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Thoma Bravo is one of the best software PE firms in the world at $183BN in AUM and 75 portfolio companies that generated $27BN of revenues in 2023

Their Founder and Managing Partner, Orlando Bravo, was recently interviewed by David Rubenstein on software PE

Recommend giving a listen. Will leave a link to the video in comments

Some of my takeaways from the conversation:

Enterprise software has 3 key components that is investable from a private equity standpoint today: (i) applications (ii) infrastructure and (iii) cybersecurity

When Orlando started his career pre dot com burst, the deals he did were not big winners. He focused on IT services businesses that had a project based model

He did a 180 degree switch and moved his focus to recurring revenue businesses where he kept existing management in place

His advice to young people: "dont try to do something just a little bit better if it has not worked previously"

After subsequent successes, Thoma Bravo established itself as a software only firm in 2008 during the GFC

Today, Thoma Bravo's sweet spot for investments are companies that make between $500M - $1BN in revenue, growing 10-20% per year with recurring business model

His biggest advice to young people: learn communication skills. Private equity is all about selling effectively (convincing a company to take your capital or investors to give you their capital)

Best investment advice that Orlando Bravo ever received: minimize risk based on information you know

Not focusing on the business is the biggest mistake that investors make. Diligence, consulting reports, and quality of earnings are there for checking your work. Focusing on the 2-3 drivers of the business is the biggest advantage as a young investor

Jim Simons's five principles (RIP):

“Be guided by beauty. Just as a great theorem can be very beautiful, a company that’s really working very well, very efficiently, that can be beautiful.

Surround yourself with the smartest and best people you possibly can. Let them do their thing. Don’t sit on top of them. If they’re smarter than you, all the better.

Do something original. Don’t run with the pack. If everyone is trying to solve the same problem ... don’t do that.

Don’t give up easily. Stick with it. Stick with it not forever, but really give it a chance to get where you’re going.

The final principle is hope for good luck.
That’s the most important principle"

Long discussion with senior partner at major Bay Area law firm today

expects legal AI to decimate profession
law firms charge by hour, and gen AI specifically cuts time for many many tasks
unimpressed by most specific legal AI offerings
chatGPT with some prompting is still superior than specific tools
10-20% error rate is acceptable -> “ 😂 you should see how dumb associates are, partners have to correct everything anyway and don’t trust associates fully”
feels lots of work will transition to in-house counsel. No need to hire external firms that charge by the hour when twenty minutes with chatGPT can get you decent results
personally looking to move in-house
good for areas of law where services were too expensive for many to afford for eg divorces
terrible for juniors entering the profession

Of one large legal AI player

tested product in January, was useless. Just simple prompting directly with chatGPT gave better results
founders were like what first year associates? They don’t understand how law is practiced
they’re very well funded but law firms are struggling to use them
heard most of their revenue is coming from PWC, audit and compliance work rather than legal