1 00:00:02,560 --> 00:00:08,200 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News Bloomberg. 2 00:00:08,240 --> 00:00:11,240 Speaker 2: Donny Berger is speaking with Tolma Bravo founder Orlando Bravo 3 00:00:11,320 --> 00:00:13,120 Speaker 2: at the LAVKA conference here in New York. 4 00:00:13,160 --> 00:00:15,760 Speaker 3: Let's listen it, or Orlando. There's so much change happening 5 00:00:15,800 --> 00:00:18,360 Speaker 3: right now in the industry, but you started your career 6 00:00:18,400 --> 00:00:20,759 Speaker 3: also at a moment of change. I would love to 7 00:00:20,800 --> 00:00:22,840 Speaker 3: get into that because you started as a banker at 8 00:00:22,840 --> 00:00:25,439 Speaker 3: Morgan Stanley. The lore of your career goes is that 9 00:00:25,480 --> 00:00:28,680 Speaker 3: you're often tried by your managers to pigeonhole you into 10 00:00:28,760 --> 00:00:31,680 Speaker 3: just Latin. But here, you say, here the expert in 11 00:00:31,760 --> 00:00:35,199 Speaker 3: private capital when it comes to software in tech. How 12 00:00:35,200 --> 00:00:36,160 Speaker 3: did you end up there? 13 00:00:36,880 --> 00:00:37,400 Speaker 1: By luck? 14 00:00:38,280 --> 00:00:42,000 Speaker 2: Yes, But Danny, it's a pleasure of being here with you. 15 00:00:42,040 --> 00:00:45,200 Speaker 2: We're friends, We've gotten to work together over the years, 16 00:00:45,240 --> 00:00:49,360 Speaker 2: and I organized my whole New York week and a 17 00:00:49,440 --> 00:00:53,360 Speaker 2: half around this conference. It's very special for me to 18 00:00:53,360 --> 00:00:56,040 Speaker 2: be here, being from a small town in Puerto Rico 19 00:00:56,160 --> 00:00:59,360 Speaker 2: with all these great investors from Latin America, are people 20 00:00:59,360 --> 00:01:03,200 Speaker 2: that have an in Latin America venture capital in the region. 21 00:01:03,280 --> 00:01:07,360 Speaker 2: It's it's really really special for me. When I started 22 00:01:07,360 --> 00:01:09,759 Speaker 2: a Morgan Stanley I grew up in a small town, 23 00:01:09,800 --> 00:01:13,200 Speaker 2: may Leagues, Puerto Rico. For anyone that has been there, 24 00:01:13,200 --> 00:01:15,880 Speaker 2: probably very few of you have. And through a lot 25 00:01:15,920 --> 00:01:18,800 Speaker 2: of opportunity and seeing things that I was able to see, 26 00:01:18,840 --> 00:01:21,400 Speaker 2: I got lucky and was able to get a job 27 00:01:21,440 --> 00:01:25,559 Speaker 2: in Wall Street and they put me in the Latin 28 00:01:25,560 --> 00:01:27,000 Speaker 2: America Group in M and A A. 29 00:01:27,120 --> 00:01:27,800 Speaker 1: Morgan Stanley. 30 00:01:27,840 --> 00:01:30,959 Speaker 2: But next to our group, there was an equally small group. 31 00:01:31,120 --> 00:01:34,640 Speaker 2: This is in nineteen ninety two, that was the Tech group. 32 00:01:35,280 --> 00:01:38,000 Speaker 2: And people were, you know, mor instantly saying, Latin American 33 00:01:38,040 --> 00:01:40,120 Speaker 2: group is small. This tech group is really small. And 34 00:01:40,200 --> 00:01:42,480 Speaker 2: for some reason we were just when we would get 35 00:01:42,520 --> 00:01:44,960 Speaker 2: together every week, those two groups will get together, I 36 00:01:45,000 --> 00:01:46,479 Speaker 2: was like, I want to be in that tech group. 37 00:01:47,360 --> 00:01:49,120 Speaker 1: There was there was something about it. 38 00:01:49,200 --> 00:01:52,440 Speaker 2: And I'm not a coder, I'm not an engineer by background, 39 00:01:52,800 --> 00:01:55,360 Speaker 2: but it was it seemed to be a business that 40 00:01:55,400 --> 00:01:58,120 Speaker 2: really fit young people really well, where you could have 41 00:01:58,160 --> 00:02:02,360 Speaker 2: a lot of responsibility early in your career. So I 42 00:02:02,360 --> 00:02:04,640 Speaker 2: went to the West Coast. I went to graduate school there. 43 00:02:04,960 --> 00:02:06,480 Speaker 2: Then the same thing. I couldn't get a job in 44 00:02:06,480 --> 00:02:10,280 Speaker 2: private equity. There were very few jobs available in the 45 00:02:10,320 --> 00:02:12,000 Speaker 2: alternatives industry back then. 46 00:02:12,080 --> 00:02:13,280 Speaker 1: It's grown so much. 47 00:02:13,800 --> 00:02:16,640 Speaker 2: And at the end, a couple of people gave me 48 00:02:16,639 --> 00:02:19,200 Speaker 2: an opportunity of being the Latin America Group, but Carl 49 00:02:19,240 --> 00:02:21,679 Speaker 2: Toma hired me and said, if you want to do tech, 50 00:02:21,760 --> 00:02:23,400 Speaker 2: you know, come on in and I'll open up an 51 00:02:23,400 --> 00:02:25,160 Speaker 2: office in San Francisco, and we started then. 52 00:02:25,520 --> 00:02:27,320 Speaker 3: I think it's also important to note even though you 53 00:02:27,400 --> 00:02:29,760 Speaker 3: didn't stay with Latin Investing, that you went into tech, 54 00:02:29,800 --> 00:02:31,880 Speaker 3: but you've always kept close ties to Puerto Rico and 55 00:02:31,919 --> 00:02:35,400 Speaker 3: continued to do work for the community there big time. 56 00:02:35,840 --> 00:02:39,520 Speaker 2: I'm actually going to Puerto Rico next week for a 57 00:02:39,560 --> 00:02:47,600 Speaker 2: foundation event. My experience thus far has been one of opportunity. 58 00:02:48,080 --> 00:02:51,799 Speaker 2: I'm very self aware of that. Even when I look 59 00:02:51,840 --> 00:02:54,800 Speaker 2: at our organization today, Toma Bravo. We were one of 60 00:02:54,800 --> 00:02:57,200 Speaker 2: the first to do a software buyout deal during the 61 00:02:57,240 --> 00:03:02,040 Speaker 2: dotcom bubble collapse. Even though we were one of the 62 00:03:02,040 --> 00:03:04,600 Speaker 2: first to do tech buyouts, and we were one of 63 00:03:04,600 --> 00:03:06,920 Speaker 2: the people or one of the groups that created this 64 00:03:07,000 --> 00:03:10,160 Speaker 2: category that has been very profitable for LPs and it's 65 00:03:10,200 --> 00:03:13,239 Speaker 2: the biggest category in buyouts and will continue to grow 66 00:03:13,280 --> 00:03:16,640 Speaker 2: and continue to take share. I've never created anything new. 67 00:03:18,120 --> 00:03:20,200 Speaker 2: I got the opportunity to learn from one of the 68 00:03:20,240 --> 00:03:23,520 Speaker 2: best investors in the world, Karl Toma. I got the 69 00:03:23,560 --> 00:03:26,280 Speaker 2: opportunity to learn from the best operator I'll ever meet, 70 00:03:26,840 --> 00:03:29,840 Speaker 2: Marcel Bernard, the most important person that has ever worked 71 00:03:29,840 --> 00:03:33,600 Speaker 2: at our company during the seventies run different divisions of Motorola. 72 00:03:34,160 --> 00:03:37,240 Speaker 2: We grab both concepts and just applied in to an 73 00:03:37,240 --> 00:03:39,640 Speaker 2: industry that we really really liked. 74 00:03:40,000 --> 00:03:42,560 Speaker 3: What a time to be doing that, though, helping found 75 00:03:42,640 --> 00:03:44,760 Speaker 3: Tomo Bravo in two thousand and eight. Really is the 76 00:03:44,800 --> 00:03:48,160 Speaker 3: tech bubble, the remnants of it, the financial crisis a 77 00:03:48,240 --> 00:03:50,560 Speaker 3: suchial a moment in time. How does how did that 78 00:03:50,560 --> 00:03:53,040 Speaker 3: help guide you? How you grew Tomo Bravo and how 79 00:03:53,160 --> 00:03:56,120 Speaker 3: you think about this market today, especially when so many 80 00:03:56,160 --> 00:03:58,920 Speaker 3: parallels are being drawn between what's happening and the AI 81 00:03:59,000 --> 00:04:01,720 Speaker 3: at the moment tack bubble of the two thousands. 82 00:04:02,040 --> 00:04:05,120 Speaker 2: Yeah, and by the way, to win with Puerto Rico. Therefore, 83 00:04:05,160 --> 00:04:08,600 Speaker 2: since I was given so many opportunities, our whole business 84 00:04:09,360 --> 00:04:13,680 Speaker 2: is based on giving opportunities to existing management, to our people, 85 00:04:13,880 --> 00:04:16,240 Speaker 2: promoting from within and in Puerto Rico to try to 86 00:04:16,320 --> 00:04:19,640 Speaker 2: change the opportunity set so the more people participate and 87 00:04:19,720 --> 00:04:22,320 Speaker 2: have an equal chance. That's kind of what I try 88 00:04:22,360 --> 00:04:26,080 Speaker 2: to do there in terms of what what happened during 89 00:04:26,160 --> 00:04:31,120 Speaker 2: the bubble, One important lesson is to focus on the 90 00:04:31,160 --> 00:04:35,520 Speaker 2: business and the numbers that are right in front of 91 00:04:35,560 --> 00:04:41,640 Speaker 2: you instead of being too affected by the noise. These 92 00:04:41,640 --> 00:04:45,200 Speaker 2: are general things that are going on right now. AI 93 00:04:45,400 --> 00:04:49,000 Speaker 2: is going to be transformative. It's going to be so powerful, 94 00:04:49,080 --> 00:04:52,280 Speaker 2: it's going to be so exciting, and it's very very 95 00:04:52,320 --> 00:04:56,000 Speaker 2: new and very early. So many people will be are 96 00:04:56,040 --> 00:05:00,640 Speaker 2: paralyzed now, including LPs, to say, do I touch this 97 00:05:00,760 --> 00:05:03,960 Speaker 2: area a services company? To I touch a software company, 98 00:05:04,279 --> 00:05:06,920 Speaker 2: is it's going to be disrupted. I just get these 99 00:05:07,240 --> 00:05:10,120 Speaker 2: inputs all the time of how everything is going to 100 00:05:10,240 --> 00:05:14,240 Speaker 2: change overnight. It will change significantly, but it will be 101 00:05:14,279 --> 00:05:17,960 Speaker 2: an evolution. In right after the dot com bubble burst, 102 00:05:19,120 --> 00:05:21,480 Speaker 2: but I don't know who remembers and who was there 103 00:05:21,560 --> 00:05:25,320 Speaker 2: Around that time, people thought that enterprise software was dead. 104 00:05:26,800 --> 00:05:30,240 Speaker 2: One article after the other, these stocks traded at one 105 00:05:30,240 --> 00:05:34,279 Speaker 2: and two dollars a share. Can you believe that it's 106 00:05:34,520 --> 00:05:36,840 Speaker 2: one of the greatest industry's one point five trillion dollar 107 00:05:36,880 --> 00:05:40,159 Speaker 2: economy today. We made a lot of mistakes before that, 108 00:05:40,200 --> 00:05:41,719 Speaker 2: but we would go to these companies and they would 109 00:05:41,760 --> 00:05:43,760 Speaker 2: let us look at all their files. We'd say, no, 110 00:05:43,839 --> 00:05:46,120 Speaker 2: this is a good business. All the customers are renewing, 111 00:05:46,160 --> 00:05:50,080 Speaker 2: they're buying more. They really need to use these products. 112 00:05:50,120 --> 00:05:53,159 Speaker 2: So just focusing on the details and the business really 113 00:05:53,200 --> 00:05:56,360 Speaker 2: helps you do something a little bit different than everybody else. 114 00:05:56,440 --> 00:05:58,000 Speaker 3: Well, it's interesting because it's a two track, and I 115 00:05:58,000 --> 00:05:59,600 Speaker 3: want to get into software more, but it feels like 116 00:05:59,600 --> 00:06:03,560 Speaker 3: a two t you're describing LP's being frozen on legacy 117 00:06:03,640 --> 00:06:06,120 Speaker 3: tech or evolving tech, let's call it. And then on 118 00:06:06,160 --> 00:06:10,599 Speaker 3: the other side, a frenzy around AI and huge valuations 119 00:06:10,600 --> 00:06:13,280 Speaker 3: that a lot of these private capital or public market 120 00:06:13,360 --> 00:06:15,839 Speaker 3: companies are getting around AI. Do you look at that 121 00:06:15,920 --> 00:06:17,240 Speaker 3: and say we've gone too far? 122 00:06:19,080 --> 00:06:25,320 Speaker 2: Look, AI and software go together. That is becoming clearer 123 00:06:25,360 --> 00:06:28,880 Speaker 2: and clearer. Look at the two hundred and fifty billion 124 00:06:28,920 --> 00:06:30,600 Speaker 2: dollar market cap software companies. 125 00:06:31,720 --> 00:06:32,240 Speaker 1: They have. 126 00:06:33,720 --> 00:06:38,800 Speaker 2: Absorbed AI and now they're selling huge augentic solutions to 127 00:06:38,800 --> 00:06:42,039 Speaker 2: their customers. We have a portfolio of about thirty billion 128 00:06:42,040 --> 00:06:45,280 Speaker 2: dollars in revenue. Now we're private equity, so we can 129 00:06:45,320 --> 00:06:49,360 Speaker 2: react faster than other forms of governance. All of our 130 00:06:49,400 --> 00:06:54,719 Speaker 2: companies now have big AI solutions embedded in their products, 131 00:06:54,960 --> 00:06:58,960 Speaker 2: or identic solutions to close the loop. Another available markets 132 00:06:58,960 --> 00:07:03,640 Speaker 2: are tam total of market has double tripled. It really 133 00:07:03,680 --> 00:07:07,239 Speaker 2: really goes together. It's not like this new thing where 134 00:07:07,400 --> 00:07:11,720 Speaker 2: the corporate enterprise would completely change all of their processes, 135 00:07:11,760 --> 00:07:15,320 Speaker 2: all of their technology, all of their interdependencies. AI will 136 00:07:15,360 --> 00:07:18,920 Speaker 2: create new solutions and new use cases, many of which 137 00:07:18,960 --> 00:07:21,640 Speaker 2: will allow people to use technology more than they were 138 00:07:21,640 --> 00:07:25,600 Speaker 2: doing before. Look, there's so many solutions today that exist 139 00:07:26,320 --> 00:07:30,000 Speaker 2: that allow customers to save half of the cost in 140 00:07:30,040 --> 00:07:33,760 Speaker 2: many items in supply chain, in many, many, many categories, 141 00:07:34,240 --> 00:07:38,600 Speaker 2: and right now society or companies use them five ten percent. 142 00:07:39,040 --> 00:07:41,840 Speaker 1: So it all takes time, but once again, it goes together. 143 00:07:42,440 --> 00:07:44,200 Speaker 3: There is, at least you can see in public market 144 00:07:44,240 --> 00:07:47,400 Speaker 3: those nerves. Salesforce Adobe, some of the worst performing stocks 145 00:07:47,480 --> 00:07:50,040 Speaker 3: underperform the s and fed down think about twenty two 146 00:07:50,080 --> 00:07:53,520 Speaker 3: percent year to date because of that. And maybe that's 147 00:07:53,640 --> 00:07:56,080 Speaker 3: a correct way to look at those specific companies. Maybe not. 148 00:07:56,640 --> 00:08:00,000 Speaker 3: Has there been a valuation reset in private capital as well? 149 00:08:00,000 --> 00:08:00,200 Speaker 1: Well? 150 00:08:00,640 --> 00:08:02,880 Speaker 3: And to what degree does that hurt you or does 151 00:08:02,920 --> 00:08:04,160 Speaker 3: it present opportunities? 152 00:08:05,960 --> 00:08:10,320 Speaker 2: The chairman said that he's an optimist, and I'm always 153 00:08:10,320 --> 00:08:13,920 Speaker 2: an optimist. When you own a company, you always have 154 00:08:14,000 --> 00:08:20,360 Speaker 2: opportunities now you mentioned a couple of stocks, great great companies. Now, 155 00:08:20,480 --> 00:08:24,720 Speaker 2: is their valuations and multiples down because there's so MANI threat? 156 00:08:25,640 --> 00:08:27,880 Speaker 2: Or are there multiples down because their growth rate has 157 00:08:27,880 --> 00:08:34,080 Speaker 2: gone down? We really think it's the latter. Investors buy numbers. 158 00:08:34,120 --> 00:08:37,040 Speaker 2: They put money out and they buy numbers. That's what 159 00:08:37,080 --> 00:08:41,000 Speaker 2: the greatest investors do. The rest is noise and the 160 00:08:41,040 --> 00:08:45,680 Speaker 2: market is highly highly highly efficient. So I don't I 161 00:08:45,679 --> 00:08:49,439 Speaker 2: don't think that there's been this rerating of the sector 162 00:08:50,520 --> 00:08:54,559 Speaker 2: because of AI, because really smart investors agree that this, 163 00:08:54,760 --> 00:08:58,560 Speaker 2: over time will help these companies that are trusted by 164 00:08:58,600 --> 00:09:01,200 Speaker 2: the customers, that have proprietary data that are embedded in 165 00:09:01,240 --> 00:09:02,600 Speaker 2: their systems. 166 00:09:02,679 --> 00:09:03,240 Speaker 1: It's helpful. 167 00:09:03,520 --> 00:09:06,600 Speaker 2: I cannot even begin to describe how helpful it is. 168 00:09:08,880 --> 00:09:12,000 Speaker 3: Does it at all though put pressure on margins? For example, 169 00:09:12,280 --> 00:09:14,280 Speaker 3: if you have someone that says, all right, I can 170 00:09:14,400 --> 00:09:17,360 Speaker 3: find a cheaper solution that's AI driven. It doesn't take 171 00:09:17,360 --> 00:09:20,000 Speaker 3: as much, it doesn't cost as much. Does the whole 172 00:09:20,080 --> 00:09:23,600 Speaker 3: industry pricing need to change because of the AI offering. 173 00:09:24,120 --> 00:09:28,000 Speaker 2: There's always the question whether software is econ one oh 174 00:09:28,000 --> 00:09:32,240 Speaker 2: one where price equesst marginal cost. You build all these products, 175 00:09:32,240 --> 00:09:35,760 Speaker 2: but the marginal cost of delivering one is extremely low, 176 00:09:36,760 --> 00:09:38,520 Speaker 2: so you kind of raise to the bottom and you 177 00:09:38,559 --> 00:09:42,120 Speaker 2: have to control discounting the key and what we try 178 00:09:42,160 --> 00:09:45,600 Speaker 2: to do is have the lowest cost of production, have 179 00:09:45,679 --> 00:09:49,040 Speaker 2: the most efficient company there is. So when we do 180 00:09:49,200 --> 00:09:53,800 Speaker 2: buy these billion dollar companies, we are very upfront that 181 00:09:54,000 --> 00:09:56,360 Speaker 2: the first course of action is we're going to reduce 182 00:09:56,400 --> 00:09:59,400 Speaker 2: the cost of the business, try to get it to 183 00:09:59,440 --> 00:10:03,360 Speaker 2: a forty percent and margin usually from zero. And if 184 00:10:03,400 --> 00:10:07,000 Speaker 2: you have the best run company making the right investment decisions, 185 00:10:07,400 --> 00:10:10,160 Speaker 2: you can invest plenty in AI because you're not wasting 186 00:10:10,200 --> 00:10:13,240 Speaker 2: a lot of money in other activities or trying activities 187 00:10:13,240 --> 00:10:16,240 Speaker 2: that the company doesn't even have a core competency in doing. 188 00:10:16,360 --> 00:10:18,559 Speaker 3: Well, Considering you've done that to so many companies, I'd 189 00:10:18,600 --> 00:10:21,320 Speaker 3: love to know how you're using AI internally. What about Toma, 190 00:10:21,360 --> 00:10:24,520 Speaker 3: Bravo's own processes. How are you utilizing AI. 191 00:10:24,559 --> 00:10:25,520 Speaker 1: To grab information? 192 00:10:26,720 --> 00:10:28,880 Speaker 2: It's really and I think most companies are using it 193 00:10:28,920 --> 00:10:31,000 Speaker 2: that way, right We all ask consumers use it to 194 00:10:31,040 --> 00:10:35,959 Speaker 2: ask questions, get quick data. Search companies as well are 195 00:10:36,040 --> 00:10:38,440 Speaker 2: using it in that way. We're using it to get 196 00:10:38,440 --> 00:10:41,000 Speaker 2: information a lot quicker. For example, at the end of 197 00:10:41,000 --> 00:10:43,480 Speaker 2: the quarter. We love those quarter ends. Now it's October 198 00:10:43,480 --> 00:10:46,480 Speaker 2: because companies have a January fiscal your end. That's something 199 00:10:46,520 --> 00:10:49,360 Speaker 2: that SaaS Companies did a while ago. But as we 200 00:10:49,400 --> 00:10:51,760 Speaker 2: come to the end of October, instead of me having 201 00:10:51,800 --> 00:10:55,000 Speaker 2: to call every single partner across our portfolio of sixty companies, 202 00:10:55,360 --> 00:10:57,960 Speaker 2: I just know the bookings results and you kind of 203 00:10:58,000 --> 00:11:00,240 Speaker 2: can consume that pretty quickly and say, oh, is this 204 00:11:00,800 --> 00:11:02,800 Speaker 2: are being good trends? And that really informs how you 205 00:11:02,880 --> 00:11:06,800 Speaker 2: invest in companies as well. All your pipeline of deals 206 00:11:06,840 --> 00:11:09,840 Speaker 2: is the industry slowing down, our customers buying more. But 207 00:11:09,920 --> 00:11:13,000 Speaker 2: the ability to consume information very quickly in data is 208 00:11:13,000 --> 00:11:13,679 Speaker 2: how we use it. 209 00:11:13,960 --> 00:11:16,080 Speaker 3: I talked to one of your competitors, who maybe will 210 00:11:16,080 --> 00:11:19,120 Speaker 3: remain nameless, that so that they were experimenting with an 211 00:11:19,160 --> 00:11:21,559 Speaker 3: ai IC member that they would feed at all of 212 00:11:21,600 --> 00:11:23,920 Speaker 3: its information and all the decisions they made, and you 213 00:11:24,040 --> 00:11:25,760 Speaker 3: almost get kind of a vote or she I don't 214 00:11:25,760 --> 00:11:29,040 Speaker 3: think we can gender these things on the IC. Would 215 00:11:29,040 --> 00:11:30,800 Speaker 3: you ever do something like that? Would you use that 216 00:11:30,880 --> 00:11:32,040 Speaker 3: for actual decision making? 217 00:11:32,320 --> 00:11:34,800 Speaker 2: That would be pretty cool. I mean we would, and 218 00:11:34,880 --> 00:11:38,040 Speaker 2: I've heard some VC firms have done that as well. 219 00:11:38,040 --> 00:11:40,040 Speaker 2: And this ICY member shows up and then has the 220 00:11:40,080 --> 00:11:43,240 Speaker 2: most power, and how could they possibly be wrong. They 221 00:11:43,240 --> 00:11:46,440 Speaker 2: have all the data, the super brain that would be 222 00:11:46,440 --> 00:11:47,240 Speaker 2: fun to do at some point. 223 00:11:47,320 --> 00:11:48,440 Speaker 3: Okay, well you have to let me know. 224 00:11:48,679 --> 00:11:50,439 Speaker 1: The thing is, I don't see, Danny. 225 00:11:50,480 --> 00:11:55,040 Speaker 2: The thing is, all these things are very helpful right now, 226 00:11:56,000 --> 00:11:58,480 Speaker 2: but you try to think of your time during the day. 227 00:12:01,480 --> 00:12:04,680 Speaker 2: I always tell our team private equity, you have three 228 00:12:04,720 --> 00:12:06,880 Speaker 2: things to do. Get the money, get the deal, and 229 00:12:06,920 --> 00:12:11,679 Speaker 2: improve the deal. If in your eighteen hour day, if 230 00:12:11,679 --> 00:12:15,080 Speaker 2: you really want to stretch it that way seven days 231 00:12:15,120 --> 00:12:18,000 Speaker 2: a week trying to crush it and make money for 232 00:12:18,160 --> 00:12:21,560 Speaker 2: LPs in an ultra competitive market, you're not spending time 233 00:12:21,600 --> 00:12:25,560 Speaker 2: on those three it maybe a competitor is going to 234 00:12:25,600 --> 00:12:28,040 Speaker 2: do better. So you have to be careful how much 235 00:12:28,120 --> 00:12:32,080 Speaker 2: you're levitating and investing in projects that are intellectually interesting 236 00:12:32,600 --> 00:12:35,520 Speaker 2: versus actually getting that deal, which, as you know many 237 00:12:35,559 --> 00:12:39,400 Speaker 2: practitioners here, is very hard to convince a company that's 238 00:12:39,440 --> 00:12:42,839 Speaker 2: worth ten billion dollars to sell it to you, no 239 00:12:42,880 --> 00:12:45,600 Speaker 2: matter how poorly they're doing. And it's a day to 240 00:12:45,679 --> 00:12:48,319 Speaker 2: day we do control deals only it's a day to 241 00:12:48,400 --> 00:12:52,080 Speaker 2: day effort to improve the company. The head of sales quits. 242 00:12:52,320 --> 00:12:54,960 Speaker 2: Now you got a problem the pipeline is low. You 243 00:12:55,000 --> 00:12:57,000 Speaker 2: have a problem with a competitor, you have to take 244 00:12:57,040 --> 00:12:58,679 Speaker 2: out the cost. You have to track that company on 245 00:12:58,720 --> 00:13:02,120 Speaker 2: a monthly basis. For example, we do instead of quarterly 246 00:13:02,800 --> 00:13:05,960 Speaker 2: board meetings, given the intensity of our operations, we do 247 00:13:06,040 --> 00:13:09,360 Speaker 2: monthly operating reviews Adie Amternoon with every single company, all 248 00:13:09,400 --> 00:13:12,440 Speaker 2: the direct reports in the room, and these processes are 249 00:13:13,320 --> 00:13:17,439 Speaker 2: that is the alpha that our industry looks for in software. 250 00:13:17,679 --> 00:13:21,599 Speaker 2: It is incredibly huge. When we started in software, the 251 00:13:21,640 --> 00:13:25,880 Speaker 2: average software company lost money. Today and after the industry 252 00:13:25,880 --> 00:13:28,679 Speaker 2: became this one point five trillion, the average publicly trying 253 00:13:28,720 --> 00:13:32,079 Speaker 2: to software company loses money. There has been no operational 254 00:13:32,080 --> 00:13:35,480 Speaker 2: improvement in the public markets in almost thirty years in 255 00:13:35,480 --> 00:13:38,360 Speaker 2: the way software companies run. Now, groups like us, we 256 00:13:38,400 --> 00:13:41,760 Speaker 2: started small, we started producing twenty five percent margin, now 257 00:13:41,800 --> 00:13:44,560 Speaker 2: thirty five, now forty to forty five because we're also 258 00:13:44,600 --> 00:13:47,719 Speaker 2: buying better businesses and we've learned. But that is so 259 00:13:47,800 --> 00:13:50,800 Speaker 2: intense that it gives you very little time to pursue 260 00:13:50,840 --> 00:13:51,839 Speaker 2: internal projects. 261 00:13:52,840 --> 00:13:55,160 Speaker 3: Well, you mentioned the things that you should be doing 262 00:13:55,520 --> 00:13:58,679 Speaker 3: if you are in this industry and delivering share, delivering 263 00:13:58,760 --> 00:14:02,640 Speaker 3: value to your LPs. One of them, of course, is exiting, 264 00:14:02,720 --> 00:14:05,000 Speaker 3: and this is an industry that has struggled with that 265 00:14:05,040 --> 00:14:08,120 Speaker 3: as a whole lafter maybe overinvesting. In twenty twenty one 266 00:14:08,160 --> 00:14:11,600 Speaker 3: and twenty twenty two, you've seen the rise of continuation vehicles, 267 00:14:11,600 --> 00:14:14,839 Speaker 3: for example, liquidity solutions, and many people would say it's 268 00:14:14,960 --> 00:14:17,720 Speaker 3: just a way to provide liquidity. It's the creativity of 269 00:14:17,720 --> 00:14:20,920 Speaker 3: this industry and it's a natural progression. Other people would 270 00:14:20,920 --> 00:14:23,520 Speaker 3: say it's a failure that you didn't get the exits 271 00:14:23,600 --> 00:14:26,440 Speaker 3: and that you're continuing things on where do you stand 272 00:14:26,480 --> 00:14:26,880 Speaker 3: on it. 273 00:14:27,160 --> 00:14:31,800 Speaker 2: Both it's pretty controversial. LPs have gotten used to it, 274 00:14:32,920 --> 00:14:35,760 Speaker 2: they've accepted this. I think you should do that as 275 00:14:35,760 --> 00:14:38,440 Speaker 2: the exception rather than the rule. You can also do 276 00:14:38,560 --> 00:14:44,520 Speaker 2: so many in your fund you mentioned valuations in our world. 277 00:14:45,240 --> 00:14:48,320 Speaker 2: Say you are looking at a fifteen percent growth company 278 00:14:49,080 --> 00:14:51,880 Speaker 2: that has high quality or revenue, that is a market 279 00:14:51,920 --> 00:14:55,480 Speaker 2: leader in its space, that is now highly profitable because 280 00:14:55,480 --> 00:14:58,440 Speaker 2: it's been owned by private equity. Those companies used to 281 00:14:58,440 --> 00:15:01,240 Speaker 2: trade in the private markets for or twenty to twenty 282 00:15:01,240 --> 00:15:04,840 Speaker 2: five times EBITDA, something in that range from one firm 283 00:15:04,880 --> 00:15:08,080 Speaker 2: to another. Now the valuations of those companies are fifteen 284 00:15:08,080 --> 00:15:08,760 Speaker 2: times EBITDA. 285 00:15:10,160 --> 00:15:12,720 Speaker 1: So as an owner. 286 00:15:13,920 --> 00:15:17,920 Speaker 2: The opportunity is that you can buy other companies out 287 00:15:17,960 --> 00:15:21,200 Speaker 2: on acquisitions much cheaper than you had in your model. 288 00:15:21,400 --> 00:15:23,120 Speaker 2: So you always try to use these things as an 289 00:15:23,120 --> 00:15:26,120 Speaker 2: owner to your advantage. You then have to create more 290 00:15:26,240 --> 00:15:29,560 Speaker 2: values so that at fifteen to seventeen times exit you 291 00:15:29,600 --> 00:15:32,240 Speaker 2: can produce the returns that your investors expect. 292 00:15:33,400 --> 00:15:34,200 Speaker 1: And that's where it. 293 00:15:36,800 --> 00:15:41,000 Speaker 2: Comes in, and it's that optimism of there's always something 294 00:15:41,080 --> 00:15:43,960 Speaker 2: you can do about it. When there was inflation, you 295 00:15:44,000 --> 00:15:47,360 Speaker 2: have this huge labor inflation in your employee base, but 296 00:15:47,400 --> 00:15:49,440 Speaker 2: that means you can raise prices to your customers even 297 00:15:49,480 --> 00:15:51,680 Speaker 2: more because these are productivity tools. 298 00:15:52,520 --> 00:15:54,280 Speaker 1: Same thing if prices go down. 299 00:15:54,600 --> 00:15:57,840 Speaker 2: So what happened in private equity and the reason why 300 00:15:57,840 --> 00:16:00,200 Speaker 2: I say the industry for a while, they're life us 301 00:16:00,240 --> 00:16:02,760 Speaker 2: its way is one of the reasons is people forgot 302 00:16:02,800 --> 00:16:08,120 Speaker 2: to sell our industry is you get the money, you 303 00:16:08,400 --> 00:16:10,880 Speaker 2: try to transform a company as best you can, and 304 00:16:10,920 --> 00:16:15,120 Speaker 2: then you sell that company. There is no permanent hold 305 00:16:15,160 --> 00:16:17,600 Speaker 2: in our industry. If you want to do that, go 306 00:16:17,680 --> 00:16:21,320 Speaker 2: to the public markets, form a holding company, tell your 307 00:16:21,360 --> 00:16:24,160 Speaker 2: investors I'm going to hold these things forever. Back me 308 00:16:24,320 --> 00:16:26,480 Speaker 2: and we'll figure out a way to do make money 309 00:16:26,480 --> 00:16:29,680 Speaker 2: that way buy my stock. Private equity is not that 310 00:16:29,760 --> 00:16:32,600 Speaker 2: the industry levitated too much, and we always say it's 311 00:16:32,680 --> 00:16:34,800 Speaker 2: much harder. Remember when I said how hard it is 312 00:16:34,800 --> 00:16:37,320 Speaker 2: to buy a company, it's much harder to sell it. 313 00:16:38,000 --> 00:16:40,360 Speaker 2: So our team has to spend more time selling a 314 00:16:40,400 --> 00:16:42,640 Speaker 2: company than buying a company. And that's something that we 315 00:16:42,680 --> 00:16:45,120 Speaker 2: do rigorously, and it's something that really helped us. You 316 00:16:45,120 --> 00:16:47,520 Speaker 2: and I were talking about in super Return. In the 317 00:16:47,600 --> 00:16:50,480 Speaker 2: last eighteen months, we delivered back to our investors twenty 318 00:16:50,520 --> 00:16:53,760 Speaker 2: billion in cash. That really helped our firm. Now it 319 00:16:53,760 --> 00:16:55,920 Speaker 2: didn't happen overnight. We were working on those deals and 320 00:16:55,960 --> 00:16:57,040 Speaker 2: on those sales for a while. 321 00:16:57,280 --> 00:17:00,800 Speaker 3: So all these evergreen funds that are popping sounds like 322 00:17:00,800 --> 00:17:01,400 Speaker 3: they're a problem. 323 00:17:01,480 --> 00:17:05,600 Speaker 2: Then it's if you hold a company too long in 324 00:17:05,640 --> 00:17:08,960 Speaker 2: private equity, and in this transformation world that we live 325 00:17:08,960 --> 00:17:11,960 Speaker 2: in that is not linear, you will ultimately face a 326 00:17:12,000 --> 00:17:16,320 Speaker 2: big project, especially in software, because it's not just the 327 00:17:16,400 --> 00:17:19,360 Speaker 2: technology change or AI or how you have to invest, 328 00:17:19,920 --> 00:17:23,520 Speaker 2: it's that these companies are exhausting to run. You live 329 00:17:23,640 --> 00:17:25,960 Speaker 2: quarter of a quarter. That's why it's tough for family 330 00:17:26,000 --> 00:17:29,480 Speaker 2: businesses to hold software companies. Right, It's not a thing 331 00:17:29,520 --> 00:17:31,760 Speaker 2: you go from one entrepreneur to the other. And it's 332 00:17:31,800 --> 00:17:35,920 Speaker 2: also a culture of employee ownership where employees, especially in 333 00:17:36,000 --> 00:17:38,520 Speaker 2: Silicon Valley, need to have that return and that pop 334 00:17:38,520 --> 00:17:41,439 Speaker 2: in their options and that restricted stock. So if you 335 00:17:41,480 --> 00:17:43,760 Speaker 2: hold these things for twenty thirty years, I mean, we 336 00:17:43,800 --> 00:17:46,280 Speaker 2: would love to. It'll be better for our business, will 337 00:17:46,280 --> 00:17:48,360 Speaker 2: make more money, but it's not the way to really 338 00:17:48,400 --> 00:17:49,800 Speaker 2: serve your customers as LPs. 339 00:17:49,880 --> 00:17:50,520 Speaker 1: Well, as you. 340 00:17:50,480 --> 00:17:52,680 Speaker 3: Mentioned when we had spoken earlier this summer, you were 341 00:17:52,680 --> 00:17:55,440 Speaker 3: really outfront with saying private equity has lost its way. 342 00:17:55,480 --> 00:17:57,479 Speaker 3: Where do we stand in that cycle? 343 00:17:57,520 --> 00:17:57,680 Speaker 2: Now? 344 00:17:57,720 --> 00:17:59,639 Speaker 3: Every now and then you hear news report of a 345 00:17:59,680 --> 00:18:02,960 Speaker 3: company or a fund that's tried to fundraise it doesn't 346 00:18:02,960 --> 00:18:05,080 Speaker 3: do so as successfully as it has in the past. 347 00:18:05,119 --> 00:18:07,359 Speaker 3: Where are we out in the shakeout? Are we about 348 00:18:07,400 --> 00:18:10,000 Speaker 3: to see some real visible pain between the haves and 349 00:18:10,040 --> 00:18:10,600 Speaker 3: have nots? 350 00:18:10,720 --> 00:18:13,560 Speaker 2: We are in the middle of the shakeout. It's when 351 00:18:13,600 --> 00:18:17,120 Speaker 2: you see the few funds that raise all this great 352 00:18:17,119 --> 00:18:20,480 Speaker 2: amount of money. They have two things. They have great 353 00:18:20,520 --> 00:18:24,159 Speaker 2: performance and they have liquidity to their LPs. 354 00:18:24,200 --> 00:18:24,840 Speaker 1: They have high. 355 00:18:24,760 --> 00:18:31,240 Speaker 2: DPIs the investors in private equity states sovereign wealth funds. 356 00:18:31,280 --> 00:18:33,920 Speaker 2: That's where most of the capital comes from the big money. 357 00:18:33,960 --> 00:18:37,879 Speaker 2: Eighty percent of the money. Their boards still believe in 358 00:18:37,960 --> 00:18:42,520 Speaker 2: private equity. The ten year performance beats everything, the fifteen 359 00:18:42,600 --> 00:18:47,000 Speaker 2: year performance, the twenty year performance. The challenge is they 360 00:18:47,000 --> 00:18:50,119 Speaker 2: have an allocation usually to private equity or fifteen percent. 361 00:18:50,640 --> 00:18:53,080 Speaker 2: Some are growing in a little bit from thirteen, others 362 00:18:53,119 --> 00:18:58,320 Speaker 2: may be decreasing depending on their portfolios. That investor base 363 00:18:58,520 --> 00:19:01,920 Speaker 2: or that allocation is very stable, which is really nice 364 00:19:01,920 --> 00:19:05,240 Speaker 2: for us and for the industry. But that allocation is 365 00:19:05,240 --> 00:19:09,399 Speaker 2: stable because people get money back and they redeploy the money. 366 00:19:10,320 --> 00:19:14,000 Speaker 2: If not, that allocation would grow on indefinitely. So when 367 00:19:14,040 --> 00:19:16,160 Speaker 2: we meet with our own investors, we have a sheet 368 00:19:16,240 --> 00:19:18,520 Speaker 2: for every one of them, and that's the one piece 369 00:19:18,560 --> 00:19:20,600 Speaker 2: of paper we have is how much money they've given us, 370 00:19:21,000 --> 00:19:23,520 Speaker 2: how much money we've given back, and therefore how much 371 00:19:23,520 --> 00:19:24,320 Speaker 2: money maybe they. 372 00:19:24,160 --> 00:19:25,280 Speaker 1: Have left to redeploy. 373 00:19:25,320 --> 00:19:27,800 Speaker 2: Because also as a manager, they cannot be or we 374 00:19:27,840 --> 00:19:31,800 Speaker 2: would love to one hundred percent concentrated into Mobravo by 375 00:19:31,880 --> 00:19:35,400 Speaker 2: continuing to give us capital. Then they need manager diversification. 376 00:19:35,960 --> 00:19:38,879 Speaker 2: So the people that have don't have liquidity and are 377 00:19:38,920 --> 00:19:42,159 Speaker 2: having problems, they're just going to go away. 378 00:19:42,600 --> 00:19:44,240 Speaker 1: And I've never seen that in the industry. 379 00:19:44,240 --> 00:19:47,760 Speaker 2: In thirty years, the best managers are going to get 380 00:19:47,800 --> 00:19:49,920 Speaker 2: a lot more money, and we're seeing that also in 381 00:19:50,000 --> 00:19:50,840 Speaker 2: the business. 382 00:19:50,960 --> 00:19:54,399 Speaker 3: What does it look like for funds to just go away? 383 00:19:55,080 --> 00:19:57,760 Speaker 3: Is it they kind of quietly wind down? Does more 384 00:19:57,800 --> 00:20:01,359 Speaker 3: consolidation happen? Do you have some really high profile shakeouts? 385 00:20:01,359 --> 00:20:03,119 Speaker 3: What exactly does that even look like. 386 00:20:03,320 --> 00:20:05,280 Speaker 2: We're seeing a lot of funds wind down and close 387 00:20:06,760 --> 00:20:09,400 Speaker 2: we meet with you know, we have most of our 388 00:20:11,119 --> 00:20:13,520 Speaker 2: our partners are most of the states and most of 389 00:20:13,520 --> 00:20:16,840 Speaker 2: the sovereign wealth funds, and I spend about twenty five 390 00:20:16,920 --> 00:20:19,320 Speaker 2: to thirty percent of my time with them to see 391 00:20:19,320 --> 00:20:22,320 Speaker 2: how our performance matches up to our competitors, to see 392 00:20:22,320 --> 00:20:24,119 Speaker 2: how they're doing. How else could we help them? Are 393 00:20:24,160 --> 00:20:26,960 Speaker 2: we doing enough co invest We are so close to 394 00:20:27,480 --> 00:20:30,479 Speaker 2: our partners and they are very open, and they tell us, 395 00:20:30,480 --> 00:20:34,640 Speaker 2: we're really worried about these dormant or zombie funds because 396 00:20:34,640 --> 00:20:37,280 Speaker 2: they've lost half their team, they've come to do something else, 397 00:20:37,960 --> 00:20:40,560 Speaker 2: and they're senior people know that they're wind down the 398 00:20:40,600 --> 00:20:43,960 Speaker 2: portfolio and that there's no future future fundraise. It is 399 00:20:44,040 --> 00:20:47,600 Speaker 2: still private equity is still a bit of a momentum business. 400 00:20:47,920 --> 00:20:50,320 Speaker 2: When you're returning a lot of money. Your people have 401 00:20:50,359 --> 00:20:53,160 Speaker 2: confidence to put money out, Investors have confidence to give 402 00:20:53,200 --> 00:20:56,480 Speaker 2: you money. People are happier. Everybody that carries worth something 403 00:20:56,520 --> 00:20:59,480 Speaker 2: to the team. People are getting promoted from within. The 404 00:20:59,560 --> 00:21:03,520 Speaker 2: older generation didn't lose ten years of opportunity. It's it's great. 405 00:21:03,560 --> 00:21:06,840 Speaker 2: So you see that now, and now that's accelerating because 406 00:21:07,040 --> 00:21:09,439 Speaker 2: the added pressure is the S and P with a 407 00:21:09,480 --> 00:21:12,320 Speaker 2: magnificent seven in the last five years, has done great. 408 00:21:12,960 --> 00:21:15,639 Speaker 2: It's hard to compete with those stocks. And yeah, that's 409 00:21:15,680 --> 00:21:16,080 Speaker 2: where we are. 410 00:21:16,200 --> 00:21:18,800 Speaker 3: So to be clear, the issue isn't just that exits 411 00:21:18,800 --> 00:21:21,680 Speaker 3: aren't happening. It's that just straight up managers are underperforming 412 00:21:21,800 --> 00:21:23,040 Speaker 3: underperforming public markets. 413 00:21:24,040 --> 00:21:27,840 Speaker 2: Over the last five years, the average private equity firm 414 00:21:27,960 --> 00:21:30,960 Speaker 2: and venture capital firm has underperformed the S and P 415 00:21:31,040 --> 00:21:34,639 Speaker 2: five hundred. Now, the best of the best always crush it. 416 00:21:35,240 --> 00:21:39,080 Speaker 2: They find a way, and we're talking about losing its way. 417 00:21:39,119 --> 00:21:42,199 Speaker 2: And for I mean, there's a lot of experience in 418 00:21:42,240 --> 00:21:44,720 Speaker 2: this room, but for those of you that are younger 419 00:21:44,840 --> 00:21:50,639 Speaker 2: in starting a firm or building a firm, private equity 420 00:21:50,680 --> 00:21:55,040 Speaker 2: should be agnostic as to what the environment is. You're 421 00:21:55,080 --> 00:21:58,840 Speaker 2: not buying a stock, you're buying a company. It's not 422 00:21:58,880 --> 00:22:01,679 Speaker 2: what's happening to you, Well, you buy a stock and 423 00:22:01,720 --> 00:22:04,639 Speaker 2: the stuff price goes down and inflation goes up, or 424 00:22:04,760 --> 00:22:08,240 Speaker 2: this happens, or there's a terif or trade. You can 425 00:22:08,280 --> 00:22:10,440 Speaker 2: only sell the stock or keep it. But things are 426 00:22:10,440 --> 00:22:14,080 Speaker 2: happening to you. When you own a company, there is 427 00:22:14,440 --> 00:22:16,439 Speaker 2: so much you can do about it. You just have 428 00:22:16,480 --> 00:22:17,720 Speaker 2: to adapt to the times. 429 00:22:17,960 --> 00:22:20,560 Speaker 3: What do you then make as the shakeout is happening 430 00:22:20,720 --> 00:22:25,600 Speaker 3: that there's a serious and big push into wealth and retail. 431 00:22:25,840 --> 00:22:28,320 Speaker 3: Some would criticize that and say it's because fundraising has 432 00:22:28,320 --> 00:22:31,600 Speaker 3: been challenged that people are looking into other avenues. Is 433 00:22:31,640 --> 00:22:33,200 Speaker 3: there a bit of that happening in this industry? 434 00:22:35,119 --> 00:22:40,520 Speaker 2: Look, it's new, just like AI or the power these 435 00:22:40,520 --> 00:22:45,399 Speaker 2: predictive models is new. How will it evolve? Would it 436 00:22:45,440 --> 00:22:48,159 Speaker 2: be a good thing for the industry and institutional investors 437 00:22:48,480 --> 00:22:52,360 Speaker 2: or not? Once again, on those things, since they haven't happened, 438 00:22:52,800 --> 00:22:56,680 Speaker 2: we don't know. Now, look at what I just said 439 00:22:56,720 --> 00:22:59,760 Speaker 2: about institutions that fifteen percent. One of the reasons it's 440 00:22:59,760 --> 00:23:02,440 Speaker 2: going to grow so much is because allocation by retail 441 00:23:02,600 --> 00:23:05,720 Speaker 2: and private wealth is close to zero percent, So it's. 442 00:23:05,600 --> 00:23:06,200 Speaker 1: Going to go up. 443 00:23:06,640 --> 00:23:10,119 Speaker 2: I mean, that's the huge market that is completely untapped 444 00:23:10,480 --> 00:23:15,440 Speaker 2: that will be tapped into this alternative asset class for us. 445 00:23:15,480 --> 00:23:18,639 Speaker 2: The way we see it is we are going to 446 00:23:18,720 --> 00:23:23,280 Speaker 2: look at it, but very carefully and very strategically. And 447 00:23:23,320 --> 00:23:26,280 Speaker 2: the reason we're going to go slowly and strategically into 448 00:23:26,320 --> 00:23:30,400 Speaker 2: it is that investors, retail investors and high net worth 449 00:23:30,440 --> 00:23:35,560 Speaker 2: investors really need to understand what the manager does, how 450 00:23:35,600 --> 00:23:37,840 Speaker 2: the manager invests. I go back to the point of 451 00:23:38,160 --> 00:23:41,520 Speaker 2: our business is not linear. We buy a billion dollar 452 00:23:41,640 --> 00:23:44,600 Speaker 2: revenue company that has no earnings, we. 453 00:23:44,600 --> 00:23:45,879 Speaker 1: Cut twenty percent of the cost. 454 00:23:45,920 --> 00:23:49,040 Speaker 2: We do this with those projects, even when we get 455 00:23:49,080 --> 00:23:50,200 Speaker 2: the best outcomes at the. 456 00:23:50,240 --> 00:23:51,880 Speaker 1: End, they weren't a straight line. 457 00:23:52,440 --> 00:23:54,720 Speaker 2: So with these investors that have liquidity, if they don't 458 00:23:54,800 --> 00:23:58,280 Speaker 2: understand really well what you're doing, they may make bad 459 00:23:58,359 --> 00:24:01,280 Speaker 2: choices with your investment over time, just like we go. 460 00:24:01,440 --> 00:24:03,800 Speaker 2: I've mentioned thirty percent of my times with institutions, I 461 00:24:03,880 --> 00:24:07,119 Speaker 2: really need our partners to know exactly what we're doing, 462 00:24:07,560 --> 00:24:09,760 Speaker 2: why we're doing it. When we make a mistake, they 463 00:24:09,800 --> 00:24:12,240 Speaker 2: understand when we do well, there's a reason why we 464 00:24:12,280 --> 00:24:15,439 Speaker 2: got lucky or did well. Explaining that to the retail 465 00:24:15,520 --> 00:24:18,879 Speaker 2: channel is going to be absolutely critical. 466 00:24:19,880 --> 00:24:20,399 Speaker 1: Think about it. 467 00:24:20,480 --> 00:24:22,240 Speaker 2: Right, we're investing in the capital. You want to know 468 00:24:22,760 --> 00:24:24,000 Speaker 2: who you're dealing with for sure. 469 00:24:24,040 --> 00:24:26,199 Speaker 3: I mean, but there are other firms. You can make 470 00:24:26,200 --> 00:24:28,880 Speaker 3: the argument they're going full speed ahead and maybe there's 471 00:24:28,880 --> 00:24:32,000 Speaker 3: something of a first move or advantage. Do you look 472 00:24:32,040 --> 00:24:35,000 Speaker 3: at some of the things happening Apollo having an ETF 473 00:24:35,040 --> 00:24:37,359 Speaker 3: others discussing trying to get into four oh one case 474 00:24:37,960 --> 00:24:40,920 Speaker 3: and worry that maybe you need to get in first. 475 00:24:41,680 --> 00:24:45,240 Speaker 2: There's that fomo and you have to resist it, especially 476 00:24:45,240 --> 00:24:48,280 Speaker 2: since there's so much demand for it. I mean, if 477 00:24:48,320 --> 00:24:51,840 Speaker 2: you open the flood gates, there is just incredible demand 478 00:24:51,840 --> 00:24:55,480 Speaker 2: because it's zero going to fifteen, and people want actually 479 00:24:55,840 --> 00:25:00,000 Speaker 2: and rightly so individuals to be part of the economy, 480 00:25:00,080 --> 00:25:03,679 Speaker 2: me in North American economy, especially in tech and software, 481 00:25:03,800 --> 00:25:06,920 Speaker 2: where you're targeting smaller companies with owners that can really 482 00:25:06,920 --> 00:25:10,520 Speaker 2: add value to these companies as as an alternative right 483 00:25:10,560 --> 00:25:13,720 Speaker 2: to just buind the magnificent seven forever, which with forever 484 00:25:13,880 --> 00:25:15,720 Speaker 2: won't do as great as they've done over the last 485 00:25:15,760 --> 00:25:16,480 Speaker 2: five years. 486 00:25:16,840 --> 00:25:20,520 Speaker 3: It's really interesting because there's pressure and other people are thriving, 487 00:25:21,040 --> 00:25:23,200 Speaker 3: and amid all of that, you had one of the 488 00:25:23,240 --> 00:25:26,399 Speaker 3: biggest take privates of the year until EA came along 489 00:25:26,680 --> 00:25:29,479 Speaker 3: with the fifty five. I know we thought we were 490 00:25:29,760 --> 00:25:30,480 Speaker 3: they knocked you off. 491 00:25:30,359 --> 00:25:32,000 Speaker 1: The throne this way, Well, I don't know. 492 00:25:32,080 --> 00:25:34,000 Speaker 2: My partners were like one of them is ripping his 493 00:25:34,040 --> 00:25:34,639 Speaker 2: eyebrows out. 494 00:25:34,680 --> 00:25:35,679 Speaker 1: He didn't understand. 495 00:25:37,359 --> 00:25:39,240 Speaker 2: I thought it was a good thing because at some 496 00:25:39,359 --> 00:25:41,679 Speaker 2: point we can't be the only crazy ones doing all 497 00:25:41,680 --> 00:25:42,840 Speaker 2: these ten dollar dollars deals. 498 00:25:43,240 --> 00:25:45,239 Speaker 3: I mean literally they but they up to you by 499 00:25:45,359 --> 00:25:49,040 Speaker 3: fifty five billion, the biggest LBO in history. Just given 500 00:25:49,119 --> 00:25:50,560 Speaker 3: some of the stresses we were talking about. Is that 501 00:25:50,640 --> 00:25:53,480 Speaker 3: a one off and aberration? Is Toma Bravo doing a 502 00:25:53,560 --> 00:25:55,399 Speaker 3: huge deal with day Force and Jepson Is that a 503 00:25:55,440 --> 00:25:58,320 Speaker 3: one off? Or have the mega LBOs returned? 504 00:25:59,440 --> 00:26:02,199 Speaker 2: It's look, this is not new for us, right. You 505 00:26:02,240 --> 00:26:04,080 Speaker 2: mentioned this year Jefferson and day four so that we're 506 00:26:04,080 --> 00:26:08,560 Speaker 2: both around ten billion announced deals. But we did proof 507 00:26:08,560 --> 00:26:11,840 Speaker 2: Point ninet eleven billion, Real Page at ten billion, Sale 508 00:26:11,840 --> 00:26:15,080 Speaker 2: Point at eight billion, Ping and four Draw at eight billion. 509 00:26:15,119 --> 00:26:16,600 Speaker 1: I mean, we were just going. 510 00:26:16,960 --> 00:26:21,840 Speaker 2: There because our strategy is to focus on our two 511 00:26:21,840 --> 00:26:26,000 Speaker 2: core competencies. One is our team really knows how to 512 00:26:26,000 --> 00:26:30,080 Speaker 2: buy the best, the market leader in these categories of apps, 513 00:26:30,160 --> 00:26:33,359 Speaker 2: infrastructure and cyber the number one player, and it's so 514 00:26:33,400 --> 00:26:36,159 Speaker 2: important in cyber to buy the number one player. You 515 00:26:36,240 --> 00:26:38,240 Speaker 2: cannot go in and buy the number three, four, five. 516 00:26:38,280 --> 00:26:41,040 Speaker 2: I can talk about that all day. Why that's the case, 517 00:26:41,520 --> 00:26:44,879 Speaker 2: and our second team score competency is turning a great 518 00:26:44,880 --> 00:26:48,560 Speaker 2: innovator which those companies are into actually a great business. 519 00:26:49,119 --> 00:26:52,520 Speaker 2: Taking that twenty percent growth of the company and innovation 520 00:26:52,760 --> 00:26:56,320 Speaker 2: and market leadership and making it work for the shareholder. 521 00:26:56,600 --> 00:26:57,679 Speaker 1: When those companies were. 522 00:26:57,520 --> 00:27:02,160 Speaker 2: Delivering zero cash, have them delivered forty percent cash. That way, 523 00:27:02,280 --> 00:27:06,639 Speaker 2: our investors become fundamental investors in software instead of depending 524 00:27:06,680 --> 00:27:09,600 Speaker 2: on a revenue multiple exit, which is completely arbitrary and 525 00:27:09,600 --> 00:27:12,520 Speaker 2: completely volatile. They depend on selling the company or they're 526 00:27:12,560 --> 00:27:15,920 Speaker 2: selling the company at a twenty five PE, highly justifiable 527 00:27:16,280 --> 00:27:18,160 Speaker 2: as a small premium to the s and P five 528 00:27:18,240 --> 00:27:21,760 Speaker 2: hundred for four times the growth and a much much 529 00:27:21,800 --> 00:27:25,359 Speaker 2: better business, all recurring where cash flow is greater than PE. 530 00:27:25,880 --> 00:27:29,280 Speaker 2: We turn a revenue multiple to an even multiple. What 531 00:27:29,480 --> 00:27:32,120 Speaker 2: happened is as the SaaS industry has really taken off, 532 00:27:32,160 --> 00:27:34,200 Speaker 2: and it's still at its infancye fifty percent of the 533 00:27:34,240 --> 00:27:38,840 Speaker 2: systems are still on premise, we have this enormous opportunity 534 00:27:39,160 --> 00:27:42,880 Speaker 2: to take these beautiful companies and transform in that way. Now, 535 00:27:42,880 --> 00:27:46,320 Speaker 2: we need to keep proving that we can generate the 536 00:27:46,400 --> 00:27:50,880 Speaker 2: performance at the scale that we're doing. And we've had 537 00:27:50,920 --> 00:27:53,880 Speaker 2: some wonderful exits in the past at a big scale. 538 00:27:54,200 --> 00:27:56,520 Speaker 2: So it's nice to see somebody do a fifty five 539 00:27:56,520 --> 00:27:58,800 Speaker 2: billion dollar deal because now we can tell our investors 540 00:27:58,840 --> 00:28:01,639 Speaker 2: we're middle market and we do middle market only, and 541 00:28:01,680 --> 00:28:04,760 Speaker 2: we're really targeted, and these things are really small. Were 542 00:28:04,840 --> 00:28:07,800 Speaker 2: like you see, we told you these companies. 543 00:28:07,400 --> 00:28:10,240 Speaker 3: Are yeah, only about a minute left Orlando. And I 544 00:28:10,320 --> 00:28:12,159 Speaker 3: know you've touched on this in different places, but it 545 00:28:12,240 --> 00:28:14,320 Speaker 3: might be nice to just put it together for everyone 546 00:28:14,359 --> 00:28:18,160 Speaker 3: watching and for trying to navigate a particularly difficult time 547 00:28:18,560 --> 00:28:21,439 Speaker 3: in private equity and private capital investing. What are just 548 00:28:21,800 --> 00:28:25,119 Speaker 3: the most important principles to be concentrating on it this time. 549 00:28:26,640 --> 00:28:30,320 Speaker 2: Focus on the business, you know, focus on your investors, 550 00:28:31,240 --> 00:28:34,600 Speaker 2: but really spend most of your time cult calling all 551 00:28:34,640 --> 00:28:39,920 Speaker 2: the companies. Really focus on the business. Get away from 552 00:28:40,360 --> 00:28:42,280 Speaker 2: what's the firm going to be in ten years or 553 00:28:42,280 --> 00:28:44,920 Speaker 2: twenty years, what's the strategy, what's. 554 00:28:44,720 --> 00:28:45,680 Speaker 1: My org structure? 555 00:28:46,200 --> 00:28:49,040 Speaker 2: Mentor your people to get the deal and then figure 556 00:28:49,080 --> 00:28:52,520 Speaker 2: out a way, a repeatable process that you can continuously 557 00:28:52,560 --> 00:28:55,040 Speaker 2: improve the company. Have your feet on the ground and 558 00:28:55,120 --> 00:28:57,680 Speaker 2: focus on the business that's right in front of you. 559 00:28:57,680 --> 00:28:59,720 Speaker 1: You know, do the work, do the diligence. 560 00:29:01,040 --> 00:29:03,760 Speaker 2: It is so important, and don't be as affected by 561 00:29:03,760 --> 00:29:08,160 Speaker 2: what everybody thinks. The answers are sometimes so obvious investing 562 00:29:08,200 --> 00:29:10,120 Speaker 2: wise and operating that you just need to go to 563 00:29:10,160 --> 00:29:12,680 Speaker 2: the source and focus on it. Our group has become 564 00:29:12,760 --> 00:29:15,240 Speaker 2: much larger now we have one hundred and eighty billion 565 00:29:15,240 --> 00:29:18,920 Speaker 2: dollars under management. We work as hard as possible to 566 00:29:19,000 --> 00:29:20,560 Speaker 2: run it just like when we did when we did 567 00:29:20,560 --> 00:29:23,720 Speaker 2: our first deal at fifty million. And frankly, the problems 568 00:29:23,720 --> 00:29:26,160 Speaker 2: that our companies have and the opportunities that our companies 569 00:29:26,200 --> 00:29:28,440 Speaker 2: have and how we generate a deal and convinced a 570 00:29:28,480 --> 00:29:30,800 Speaker 2: founder or a big company to work with us is 571 00:29:30,840 --> 00:29:33,520 Speaker 2: the same as it was before. 572 00:29:33,840 --> 00:29:36,160 Speaker 1: So remaining true to that is very, very important. 573 00:29:36,280 --> 00:29:38,520 Speaker 3: That's the perfect note to end it on. Orlando, thank 574 00:29:38,520 --> 00:29:41,000 Speaker 3: you so much for joining this morning, and thank you 575 00:29:41,040 --> 00:29:44,560 Speaker 3: all for watching. Please join me in thinking, Orlando. Bravo, bravo, 576 00:29:45,080 --> 00:29:48,600 Speaker 3: thank you