The Exchanges

Q And so, so just tell us about how the decisions you've made now to build this business. How many people do you have? How do you run two hundred billion effectively? How do you raise 34? How do you, what do you tell people to raise thirty-four billion? I don't, I don't even, I don't even comprehend that.

A I think you do. Come on. You guys have done pretty well. I appreciate that. But, but it's, ah, ok, so we have, we are very, very focused on keeping the team Very small. So we have about 230 people at Toma Bravo within the organization. Um, the, the reason is you, if you have too big of a team, you become internally focused and start dreaming about conversations internally. And as I always say, the deal's not in the office, the company's not in the office, and the buyer of your company is not in the office. So you always have to be outward facing. The second thing is, I got the benefit and so did my senior partners of incredible mentorship. I can tell you so many stories about Carl Thomas spending time with me in 1998 on the deal we were going to lose. And I would be like, why did you spend all that time with the CEO and me on his kitchen table? He wanted to teach me how to sell. He wanted to teach me how to do a deal. And, and that was just incredible. So if we have too many of those, we can't, we can't touch the next generation leadership. So that is, that is part of our philosophy. Now, how do we raise that money? Look, our first deal, it's always been one step at a time. Our first deal was fifty million. The second deal was a hundred million enterprise value. The third was Datatel at two hundred and fifty million. We didn't buy a company in Silicon Valley till 2010. Uh, that…

AI assessment note: “we have about 230 people at Toma Bravo within the organization.”

Q But was that something like your parents gave you, where they're like, you have to go, you have to do something, or?

A Yes. Now at every turn, I tell you this, how exactly I got here, I've never created anything new, but I always had my mom, who was a Cuban immigrant, and for her, just me staying there, it didn't feel right to her. She was always, you know, she would put me in positions where I would always have to be traveling to San Juan to play tennis, the sport of tennis individual. Then if I did well, I remember I played my first tournament, When I was 10 years old in Caracas, Venezuela, and I saw wealth back then. Caracas, Venezuela in 1982 was quite a place, and you played in this fancy club, and then you go, if I do really well, I get to play in Florida. So she was always, always kind of giving me a road map for that. I was lucky that I wasn't that good to go pro, so I went, so, so that I went into business. But then the same thing at work, you know, I had the two best mentors, And the only thing I give myself credit for is, at a young age, I really listened. I had discipline, and I would kind of, kind of take it all in.

AI assessment note: “she was always, always kind of giving me a road map for that.”

Q That's sort of Warren Buffett's mentality, isn't it? That he, he already knows all the companies, he knows which ones he wants to buy, and when they come up, that he doesn't nickel and dime, he just quickly works out a deal. Is that something, is that a mentality that you have?

A 100%. It all, it all fits together with having a small team. We also have a small portfolio. So in every fund, we'll buy 10 to 12 companies. We, we strive for the two core competencies that we try to have. One is buy the best and operate the best, and just focus on that. In a three to four year timeframe for our funds, for investing our funds, we cannot say with a straight face that there are 30 of the greatest companies that were available to be bought at that time. Right. So, so that's why, and two, we cannot say with a straight face that We can try to influence management with everything we learned from an incredible mentor if we had a portfolio of 30. That's as much as well as we can handle, so we have to go for it. Now, I do want to add that what I love about the private equity business, one of the items, is that those deals. Because the decisions that you make with your partners an hour before the bid is, is really, really important. It's really telling.

AI assessment note: “100%. It all, it all fits together with having a small team.”

Q What is the role of private equity in the US economy, do you think? What is the role that it should play?

A I think it's a great change agent. It's, it's a business in a way similar to venture, where what matters is the returns that you put up, and you have incredible alignment with the sources of capital. They give you the money, and if you make the return, you can stay in business, and if they give you the money and you don't make the return, no matter how big we may be, we slowly lose that and, and we're out of business. And that, that alignment is so important because you're such a big change agent to companies. These software companies are not meant to be owned by the same group for 30 or 40 years. Management gets tired. It's exhausting to run. It's exhausting to be a CRO. And the more they trade hands, you have somebody with maybe a new idea, maybe a perspective, and maybe a perspective that was right for the company at that time. And that buyer, like private equity, can assume it'd be super entrepreneurial. And try to do something special.

AI assessment note: “I think it's a great change agent.”

Q Vlad tried to get a job at Climate Corp, couldn't, started Robin Hood. You know, famously, um, my HR lead at Facebook introduced me to her then boyfriend, Ben Silberman. We interviewed Ben. We ended up not hiring him. He immediately started Pinterest. And when you graduated from Stanford, you only got one job offer from, like, a three-person firm, basically. Do you want to tell us about that story?

A Yeah, I would, you know, in There was not, not much private equity, and the venture business, you didn't hire a lot of people. It was also, it was also small. Now, I want to add this to the story. I had, I got one interview with one of the largest private equity firms at the time, and the head of the firm spent time with me. Very, very nice guy. But you know what he said, and this is 1997, there's not much opportunity in our industry anymore, and the industry is taken. Now our firm is multiples bigger than they are, and the same thing will happen in the future for the few of you that may be interested in private equity. You'll come by and create a firm and the American spirit and entrepreneurialism and being at the right place at the right time, because we started doing software and it's hard not to do well if you started doing software back then and had all this, uh, this wind behind your back. So I didn't, I couldn't get a job. There weren't many. And then Carl Thoma hired me. And at the end of the process is interesting. There were a few private equity firms that kind of opened up a position for me to do Latin American private equity. And I'm like, no, I've, I've spent too much time in the South. The money's in the North. I, I, you know, I want to do US buyout tech. That's what I wanted to do. And Carl was great. He said, if you want to do tech, that's not something we do, b…

AI assessment note: “I couldn't get a job. There weren't many. And then Carl Thoma hired me.”

Q went down, and be like, oh no, you lost your internet connection on your phone. And they'd be like, no, it's, it's not coming up, and it's like, yeah, yeah, you re-put the wifi password in, and it never went down. It, It was pretty crazy, but how do you assess talent when you're coming into one of these legacy businesses, you know, 10 years, 20 years into the business?

A History tells you a lot of that. So you, you're trying to identify, not everybody's good at everything, and it starts with a leader. If the leader is good, everything is good. If the leader is not good, nothing is good. You, you don't want to work around them to deal with sales and product and stuff because nothing is going on now. What does a good leader mean? Right? There's so many judgments that come in. Are they, is the company hitting bookings? Is it missing? Are they good at customer service? What's their retention? How do they make decisions? What we look for overall, cause nobody's perfect is to back what they're look, what they're good at. We love to do add on acquisitions for our company. So the reason we like to take out the cost once is the rest is about bookings, growth and add ons. We don't want to revisit margin too much. We want profitable growth going forward. Let's be done with that. And then let's go forward. The leader can stand up in front of the entire employee base and said, we needed to do this. This deal probably gave us the courage to do what we need to do. Let's go, let's go build the business. So, but we, we look at a leader and we say, if they're open-minded, if they care about numbers and if they have the following of their employees and customers and really know the business, that is something that we really, really, really try to work with. With …

AI assessment note: “if they're open-minded, if they care about numbers and if they have the following”

Q So you started doing a lot of these SaaS deals in 2010. When you sit there with your partners in 20, 25, is there a risk of SaaS being cannibalized from within by AI or, you know, how it can just be rebuilt in different ways? How do you underwrite it today? Which is different from how you may, would have underwritten it in 2010.

A Our investors don't love to hear this because for, right, our investors, especially the large institutions, that's kind of our market, that those are our, our, our people that have backed us for a long time. Besides good returns, they need consistency and predictability. They would rather have us do what we were doing in 2002 in these deals. I'm wondering, why can't you just keep doing the same thing? And it all changes. One is There is a big risk of AI in this business. I mean, in a big, big way. There's so many verticals that are going to get disrupted. There are so many areas that are very confusing, and you don't want to touch. So it limits the space significantly. Even if you believe what we believe, which is in the enterprise, it's going to take a while, because we always say technology is evolutionary, not revolutionary, because our customers are buying this stuff for cost. They want the ROI and you need to see the plan and everything else. But one is there's a big disruption and that's another, all these areas we don't get into. Um, and we have to keep learning, um, and, and updating ourselves. That's, that's a lot of work that the young people in the firm as well will have to do. But we have another equally big or even bigger challenge, which is if you look at our trajectory, it's not like one day we woke up and said, oh, we can do a ten billion dollar deal. No, we, we…

AI assessment note: “There is a big risk of AI in this business. I mean, in a big, big way.”