Orlando Bravo - The Art of Software Buyouts

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money.
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**SPEAKER_2** (1:41)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions and the securities discussed in this podcast.

**Patrick O'Shaughnessy** (2:06)
My guest today is Orlando Bravo, co-founder and managing partner of leading private equity firm, Thoma Bravo. Thoma Bravo manages over $90 billion of assets and is best known for investing in software and technology businesses.
It was Orlando who led the firm's early entry into software buyouts some 20 years ago. And he has overseen more than 350 software acquisitions since. There are a few, if any, people better placed to discuss private equity and software investing. Please enjoy this excellent discussion with Orlando Bravo.
So Orlando, when we talked the other day, we were kind of fishing for places to begin this conversation. And the one thing that stood out probably more than anything to me was this notion that there are probably more opportunities for great return in private equity than there is capital in terms of committed capital in traditional fund structures. That just seems like a very strange idea in what seems like a bountiful period of capital availability. I'd love you to expound on that idea to begin here. What's behind that opportunity capital mismatch that you see today?

**Orlando Bravo** (3:06)
Well, Patrick, first of all, thank you so much for having me.

**Patrick O'Shaughnessy** (3:09)
My pleasure.

**Orlando Bravo** (3:10)
I really appreciate it.
Look, the proof is in the numbers. You see growth equity investors, whether they come from private equity world, venture world or hedge fund world, investing those growth equity funds in a period of nine to 12 months.
Then on top of that, you see what you would call the traditional private equity community, the control investors that would take usually four to five years to fully invest a fund, doing it in 12 months, 24 months. We at Thoma Bravo have always invested fast and sold fast. There are many, many, many reasons for that. But now you see the whole community doing that. And the reason is the market, both for private equity and obviously for gross investing, is becoming much more tech-oriented. And these tech companies are going public and are achieving scale faster than you could raise capital to go out and invest in them. And that is only going to get worse. Even if you look at assets that are at scale, a billion dollars plus, they're now compounding in the SaaS world at 20%, which means they'll double every four years. It's more of an issue of where do you decide to spend your time to go invest or buy a business?

**Patrick O'Shaughnessy** (4:27)
How do you think about it from the perspective of Thoma Bravo and the challenge you have in front of you, which is you have to raise funds, you have to have those funds be reasonably diversified, the size of the equity checks may be growing. You mentioned it's crazy that some of these companies are doing two, $3 billion of revenue in what might seem like a niche area and growing fast. So how do you adjust your business and your model to be able to take advantage of these opportunities?