has 900 employees across 17 offices, and operations in

Asia.

The firm has raised a few hundred million from investors

such as Thrive, ZBS Partners and Bessemer Venture Partners. It

plans to use its cash flow and external capital to fund more

roll-ups, through which it acquires majority stakes in local

firms and supports them with recruiting and administrative work.

Jake Sloane, co-founder of Crete PA and ZBS Partner, has

previously built roll-up businesses from veterinary to plumbing.

Believing AI tools could help accountants expand their customer

base and take on more workloads, he partnered with Thrive to

take advantage of the tech investor's expertise and network in

May 2024.

Since then, Thrive, known for its big bets in Silicon Valley

companies such as Stripe, OpenAI and Databricks, has its

in-house tech team working with OpenAI to build customized tools

and models for the accounting industry, from data mapping and

memo writing.

Bennie Lewis, President at Assurance Dimensions, one of

Crete-owned accounting firms in Tampa, Florida, said that in

audit testing, the AI tools saved his team hundreds of hours

every month, freeing them up for more client-facing work.

Sloane said the roll-up diverges from the traditional

private equity approach in allowing accounting practices to

maintain a minority equity stake in the local business, ensuring

original shareholders remain actively involved.

Traditional services like accounting have become a hotbed

for venture capital investment, which is typically known for

ambitious bets on nascent startups in Silicon Valley.

Kareem Zaki, a partner at Thrive, said it takes more than

selling the software to create value in a complex industry like

accounting, so the fund decided to pursue roll-ups that give it

more ownership and control of the businesses.

"As full-stack operators of the accounting firm, we can take

all the software elements, the operational elements, and be able

to flow that through into the end customer experience," Zaki

said.

Sloane said the goal is not to replace accountants with AI,

but to use technology to enhance service quality, while humans

build trusted relationships.

"I don't believe AI is something that will fundamentally

eradicate the need for accountants," Sloane said.

The industry has faced challenges such as an accountant

shortage. Technology has played a significant role in enhancing

productivity in the past, such as software tools like

QuickBooks.

Thrive Capital is not alone in pursuing roll-ups of services

in the hope of AI automation. General Catalyst, another VC firm,

is also creating firms that buy companies in professional

services, including its accounting firm Accrual.

Those investors believe generative AI technology can boost

profitability and scalability for service businesses, especially

those reliant on knowledge work.

While accounting firms have been popular targets for private

equity, analysts say it will take time to see if they can

deliver the higher returns expected for venture capital

investments on the heels of AI automation.

(Reporting by Krystal Hu in New York; Editing by Lincoln

Feast.)